unfair competition
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President Biden signed an Executive Order broadly targeting anti-competitive tactics that disadvantage smaller businesses and people.

One aspect of this order targets the use of noncompete agreements. Under the Order, the Federal Trade Commission (FTC) is encouraged to ban or limit noncompete agreements.

The noncompete provision of the Order is intended to promote competition and economic growth by making it easier for workers to change jobs. The Order also encourages the FTC to limit employers’ ability to share wage and benefits data to prevent employers from collaborating to suppress wages and benefits.

Why it matters:

According to the Order:

Roughly half of all private-sector businesses require at least some employees to enter non-compete agreements, affecting 36 to 60 million workers [and] third parties … make wage data available to employers—and not to workers—in certain circumstances without triggering antitrust scrutiny. This may be used to collaborate to suppress wages and benefits.

Yet many businesses are using post-employment restrictions simply to limit wages. For example, we recently obtained a ruling from Michigan’s Wage and Hour Division against an IT subcontractor over its use of a noncompete and other post-employment restrictions.

The subcontractor claimed our client improperly disclosed “confidential information,” which consisted of the employee’s own compensation rate and terms. The subcontractor further claimed the employee breached the agreement and engaged in unfair competition by obtaining a higher-paying job with a competitor. But such restrictions are not permitted under Michigan law, which provides that employers may not, as a condition of employment, prohibit employees from discussing their wages or benefits.

How the Order will Affect Noncompete Agreements:

It’s not clear how the Executive Order will affect noncompete restrictions used by businesses.

One reason for this uncertainty is that noncompete agreements are mainly subject to state laws. And states vary significantly in how noncompete agreements are treated.

For example, California generally bans their use in employment situations. Other states have limitations based on wages. States like Michigan allow for their use if specific requirements are met involving “reasonableness.” And other states have no specific laws for or against noncompete restrictions.

Second, aside from the Order focusing on “unfair” use of noncompetes restrictions, it is unclear how broad the ban would be.

We think it is unlikely that the FTC will move to eliminate post-employment restrictions. But because the Order focuses on protecting mobility and the ability of lower-wage workers to get higher-paying jobs, we believe the FTC will likely concentrate on limiting noncompete restrictions imposed on low-wage workers.

Yet even with the uncertainty over how President Biden’s Order will apply, employers should review their noncompete agreements.

How Should Employers Respond:

President Biden’s Order follows a trend towards scrutinizing the use of noncompete restrictions in general, but especially in lower-wage jobs. Such scrutiny has come from egregious misuse of noncompete restrictions like Jimmy John’s imposing them on sandwich makers (See Jimmy John’s Sued (Again) Over its Noncompete Restrictions) or actions by state legislatures or attorney generals limiting their use or suing under anti-competition theories.

We will be counseling businesses on how noncompete restrictions are currently used. One focus area will be whether our clients impose noncompete restrictions across the board for all employees or (preferably) in a more surgical manner consistent with reasonably protecting the business from unfair competition.

If you would like more information about best practices and legal strategies for maximizing post-employment protections or understand if your noncompete agreement is enforceable, use this link to contact Michigan attorney Jason Shinn. Since 2001, Mr. Shinn has represented companies and individuals concerning the issues discussed above and other employment matters under federal and Michigan employment laws.

Vaccine MandateThis past week Trinity Health announced it would require its employees and contractors to be vaccinated against COVID-19. Under a rolling schedule, current employees must comply with the policy by September 21. People hired after September 1 must be vaccinated within 14 days.

Trinity’s announcement follows Henry Ford Health System’s decision announced in June that its workforce must get vaccinated by September 10, 2021. See Dustin Walsh from Crain’s Detroit Henry Ford Health System to require COVID-19 vaccine for all employees.

Why it Matters:

These vaccine mandates by Trinity and Henry Ford are part of a larger, national trend where companies require employees to be vaccinated or face termination. I expect this trend will continue along with challenges by employees who oppose any mandate to get vaccinated.

Going Deeper:

Our office has fielded many questions over the past weeks about whether employers can require employees to be vaccinated. If there is a “short answer,” it is “yes, probably, but with some exceptions.” In May, we explained that employers could require their employees to be vaccinated and encourage doing so according to guidance from the Equal Employment Opportunity Commission (EEOC). See EEOC says employers can require and encourage employees to get vaccinated.

