Trade Secrets, NDA’s and Non-competes

IM 350 – Fall 2013Day 19

Pepsico v Redmond (7th Cir. 1995)

• In some cases, “Inevitable disclosure” will occur, and can be injoined, even if the individual has not (and does not intend to) share/trade on a secret.

DVD Copy Control Assn., Inc. v. Bunner, 31 Cal. 4th 864, 889 (2003)

DVD-CCA v. Bunner, Court of Appeals of the State of California, 6th AppellateDistrict, HO21153 Santa Clara County Super. CT. No. CV786804, (Feb.27, 2004)

Trial court issued injunction, CA court reversed, CA SC remanded [perhaps compromising the free speech claim]. The book stops, but the web-update continues

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• The treatment of DVD Copy Control Assn., Inc. v. Bunner in the trade secrets chapter is incomplete.

• The treatment is accurate through the action of the California Supreme Court, which remanded the case back to the appeals court with the instruction that Bunner’s first amendment rights did not provide protection from potential trade secret violations in this case. The .pdf of the CA SC’s ruling may be accessed here:

• http://scocal.stanford.edu/sites/scocal.stanford.edu/files/opinion-pdf/S102588-1259016537.pdf

• However, on remand, the appeals court found that Bunner’s posting DID NOT constitute a trade secret violation and so the court upheld their overturning of the trial court’s injunction against Bunner. The .pdf for that decision can be found at:

• http://www.eff.org/IP/Video/DVDCCA_case/20040227_Decision.pdf

• Although one usually cites the findings of the highest court, in the case of a remand to a lower court from the Supreme Court, the finding of the appeals court in this case “wins out” and serves as the court of last decision as no further appeal was entered.

• McRoberts Software Inc. v. Media 100 Inc., 329 F.3d 557 (7th Cir. 2003)

• The 7th Circuit noted that it is possible to recover damages based on more than one legal theory in the same suit, provided the plaintiff provides sufficient evidence of his injuries. [Copyright infringement and trade secret misappropriation].

• 7th Circuit held that it was an error for the District Court to vacate the jury’s award of $300,000 to MSI for trade secret damages was duplicative of the copyright infringement damages

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IDX Systems Corp. v. Epic Systems, Corp., 285 F.3d 581 (7th Cir. 2002)

• It’s not good enough to just show that valuable information has been transferred.

• One has to be able to specify which part(s) were protected, how they were protected, and specifically that the alleged violation involved those parts.

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EF Cultural Travel BV v. Explorica, Inc., 274 F.3d 577 (1st Cir. 2001)

• In many instances, you can’t take what you know with you and apply it in direct competition against your former employer.

• Note here, though, that without the contractual agreement, it’s possible this case could have gone the other way.

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ClearOne v. Chiang (2007)

• Court = USDC Utah• Plaintiff = ClearOne = Maker of wideband

code• Defendants = Biamp licenses object code

from Wideband• The fight’s about whether the code is a

trade secret• The posture: Biamp files a motion to

dismiss

ClearOne v. Chiang (2007)

• Biamp says: it can’t read the object code; only machines can read object code.

• Court says: who cares. It doesn’t matter.• Biam says: object code was publicly available.• Court says: who cares. Even if object code

available, the source code (human readable) may still be protectable trade secret.

• Result: Motion to dismiss complaint denied.

Cenveo Corp. v. Southern Graphic, et al (1-22-09)

• Court = US DC Minnesota• Plaintiff = Cenveo• Defendants = Southern Graphic and indiv.• Fight = Cenveo wants to stop SG from

working with past and current Cenveo clients and using proprietary info.

• Court to decide whether to enter preliminary injunction.

Cenveo Corp. v. Southern Graphic (1-22-09)

• Court decides:– Grants preliminary injunction in part and

denies in part.

• What are alleged trade secrets:– Job history information – USB flash drive

Taco Bell v. TBWA (2009)

• http://www.youtube.com/watch?v=M8sZ1DWsAHE/

Taco Bell v. TBWA (2009)

• Court = Ninth Circuit Court of Appeals• Plaintiff/Appellant = Taco Bell• Defendant/Appellee = TBWA• They’re fightin’ about who should pay for

the use of the psycho chihuahua character.

