Continuing our tradition of presenting annually our thoughts concerning the top 10 developments/headlines this past year in trade secret, computer fraud, and non-compete law, herein no particular orderis our listing for 2015 and a few predictions for 2016. Please join us for our first webinar of the New Year on January 29, 2016 discussing these developments/headlines.
1) Enactment of federal trade secret legislation moves closer, while federal non-compete bill gains no traction. In last year's Top 10 listing, and in several blog posts from 2015, we described the ongoing effort of a large bipartisan group of U.S. Senators and Representatives to create a federal civil cause of action for trade secret misappropriation (according to govtrack.us, as of January 11, 2016 there were 23 cosponsors of such legislation in the Senate and 107 in the House). The proposed bill is entitled "The Defend Trade Secrets Act of 2015" ("DTSA"). On December 2, 2015, the Senate Judiciary Committee held a hearing on the DTSA and it received a positive reaction from the Committee. We expect that the DTSA will be voted on by Congress in the spring of 2016.
Many industry representatives who have written or spoken on the subject support the DTSA. They cite such reasons as: (a) it will provide uniform statutory provisions in contrast to the "Uniform Trade Secrets Act" ("UTSA")adopted by every state except New York and Massachusettsbut which contains some significant state variations; (b) rather than litigate in state courts, some attorneys and companies prefer federal courts, particularly because of federal bench experience with patent, trademark, and copyright cases; (c) personal jurisdiction over defendants may be easier to obtain in a federal court than in a state court with respect to individuals or businesses charged with claims involving overseas trade secret misappropriation or computer fraud and discovery of parties and non-parties may be easier to conduct in federal court; and (d) the statute of limitations in the proposed DTSA is longer, and the maximum amount that can be awarded as punitive damages is higher than the amount available under the UTSA.
A number of academics oppose adoption of the DTSA. They suggest that the expense of litigating in federal court often exceeds the cost of handling a case in a state court. Some also take issue with, among other sections, the ex parte seizure provisions in the DTSA (although proponents cite those provisions as advantages). Opponents of the DTSA mention that the UTSA has had years of judicial interpretation that provides some measure of predictability. Opponents have also voiced concern with respect to some potentially ambiguous terms in the proposed DTSA.
We also reported on proposed federal legislation to ban enforcement of non-competes against low wage employees and to require employers to disclose in advance that employees must sign non-competes. The Senate bill is called "Mobility and Opportunity for Vulnerable Employees" ("MOVE"). At present, MOVE has few sponsors and does not appear to be gaining any traction.
Please see our dedicated page for the latest updates on the proposed federal trade secret legislation. As discussed below, we expect regulators and employees to continue to challenge the necessity and breadth and scope of non-compete agreements in certain industries.
2) Watch for challenges to (a) confidentiality covenants interpreted as discouraging cooperation with government agency investigations or chilling Section 7 rights and (b) "do-not-hire" agreements. In 2015, federal government agencies such as the SEC took aim at confidentiality clauses seemingly intended to dissuade employees from whistleblowing with respect to alleged employer misconduct. Additionally, the NLRB continued its crusade of striking employer confidentiality agreements/policies that may chill...