And consistent with our analysis, on June 12, 2021, a Judge (a Reagan appointee) dismissed a lawsuit over Houston Methodist Hospital’s requirement that its employees must be vaccinated or face discharge. In that opinion, the Judge ruled Houston’s vaccine requirement does not violate state or federal law or public policy.

But we also explained that any vaccine mandate will also likely need exemptions. Likely exemptions would be for medical or religious reasons.

While we have not reviewed Henry Ford or Trinity’s policy, Dustin Walsh of Crain’s Detroit reported that both vaccine policies include procedures for employees seeking an exemption for medical or religious reasons. Trinity’s exemptions are discussed here and Henry Ford’s are here.

Other Considerations on Vaccine Requirements:

Trinity employs about 24,000 people in Michigan. And Henry Ford employs about 33,000. While many of these people have been vaccinated, a sizeable portion has not. So these vaccine mandates affect a lot of employees.

It is also not clear how many of the unvaccinated employees would choose termination over getting vaccinated. Going back to Houston Methodist, it was reported that out of approximately 25,000 employees, 153 chose resignation or termination over getting vaccinated.

It is also worth noting that Michigan employees would likely be ineligible for unemployment benefits if they chose not to follow their employer’s vaccine requirement.

Use this link to contact Michigan attorney Jason Shinn if you have questions about this article or complying with Michigan or federal employment laws. Since 2001, Mr. Shinn has represented companies and individuals about the issues discussed above and other employment matters under federal and Michigan employment laws. Further, in response to the coronavirus, he has represented both employers and companies to respond to it, including drafting COVID-19 related policies and addressing vaccine exemption issues.

Defend Trade Secrets ActA court decision from the Third Circuit clarified requirements for making a trade secret misappropriation claim under the Defend Trade Secrets Act (”DTSA”). 

At the pleading stage (the beginning phase of a lawsuit), the Court allowed a plaintiff to pursue its claims under a less demanding threshold of proof of the actual trade secrets and evidence of misappropriation than the lower court had required. 

Trade secret plaintiffs will still need to provide the detailed factual support required to maintain a trade secret misappropriation claim, but that measure of proof can come later in the lawsuit. 

While good for plaintiffs, this is not good news for trade secret defendants. This is because defendants will likely expend more legal fees and resources in discovery before moving to dismiss DTSA claims, including weak or even frivolous DTSA claims.   

Going Deeper:

In 2017, Oakwood Laboratories, L.L.C. sued its former Vice President of Product Development, Dr. Thanoo. It also sued Dr. Thanoo’s new employer, Aurobindo Pharma U.S.A., Inc., and its parent and affiliated companies (collectively Defendants). Oakwood sued these Defendants for trade secret misappropriation under DTSA and related claims. 

However, over the next two years, the district court dismissed Oakwood’s complaint and three other iterations for “failure to state a claim.” Dismissals, for this reason, relate to sometimes complex civil procedural issues; essentially, a plaintiff failed to provide sufficient factual support needed to establish the legal elements of a claim. 

On that point, Oakwood stumbled in showing two elements needed to make its DTSA claim: 

  • the existence of a trade secret — information with independent economic value that the owner has taken reasonable measures to keep secret (18 U.S.C. § 1839(3)); and 
  • the misappropriation of that trade secret involves showing the defendant knew about the improper acquisition, use, or disclosure of the secret (§ 1839(5))

On appeal, the Court reversed the district court’s decision. The Court found Oakwood had sufficiently alleged the identity of its trade secrets claimed to have been misappropriated. It also reversed the lower court’s decision that Oakwood failed to offer direct proof of how the competitor’s product used Oakwood’s trade secrets without permitting the discovery essential to uncovering the evidence for proper consideration of the merits.

Here is a copy of the Court of Appeals decision, Oakwood Labs. LLC v. Thanoo (3d Cir. June 8, 2021).

Trade Secret Litigation Trends:

As the Lex Machina Report confirms, DTSA litigation is not going away; during the pandemic, it made up 72.9% of trade secret suits in 2020, compared with 72.5% in 2019.

