Bradley Lecture Trade Secrets, NDA’s and Non- competes IM 350 – Fall 2012 Steven L. Baron October 30, 2012

Top Trends In Trade Secrets Increase in trade secret litigation and size of verdicts High profile criminal prosecutions Protecting American Trade Secrets and Innovation Act of 2012 (“PATSIA”) Illinois Supreme Court adopts a flexible approach to enforceability of restrictive covenants Trade Secrets in a Social Media World

Increase in Trade Secret Litigation $4.6 billion in verdicts in TS and Patent Litigation in 2011 (compared to $2.4 billion in 2010) (Business Week, Feb. 1, 2012) Trade secrets verdicts accounted for 4 of top 10 in size in 2011: – $2.3 billion against ex-employee of St. Jude – medical device maker – $920 million against Korean company over secret connected to DuPont’s kevlar.

High Profile Criminal Prosecutions Ex-Goldman Sachs programmer sentenced to more than 8 years in prison for theft of information relating to trading system Ex-Dow scientist sentenced to more than 7 years in prison for theft of secret information about organic insecticides

PATSIA Protecting American Trade Secrets and Innovation Act Introduced in July 2012 by Kohl (WI) and Whitehouse (RI) and Coons (DE) Create a unified federal statute that would allow TS owners to bring claims in federal court

Illinois Supreme Court and Restrictive Covenants Reliable Fire Equipment Co., v. Arredondo, 2011 IL (December 1, 2011). – Under what circumstances is a restrictive covenant over customer identities protectable?

Illinois Supreme Court and Restrictive Covenants Court applies more flexible seven factor test: 1. the number of years required to develop the customer; 2. the amount of money invested to acquire customers; 3.the degree of difficulty in acquiring customers; 4. the extent of personal customer contact by the employer; 5.the extent of the employer’s knowledge of its customers; 6.the duration of customer association with the employer; and 7.the intent to retain employer-customer relations.

Trade Secrets in a Social Media World PhoneDog v. Noah Kravitz, No. C MEJ, 2011 U.S. Dist. LEXIS (N.D.Cal.)(November 8, 2011) – Kravitz worked for PhoneDog as a product reviewer. – Kravitz was given and maintained a Twitter account at PhoneDog. – Account generated 17,000 followers. – Kravitz left company and maintained account.

Trade Secrets in a Social Media World PhoneDog v. Noah Kravitz – PhoneDog sues Kravitz for misappropriating trade secrets, including Twitter password and followers. – Kravitz moves to dismiss, claiming that followers are “public” and not secret and password has no inherent value. – Court denies motion to dismiss and says that PhoneDog has sufficiently stated a claim.

Trade Secrets in a Social Media World Can an employer claim ownership in an employee’s LinkedIN profile? Possibly yes. – Eagle v. Morgan, No , 2011 WL (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.

Ask Mr. or Ms. IP – Trade Secrets

Ask Mr. or Ms. IP – Trademark Questions: 1.What is the universe of trade secrets at issue? 2.Does the fact that you didn’t sign an agreement help your case? 3.What is the impact of the clause in the employee handbook? 4.Can the employer really claim a trade secret in programming information that is only in your head? 5.Does the fact that you can easily download the information onto a flash drive help your defense against a claim of misappropriation of trade secrets? 6.What steps do you think the employer should take in the future to better protect itself?