Trade Secrets & Employee Mobility

A recent New Jersey Supreme Court decision, Stengart v. Loving Care Agency Inc., et al., calls into doubt the enforceability of employer policies prohibiting employees from using the employer's computers for personal use, and effectively holds that an employee's communications with personal counsel concerning matters adverse to the company may occur during work time using the employer's resources.

A new study of federal court trade secret litigation published in the Gonzaga Law Review on March 17, 2010 confirms that the number of lawsuits involving alleged trade secret misappropriation continues to grow exponentially.

A former engineer and salesman for DuPont, Michael Mitchell, was recently sentenced to 18 months in prison after pleading guilty to stealing trade secrets and providing them to a Korean rival of DuPont.

A bill recently introduced in the Illinois House of Representatives, the "Illinois Covenants Not To Compete Act," would substantially alter the law regarding non-competition agreements in Illinois. In most respects, it would limit the enforceability of no-competes and make them easier for individuals to challenge. However, in certain respects, the bill would make no-competes easier to enforce.

An article recently published in the New York Law Journal explores an employee's duty of loyalty and the permissible steps that employee may take, prior to termination of employment, in preparing to compete with the employer.

A recent Alabama Court of Appeals case, Jones v. Hamilton, Case No. 2081077 (January 22, 2010), illustrates how a failure to take reasonable steps to maintain the confidentiality of documents and information will result in the loss of trade secret status.

The importance of corporate security and vigilance with regard to trade secrets was demonstrated by recent events in Syracuse, New York. On February 3, 2010, the FBI and the U.S. Attorney's Office in Syracuse announced the arrest of 29 year-old Shalin Jhaveri, who is charged with stealing trade secrets from his employer.

On January 29, 2010, in an unpublished opinion, Majestic Marketing, Inc. v. Nay, No. E047085 (Fourth District, Division Two), at least one California Court of Appeal appears to have recognized the viability of the trade secret exception to California Business & Professions Code ¶16600 prohibition of employee non-competition agreements.

In Zambelli Fireworks Manufacturing Co., Inc. v. Wood, the U.S. Court of Appeals for the Third Circuit recently held that a stock sale did not invalidate an employee's non-compete agreement.

A lawsuit recently filed in the United States District Court for the Eastern District of Virginia could be of interest to employers and attorneys alike who are following the split in the courts across the country as to whether computer access while an employee meets the statutory test for "without authorization" under the Computer Fraud and Abuse Act.