And the Oakwood case is not an anomaly. Instead, it echoes significant trends highlighted in Lex Machina’s 2021 report on the DTSA and other trade secret litigation insights. Specifically, Lex Machina identified from 2016 to 2020, that courts found in 114 cases a failure to identify a trade secret such that the claim could not go forward. And in 63 cases, courts found a failure to maintain secrecy as the reason to dispose of the trade secret claim. 

Next Actions for Companies:

Even under a lower evidentiary standard like that provided for in the Oakwood opinion, trade secret plaintiffs still must support their DTSA claims even if they get past the pleading stage. Yet successful trade secret litigation begins before suits are filed. Accordingly, proactive companies should act now to shore up the company’s trade secret protections and policies. Such actions are needed if (or when) your intellectual property is misappropriated. 

Use this link to contact Michigan attorney Jason Shinn if you have questions about this article or complying. Since 2001, Mr. Shinn has collaborated with companies and entrepreneurs to perform trade secret audits and implement protection plans for such intellectual property. He also litigates these disputes in federal and Michigan Courts, including recently getting a DTSA and Michigan trade secret claimed dismissed for his clients.    

Michigan Unemployment BenefitsMichigan’s Unemployment Insurance Agency (UIA) reinstated its work search requirements for unemployment benefit claimants. This reinstatement went into effect on May 31, 2021. Exceptions and exemptions remain.

Beginning in March 2020, the UIA suspended its work search requirements. This suspension stemmed from the significant number of Michiganders facing unemployment because of the Coronavirus pandemic.

Work Search Requirements

Claimants, however, must now actively seek work and report at least one work search activity per week for each week they claim benefits. A work search activity may include:

  • Submitting a job application;
  • Attending a job fair or employment workshop; or
  • Interviewing with prospective employers.

There are COVID-19 exemptions. These exemptions are generally for:

  • Self-employed people;
  • People unable to work due to COVID-19; and
  • Parents with children attending school remotely because the school is closed.

If an individual has an approved waiver, they are exempt from the work search requirement. Claimants must apply for a waiver before their certification for benefits.

Besides COVID-specific waivers, claimants may also be exempt from the work search requirement if they are granted a temporary layoff waiver. The employer must request this type of waiver before a worker is laid off. The Registration and Seeking Work Waiver may be approved for 45 days. The criteria for establishing a waiver are:

  • The separation must be a layoff for lack of work;
  • The layoff is temporary (work will be available within 45 days); and
  • The request must be received before the layoff occurs (no later than the week before the layoff).

If the waiver is not requested before the layoff, it cannot be retroactively applied.

Refusing an Offer of Suitable Work

Suppose an employer offers suitable work to an employee or makes an offer for an employee to return to their previous job. In that case, the employee may lose unemployment benefits if the person refuses.

Both employers and employees must report offers and refusals of suitable work to the Agency. The employer should notify the UIA by submitting details of the rejection to the UIA’s MiWAM.

Use this link to contact Michigan attorney Jason Shinn if you have questions about this article or complying with Michigan or federal employment laws. Since 2001, Mr. Shinn has represented companies and individuals concerning the issues discussed above and other employment matters under federal and Michigan employment laws.

Employee Computer HackingOn June 3, 2021, the U.S. Supreme Court issued a ruling that significantly limits the “exceeds authorized access” clause of the Federal anti-hacking statute called the Computer Fraud and Abuse Act of 1986 (CFAA). Here is a copy of the opinion (Van Buren v U.S.)

Why the CFAA Opinion Matters:

Without proper planning, this ruling will drastically limit remedies and strategies employed by companies against former employees accused of wrongfully accessing information stored on company networks.

Going Deeper – Understanding the CFAA.

The CFAA is the main federal anti-hacking law. The CFAA imposes liability in two situations: any one (1) who “intentionally accesses a computer without authorization; or (2) exceeds authorized access.” 18 U. S. C. §1030(a)(2). The Supreme Court addressed the second situation in its ruling on Thursday.

The CFAA is often the go-to claim prosecutors use when someone “hacks” into computer networks covered by the CFAA. But over the years, the CFAA became a favorite tool for businesses to use against former employees accused of wrongfully accessing company data for personal gain. Or in other instances, CFAA claims were brought against employees with authorized access to company data, but exceed that authorization by misappropriating the employer’s trade secrets or other confidential information before leaving to work for a competitor.