• The confidential TS is the concept of using a psycho chihuahua as a Taco Bell mascot

Taco Bell v. TBWA (2009)

• Underlying case: Wrench v. Taco Bell– Jury finds that Taco Bell breached and implied

confidentiality agreement.– Awards Wrench $30 million, which mounts to

$42 million with interest.

Taco Bell v. TBWA (2009)

• This case:– Question presented: Is Taco Bell’s ad agency,

TBWA, liable for “indemnity” to Taco Bell?– Trial court granted summary judgment for

TBWA.– Ninth Circuit agrees: TBWA not aware of

implied contract b/t Taco Bell and Wrench.

Spring Design, Inc. v. Barnesandnoble.com (N.D. Cal. Dec. 27, 2010)

• Spring Design and B&N discuss doing a reader together; talks break off

• Both come out with a reader; Spring Design sues for trade secret misappropriation and Unfair competition.

• B&N files for summary judgment (dismissal). Gets dismissal on 1 of 4 patents (due to a public patent filing), but loses on the other claims that might set the case aside. NDA’s were signed that cause the court to be willing to examine the claims of fact.

• Pretty typical here: the side that loses at summary judgment will sometimes settle rather than go to trial:

• B&N settles with a licensing agreement.

Coady v. Harpo, Inc., 308 Ill.App.3d 153 (1st Dist. 1999)

Coady v. Harpo, Inc., 308 Ill.App.3d 153 (1st Dist. 1999)

• Post-employment restrictive covenant.• Senior Associate Producer seeks DJ of non-

enforceablility.• Prohibitions in contract:

– During contract and thereafter (i.e. forever)– Can’t reveal info about:

• Oprah, her business or private life;• Business and dealings of Harpo;• Harpo’s employment practices and policies

– Can’t give or participate in interviews about Oprah

Coady v. Harpo, Inc., 308 Ill.App.3d 153 (1st Dist. 1999)

• Court’s rationale:– No restraint on plaintiff’s future career.– No restraint on commerce.– Forever is ok.

• “Whether for better or for worse, interest in a celebrity figure and his or her attendant business and personal venture somehow seems to continue endlessly, even long after death, and often, as in the present case, extends over an international domain.”

RKI, Inc. v. Grimes, 177 F. Supp. 2d 859 (N.D. Ill. 2001)

• “This is a case about how an employee who signed a non-disclosure and non-compete agreement chose to join a competitor. This is a textbook case of how not to do it.”– Magistrate Judge Morton Denlow

RKI, Inc. v. Grimes, 177 F. Supp. 2d 859 (N.D. Ill. 2001)

• Employee signs 2-year deal and agrees during the term and thereafter.– Won’t reveal “Proprietary Information.”– PI = “any and all information including but not limited to

information concerning the design and development of tooling used in the Company’s business, not generally known or recognized as standard practices, and information which is disclosed to … [employee] concerning any and all of the technology, research, . . . produced by the Company.

RKI, Inc. v. Grimes, 177 F. Supp. 2d 859 (N.D. Ill. 2001)

• Employee has access to:– Customer contact management system.– Account contact management software.– Reports with quote, order, cost and profit data.

• Info provided with appropriate safeguards (e.g. password protection)

RKI, Inc. v. Grimes, 177 F. Supp. 2d 859 (N.D. Ill. 2001)

• Employee recruited by direct competitor.• Before leaving, employee downloads

customer information from databases.• Employee immediately begins to solicit former

employer’s customers.• Held: Confidentiality provision of contract was

enforceable, and employee breached.

Nilssen v. Motorola, Inc., 963 F. Supp. 664 (N.D. Ill. 1997)

• Nilsson approaches Motorola about electronic ballasts.

• Discussions ensue over several years• In midst of discussions, parties enter a confidentiality

agreement.• Motorola afforded Nilsson opportunity to

retroactively label material “confidential.”• Trade secret litigation erupts.• Court finds no implied duty of non-disclosure in the

face of express contract.

Trade Secrets in a Social Media World

• Can an employer claim ownership in an employee’s LinkedIN profile?

• Possibly yes.– Eagle v. Morgan, No. 11-4303, 2011 WL 6739448

(E.D. Pa. Dec. 22, 2011)– Company required employee to create account

based on company template. – Company monitored the account.– Company could not claim ownership in contacts.