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Non-Compete Blog

  • Posts by Richard M. Reice
    Partner

    Richard Reice, L&E partner, is an experienced labor and employment law counselor and litigator with both law firm and in-house counsel experience.  Recruited from a large New York law firm as a senior L&E associate, he was appointed ...

Companies in competitive niche industries use non-compete agreements and other forms of restrictive covenant agreements to protect their trade secrets and limit the ability of their employees to work for a competitor. But what happens when one competitor aggressively recruits employees from another? Can those efforts be so targeted and intense that they give rise to a claim of unfair competition? No, ruled SDNY Judge Paul Crotty in Creative Circle v. Susan Norelle Bortone, et. al., SDNY Case No 18:7333.

Lex Machina, a Silicon Valley-based legal data analytics firm now owned by LexisNexis, recently published its first Trade Secret Litigation Report. Drawing statistics from about 800 or so federal district court cases, presumably brought via statute and diversity, the report by the legal data analytics firm examines a number of case-related metrics.[1] While the lack of detail somewhat limits the report’s utility, the report does provide some useful information about case timing and win/loss statistics. Trade Secret Litigation Report 2018 (Lex Machina, July 2018).

The regulation of restrictive covenants seems to be moving from the courtroom to the statehouse. While some states have enacted laws to codify non-competition laws that favor businesses in its effort to sustain such agreements (e.g., Florida, Georgia, Wisconsin, etc.), activity in recent months indicate a counter-trend: legislation to limit employers’ use of non-compete agreements- an unsurprising result given much of the negative press about non-competes and the White House’s May 2016 report criticizing their overuse. [1]

The defection of a team of high-level executives to a competing business is a crisis for almost any company. Savvy businesses can try to mitigate the effects of such departures by entering into restrictive covenants, including non-competition and non-solicitation agreements, with their high-level employees. However, as a recent New York restrictive covenant case illustrates, courts remain skeptical of agreements that excessively restrict the freedom of employees to move between jobs.

In perhaps the mother of present day trade secret cases, Waymo LLC, a subsidiary of Alphabet Inc. (parent company to Google), has sought a preliminary injunction against Uber for alleged misappropriation of self-driving car technology, called LiDAR, a laser system which allows self-driving cars to “see” the world around them.   Waymo sued under the DTSA (about which we have previously written) for theft of trade secrets and for infringement.

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