By adding a CFAA claim, a business could easily sue in federal court and gain significant leverage using the CFAA’s provisions for damages and recovery of attorneys’ fees.

Exceeding Authorization to Access the Computer Data.

Van Buren is a former Georgia police sergeant. He used his police account to access a law enforcement database to retrieve information about a license plate number in exchange for $6,000.00. But the money, however, came as part of an FBI sting operation.

So Van Buren had the authority to access the database for police purposes and he used his valid log-in credentials to perform the search. But his access was for personal use and gain. This conduct violated a department policy against obtaining database information for non-law-enforcement purposes.

For this, he was charged with a felony violation of the Computer Fraud and Abuse Act of 1986 (CFAA) and later convicted. The Eleventh Circuit upheld the conviction in 2019. But in a 6-3 split opinion, the Supreme Court Justices reversed the CFAA conviction.

Limits to “Exceeding Authorization” Claims?

Van Buren was not a sympathetic defendant. But much of the majority opinion, in excruciating detail, focused on the language of the CFAA statute (I lost count of how many times various dictionaries were cited). And the majority of the Supreme Court Justices were troubled about how easily “exceed authorization claims,” could be weaponized against fairly standard, everyday conduct.

In fact, much of the majority opinion’s concern over the broad scope of the CFAA advocated by the Government came from everyday employment situations. Here’s how Justice Barrett (the author of the majority opinion) explained this concern:

If the “exceeds authorized access” clause criminalizes every violation of a computer-use policy, then millions of otherwise law-abiding citizens are criminals. Take the workplace. Employers commonly state that computers and electronic devices can be used only for business purposes. So on the Government’s reading of the statute, an employee who sends a personal email or reads the news using her work computer has violated the CFAA.

The other concern involved the “terms and conditions” on websites or social media platforms (those things that no one pays attention to, but everyone accepts). Here’s what Justice Barrett had to say on this topic:

Or consider the Internet. Many websites, services, and databases—which provide “information” from “protected computer[s],” §1030(a)(2)(C)—authorize a user’s access only upon his agreement to follow specified terms of service. If the “exceeds authorized access” clause encompasses violations of circumstance-based access restrictions on employers’ computers, it is difficult to see why it would not also encompass violations of such restrictions on website providers’ computers.

Closing Thoughts:

I’ve represented parties pursuing and defending civil CFAA claims. Those lawsuits involved fact patterns remarkably similar to both scenarios Justice Barrett described. Based on this experience, the CFAA can be an appropriate tool to protect businesses from unscrupulous employees exploiting their employer’s digital assets. But it is equally (if not more so) a tool inappropriately used by overly aggressive lawyers asserting questionable claims on behalf of their clients.

With this insight, the Supreme Court ruling should be mostly a welcome limit for when exceeding authorized access suits can be pursued.

And it is important to note that such claims can still be pursued under this ruling. But to do so, employers will likely need to revise workplace policies and how company information is stored and accessed. This will require access control or other technological barriers around confidential and trade secret information with an emphasis on making such information accessible only on a “need to use” basis.  But such limits should already be in place. And those limits are already needed to pursue traditional trade secret misappropriation claims. If not, employers now have a good excuse to make their company information more secure from internal and external threats.

Use this link to contact Michigan attorney Jason Shinn if you have questions about this article. Since 2001, Mr. Shinn has represented companies and individuals concerning the issues discussed above and other employment matters under federal and Michigan employment laws.   

Karen and RacismA lawsuit stemming from a company’s termination over off-duty conduct that went viral on social media is a reminder of the need to properly handle disciplinary actions.

The lawsuit also reflects the increasing trend employers’ are forced to respond to – reacting to social media incidents of employee conduct outside the workplace. It also reflects the risks employers face over terminating an employee for such issues. Below we offer suggestions for limiting these risks.

Going Deeper:

Remember Amy Cooper? She was the white dog owner who called the police on a Black man who was bird-watching in New York’s Central Park. She claimed he threatened her. But that was not true. Instead, a video of the incident showed she only called the cops after he politely asked her to leash her dog. As an aside, she’s lucky she was not charged for animal cruelty for the way she “handled” her poor puppy in the video.

Adjectives to describe Cooper’s actions could include vile, reprehensible, or despicable. But the District Attorney’s office simply called it a misdemeanor for falsely reporting an incident to police. Those charges were later dropped after she completed an alternative sentencing program.

