1. Presentation To: Association of Corporate Counsel January 26, 2010
______________________________
Covenants Not to Compete
and Trade Secrets
Bryce K. Earl, Esq. and Thomas G. Grace, Esq

2. Three Certainties For The Future Death, Taxes, and…

3. Non-Compete/Confidentiality Agreements

4. Myths About Non-Competes

5. 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

6. Types of Restrictions

7. Trade Secrets/Covenants Not to Compete Impact…
All Industries
Employees at Every Level
Many Business Transactions

8. Guidelines Regarding Enforceability
Protection of Legitimate Business Interests?
Reasonable Geography?
Reasonable Duration?
Other Equities? (Wild Card)

9. 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

10. Claims Against Third Parties
Tortious Interference with Contract
Tortious Interference with Prospective Business Relations
Aiding and Abetting

11. The Uniform Trade Secret Act has been enacted in 43 states . . .
Not enacted in: VT NY MA PA NJ AR WY

12. 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:

13. 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.

14. Trade Secret? Customers Potential Customers Pricing
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

15. 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”

16. Nevada’s Privacy Amendment
Requires encryption
any electronic transmission
Any movement of a data storage device
Includes data storage contractor
Excludes certain telecommunications providers
2005 – requires disclosure of any security breach

17. 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.

18. 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.

19. Confidentiality Agreements
Trade Secret or Confidential Information
Definition of:
Trade Secret
Confidential Information
Durational Term
Enforceability

20. 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

21. 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

22. New Employee Risks Confidentiality Trade Secret Noncompete
Nonsolicitation
Customers
Employees
Related Company Policies

23. Review and Update Trade Secrets / Protection Programs
Privacy Programs
Covenants Not to Compete
Confidentiality and Non-Disclosure Agreements
Deceptive Trade Practices
Employee Disloyalty

24. Bryce K. Earl Thomas G. Grace South 4th Street 3rd Floor Las Vegas, NV tel: fax: