Bryce K. Earl, Esq. and Thomas G. Grace, Esq

Presentation To:Association of Corporate Counsel

January 26, 2010

______________________________

Covenants Not to Compete

and Trade Secrets______________________________

Three CertaintiesFor The Future

Death, Taxes, and…

Non-Compete/ConfidentialityAgreements

Myths About Non-Competes

If you didn’t sign a non-compete agreement, thenyou’re free to work anywhere.

If you didn’t sign a writtencontract, you’re free to workanywhere

Since you signed before themerger (or sale), that oldcontract can’t be enforced

If you were fired, then yournon-compete is unenforceable

If anyone in the industry hasthe info, you can take it withyou.

California has no restrictionsregarding where you can gowork.

Where to Find the Restrictions

Non-Compete Agreements Confidentiality/Non-Disclosure Agreements Employee Handbook/Company Policies IP Agreement/Work-For-Hire Training Agreements Stock Options/Compensation Agreements Transfer/Relocation Agreements

Types of Restrictions

Non-Compete Non-Solicitation ofCustomers

Non-Solicitation ofEmployees

Confidentiality

Trade Secrets/Covenants Not to Compete Impact…

All Industries

Employees at Every Level

Many Business Transactions

Guidelines Regarding Enforceability

Protection of Legitimate Business Interests? Reasonable Geography? Reasonable Duration? Other Equities? (Wild Card)

Potential Related Claims Inevitable Disclosure Violation of UTSA “Unfair Competition” Conversion Breach of Duty of Loyalty Economic Espionage Act Computer Fraud And Abuse Act Breach of Good Faith &Fair Dealing Accounting Corporate Raiding

Claims Against Third Parties

Tortious Interference with Contract Tortious Interference with Prospective

Business Relations Aiding and Abetting

The Uniform Trade Secret Act has been enacted in 43 states . . .

Not enacted in:

VT

NY

MA

PA

NJ

AR

WY

Trade Secret Definition

“TRADE SECRET” means information, including, without limitation, a formula, pattern, compilation, program, device, method, technique, product, system, process, design, prototype, procedure, computer programming instruction or code that:

Trade Secret Definition (cont.)

Derives independent economic value, actual or potential, form not being generally known to, and being readily ascertainable by proper means by the public or any other persons who can obtain commercial or economic value from its disclosure or use; and

Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Trade Secret?

Customers Contact Information Purchasing History Credit / Payment History

Potential Customers Pricing

Discounts Incentives Programs

Personal Information (NV Amendment)

Periodic Sales Figures Profitability Sales Commission

Programs / Compensation Inventories Product Profitability Suppliers

Discount Programs Product Quality

Nevada’s Privacy Amendment

Made Effective January 1, 2010 Applies to all “data collectors doing

business in this State” Requires implementation and maintenance

of reasonable security measures Requires compliance with PCI standards Specifically defines “encryption”

Nevada’s Privacy Amendment

Requires encryption any electronic transmissionAny movement of a data storage device

Includes data storage contractor Excludes certain telecommunications

providers 2005 – requires disclosure of any security

breach

Nevada’s Privacy Amendment

“Data collector” means any governmental agency, institution of higher education, corporation, financial institution or retail operator or any other type of business entity or association that, for any purpose, whether by automated collection or otherwise, handles, collects, disseminates or otherwise deals with nonpublic personal information.

Nevada’s Privacy Amendment

“Personal information” means a natural person’s first name or first initial and last name in combination with any one or more of the following data elements, when the name and data elements are not encrypted: Social security number. Driver’s license number or identification card number. Account number, credit card number or debit card number, in

combination with any required security code, access code or password that would permit access to the person’s financial account.

The term does not include the last four digits of a social security number or publicly available information that is lawfully made available to the general public.

Confidentiality Agreements

Trade Secret or Confidential Information Definition of:

Trade SecretConfidential Information

Durational Term Enforceability

Potential Defenses Unreasonable Lack of Consideration Not “Competing” With Prior Employer Breach of Agreement by Prior Employer Does Not Protect Legitimate Business Interest of

Prior Employer Antitrust Labor Practices Declaratory Judgment

Other Key Issues

Choice of Law Forum Selection Arbitration Assignment Settlement Terms

Return of All Documents Exit Interview Regular

Acknowledgement of Obligations

Marking Documents (electronic and Hard Copy)

Notification to New Employer

New Employee Risks

Confidentiality Trade Secret Noncompete Nonsolicitation

CustomersEmployees

Related Company Policies

Review and Update

Trade Secrets / Protection ProgramsPrivacy ProgramsCovenants Not to CompeteConfidentiality and Non-Disclosure

AgreementsDeceptive Trade PracticesEmployee Disloyalty

Bryce K. Earl Thomas G. Gracebearl@nevadafirm.com tgrace@nevadafirm.com

400 South 4th Street3rd Floor

Las Vegas, NV 89101tel: 702.791.0308fax: 702.791.1912

www.santorodriggs.com