Cooper’s employer, Franklin Templeton, fired her in response to the Central Park incident. Cooper Franklin Templeton Tweet

But Cooper’s retelling of this incident from her Complaint against Franklin Templeton returns to the story where she claims to be the actual victim of various villains conspiring against her to make her out to be a terrible, racist person. Here’s a sampling of that retelling:

  • “On May 25, 2020, Plaintiff was confronted in Central Park by Christian Cooper while walking her dog alone. This confrontation became international news as a racial flashpoint, characterized as a privileged white female “Karen” caught on video verbally abusing an African American male with no possible reason other than the color of his skin.”
  • “This characterization was created and nurtured, in whole or in part, by the public statements published by the Defendants …”
  • “[Cooper] did these things because she was alone in the park and frightened to death after being selected as the next target of Christian Cooper, an overzealous birdwatcher…”
  • It was Christian Cooper’s practice and intent to cause dog owners to be fearful for their safety and the safety of their dogs.
  • Franklin Templeton only interviewed Cooper when she was “palpably distraught and fearful of her safety.”
  • Through Twitter statements and interviews from the CEO, “Franklin Templeton perpetuated and legitimized the story of “Karen” vs. an innocent African American to its perceived advantage, with reckless disregard for the destruction of Plaintiff’s life in the process.

Cooper also asserts Franklin Templeton did not conduct an adequate investigation. Among the claimed shortcomings of the investigation, Franklin Templeton did not review the African American birdwatcher or any witnesses from the park. She also complained Franklin Templeton did not review her 911 call or meeting minutes from the New York City Park Board Meetings. These minutes are alleged to include incidents pre-dating her call to the police where Christian Cooper asked other dog-owners to leash their dogs (Not sure how the serial “please leash your dog” Black Guy defense helps here or justifies Cooper’s 911 call to the police but that’s just me).

According to Cooper the cumulative effect of her former employer’s response “convey[ed] that Franklin Templeton had performed a thorough and fair investigation, and that the result of the investigation concluded that Plaintiff was a racist and that is why Franklin Templeton fired her.”

Cooper also alleged Franklin Templeton discriminated against her based on race and sex because she wouldn’t have been “targeted” if not for being a White woman.

Suits like Cooper pose real problems for employers.

We’ve successfully defended companies and managers over frivolous or questionable claims on par with those against Franklin Templeton. But that success comes at a cost, including in some instances days of trial waiting for a jury to return a verdict. And cases like Cooper’s show that even where employers have a legal reason to terminate, they can often be sued for how the termination is carried out or, at least, find an attorney to pursue such theories.

Here are a few takeaways and recommendations from or experience for limiting your legal risks:

  1. Generally, an employer’s reasonable investigation won’t be second-guessed by judges, including whether it was was ‘fair’ or not. In Michigan, this is called the “business judgment rule.” Even so, employers should prepare this defense by adequately documenting the facts for or against disciplining an employee.
  2. Investigations and decisions for or against discipline should be applied consistently across the workforce; Be prepared to explain and support any deviations from past disciplinary action.
  3. Less is more. If your company terminates an employee, decide whether it is worth commenting on it. If it is, the response should be carefully crafted, be limited to the facts, and come from a designated company representative who is also the point-person for follow-up.
  4. The reasons for disciplining an employee should be “job-related.” If the offending action occurs during non-working hours, employers should be prepared to show the offending conduct adversely affects the employer’s business or violates its written policies.
  5. As to employer social media policies, careful consideration should go into drafting them. Balancing three considerations should be reflected in your policies: (i) Protecting the company’s reputation and business interests; (ii) Not unnecessarily expending resources policing the workforce; and (iii) Not alienating good employees with an overzealous policy of policing off-duty conduct.

For employees, you should assume, except for narrow exceptions, that social media or off-duty conduct is not a bar for your employer to discipline you. Just ask the insurrectionists who lost their jobs after attacking the Capital on January 6.

Use this link to contact Michigan attorney Jason Shinn if you have questions about this article or complying with Michigan or federal employment laws. Since 2001, Mr. Shinn has represented companies and individuals concerning the issues discussed above and other employment matters under federal and Michigan employment laws.

