Trade Secrets & Employee Mobility

Trade secret misappropriation cases turn on details. A recent Indiana misappropriation of trade secrets case turned on a contractual clause requiring the return of all company property and confidential information at termination.

A federal judge in Chicago recently wrestled with two issues that we frequently blog about: what constitutes misappropriation of confidential information, and to what extent can a current employee prepare to compete with his employer without breaching his fiduciary duty?

This week, a Wisconsin Court of Appeals issued a decision determining that a non-compete clause does not render an arbitration clause in an employment agreement unenforceable.

In a per curiam opinion issued yesterday, the United States Supreme Court reversed a decision of the Oklahoma Supreme Court that had determined the enforceability of a non-compete agreement arising out of a contract that contained an arbitration provision. Despite the fact that the restraint at issue was found to violate Oklahoma law, the US Supreme Court determined that the Oklahoma Supreme Court overstepped its bounds and that under the Federal Arbitration Act enforceability of the non-compete should have been left to the Arbitrator.

In a recent decision in Pactiv Corporation v. Rupert, the U.S. District Court for the Northern District of Illinois held that under an employer's severance pay plan, the employer could not require a former employee to agree to a restrictive covenant in order to receive severance pay.

Last week, the Ohio Supreme Court reversed its decision of earlier this year in Acordia of Ohio, L.L.C. v. Fishel et al., in which the Court held that when a company that was the original party to a noncompete agreement merges in to another company, unless the noncompete agreement contained a "successors and assigns" clause, the merger was a termination of employment which triggered the running of the restrictive period in the noncompete.

Although the California courts have steadily eroded employers' ability to contractually limit their former employees' solicitation of their customers, a recent decision held that a stipulated injunction limiting solicitation can still be enforced.

A recent Texas case provides a good lesson about workplace paperwork formalities. In Holloway v. Dekkers and Twin Lakes Golf Course, Inc., a Texas appellate court ruled that a one-year employment agreement that was not signed by the employer fell within the statute of frauds and was therefore unenforceable.

Last week, American Airlines and one of its former employees entered in to an agreed permanent injunction which prohibits the former employee from disseminating certain confidential, proprietary or trade secret information through any medium.

In California, a non compete given in return for the sale of a business' goodwill is one of the few exceptions to the state's broad prohibition against non competes. In Fillpoint, LLC v Maas, a California appellate court narrowly construed the exception and invalidated a non compete/non solicit agreement contained in an employment agreement which was signed in connection with the sale of goodwill.