Carrot Stick IncentiveOn May 28, 2021, the Equal Employment Opportunity Commission (EEOC) issued guidance for employers on whether it is legal for companies to require workers to get coronavirus vaccines.  

Vaccine Requirements

In the EEOC’s guidance, the Agency said it is legal for employers to require workers to get coronavirus vaccines, subject only to the reasonable accommodation provisions of Title VII and the ADA and other EEO considerations discussed in the guidance. According to the EEOC, companies can also offer incentives to employees to get vaccinated, as long as the employer does not administer the vaccine.

Reasonable Accommodation Guidance

Regarding reasonable accommodation considerations, there are two situations where these issues could arise under Title VII or the ADA: Reasonable accommodation because of disability or sincerely held religious belief, practice, or observance. 

Undue hardship analysis (at least for now*) differs depending on whether the accommodation is for a disability or religion. It is also important to note that disability issues may include pregnancy-related conditions if they constitute a disability under the ADA. The EEOC provided examples of reasonable accommodations

* The Supreme Court recently declined to hear cases that could have put an additional burden on businesses in religious accommodation cases.  Undue hardship under the ADA means significant difficulty or expense in providing the accommodation. In contrast, undue hardship for religious accommodations is much lower, e.g., an undue hardship is created by an accommodation that has more than a very small cost or burden on the employer (referred to as “de minimis.”). Three Justices, however, want to change this (Samuel Alito, Clarence Thomas, and Neil Gorsuch).

Use this link to contact Michigan attorney Jason Shinn if you have questions about this article or complying with Michigan or federal employment laws. Since 2001, Mr. Shinn has represented companies and individuals concerning the issues discussed above and other employment matters under federal and Michigan employment laws.   

Employee Mask RequirementsToday, MIOSHA updated its COVID-19 Workplace Rules under Gov. Whitmer’s MI Vacc to Normal plan.

The changes, which reflect the recent order from MDHHS and guidance from the CDC, include: 

  • Employers may allow fully vaccinated employees not to wear face coverings and social distance provided they have a policy deemed effective to ensure non-vaccinated individuals continue to follow these requirements. For businesses or operations that provide in-home services, this policy must include accurate appointment records, including date and time of service, name of the client, and contact information, to aid with contact tracing.   
  • The rules were also reformed, focusing on performance, eliminating industry-specific requirements, and updated definitions to more clearly reflect changes in close contact and quarantining requirements for fully vaccinated employees.  
  • Cleaning requirements were updated to reflect changes in CDC recommendations.  

The revised COVID-19 emergency rules are in response to Michigan reaching a 55% vaccination threshold.

MIOSHA also removed the requirement that employers must create a “policy prohibiting in-person work for employees to the extent that their work activities can feasibly be completed remotely.” Employers should continue to have and implement a written COVID-19 preparedness and response plan consistent with these updated rules.  

Use this link to contact Michigan attorney Jason Shinn if you have questions about this article or complying with Michigan or federal employment laws, including COVID-19 regulations. Since 2001, Mr. Shinn has represented companies and individuals concerning the issues discussed above and other employment matters under federal and Michigan employment laws.

A former Toronto Blue Jays pitcher, Michael Bolsinger, sued the Houston Astros for trade secret misappropriation. He claims the Astros violated Texas trade secret law by stealing his team’s pitching signs in an August 2017 game.

Why it matters:

As an attorney who has handled trade secret matters for almost 20 years, this lawsuit is perplexing. But it does offer an overview for discussing the broad application trade secret protections have for a business and where trade secret protections can come up short in business.

The Details:

On August 4, 2017, Bolsinger only pitched a partial inning before giving up 4 runs. This would be the last inning he pitched in MLB.

It was later discovered that the Astros used a centerfield camera to steal the pitching signs of its opponents. Someone watching this camera feed would then relay to the batter the next pitch by banging a coded message on a garbage can.

According to Bolsinger’s lawsuit, the Astros decoded and stole the sign for essentially every pitch he threw on August 4. Bolstering this conclusion, 41% of Bolsinger’s pitches were preceded by trash can banging. After this disastrous inning, Bolsinger was cut by the Blue Jays.

In November 2019 news of this sign-stealing scheme broke and was later confirmed by MLB on January 13, 2020.

It is fitting a trashcan was integral to the Astros sign-stealing scheme because the whole plan was garbage. But the same can be also be said about Bolsinger’s trade secret lawsuit. Here is a copy of that complaint, Bolsinger v Houston Astros.

The Trade Secrete Claims – A swing and a miss!

Trade secret protection may extend to any information used in one’s business, and if it gives the owner an opportunity to obtain an advantage over competitors who do not know or use it.

But certain requirements must also be met to qualify as a trade secret. And here are two glaring reasons why Bolsinger’s claim over pitching signals is not likely to be successful:

  • Trade secrets – As the name suggests, secrecy is important. In fact, to have a valid trade secret requires reasonable efforts to maintain its secrecy from others. But a pitcher’s signs come from a catcher. So those signs can be readily observable by an opposing player on second-base or anyone in the stands with a view of the catcher.
  • Ownership – Another trade secret requirement is ownership. To the extent pitching signals are “owned,” that ownership would be with the team – not the pitcher.

These are just “two strikes” against Bolsinger’s trade secret complaint, but there are more. As such, it is hard to see how the lawsuit will be any more successful than the disastrous pitching outing that was that gave rise to this lawsuit.

Use this link to contact Michigan attorney Jason Shinn if you have questions about this article. Since 2001, Mr. Shinn has represented companies and individuals concerning the issues discussed above and other employment matters under federal and Michigan employment laws.

Trade Secret RisksNephron Pharmaceutical Corp. agreed to accept $7.9 million to settle its trade secret misappropriation lawsuit against its competitor U.S. Compounding Inc., its parent company Adamis Pharmaceuticals Corp., and former employees.

Why it Matters: 

For the defendant businesses, the case arose from actions that every company routinely faces – hiring employees. But the competitors could have avoided the lawsuit or slashed their monetary liability.

The Details:

Nephron sued the Defendants for claims under Defend Trade Secrets Act and related claims. For its lawsuit, Nephron alleged that its former employee (Hulsey) used multiple devices to download its data, including customer contacts, purchasing history, and pricing details, before leaving Nephron to work for U.S. Compounding.

And just after leaving, Hulsey emailed Nephron’s customer about her new position and details for providing the same medications through her new employer. Nephron asserted the information in this email used its trade secret information.  

Nephron also alleged a second former employee used confidential information in her new sales position with U.S. Compounding/Adamis. 

The Take-away:

Your company’s hiring procedures should explain that it respects competitors’ intellectual property rights. And employees will not be allowed to use any such property from a prior employer. Further, your offer letter or employment agreement should include a representation that the new hire will not use any intellectual property from any previous employer and is not subject to any contracts or obligations that would interfere with the offered position. 

Also, Nephron and its legal counsel put on a clinic for how to pursue trade secret misappropriation claims. From the start, they preserved evidence of the misappropriation, showed how that information qualified as a “trade secret,” and provided evidence for how the information was improperly used.

In contrast, plaintiffs and their attorneys don’t always show the same competence. For example, in two recent trade secret misappropriation lawsuits against our clients, we defeated both on motions. These dismissals exemplify the importance trade secret plaintiffs need for properly evaluating potential misappropriation issues and selecting legal counsel who can competently pursue them.

For example, in one of these dismissal orders, the Judge pointed out that the Plaintiff, Qualite Sports Lighting, failed to even provide evidence its information was a “trade secret.” And even if it had, Qualite failed to show any information was misappropriated.

Instead of properly addressing these basic deficiencies at the beginning of the case, the plaintiff likely expended over $200,000 in legal fees. That’s not a good investment – unless you are the plaintiff’s law firm. Here’s a copy of the Qualite Sports Lighting Order Dismissing its Trade Secret Claims.

For individuals, the lawsuit exemplifies what not to do when ending your employment to join a competitor. Specifically, you need to understand what post-employment conditions you have with an employer. Often such restrictions include noncompete, non-solicitation, and confidentiality requirements. Even if there are no written agreements, you may face liability for taking any information of your soon-to-be ex-employer. You should also assume there will be “digital fingerprints” on any information, email, database, or file that you download, forward, or otherwise copy. 

Use this link to contact Michigan attorney Jason Shinn if you have questions about this article or our history of successfully pursuing and defending trade secret claims. Since 2001, Mr. Shinn has represented companies and individuals over the issues discussed above and other employment matters under federal and Michigan employment laws.