Top 10 Developments And Headlines In Trade Secret, Non-Compete, And Computer Fraud Law In 2018/2019

Continuing our annual tradition, we have compiled our top developments and headlines for 2018-2019 in trade secret, non-compete, and computer fraud law.

1. Government Agencies Increasing Scrutiny of Restrictive Covenants

   In mid-2018, the Attorneys General of ten states investigated several franchisors for their alleged use of "no poach" provisions in their franchise agreements. In a July 9, 2018 letter, the Attorneys General for New Jersey, Massachusetts, California, Washington, D.C., Illinois, Maryland, Minnesota, New York, Oregon, Pennsylvania, and Rhode Island requested information from several franchisors about their alleged use of such provisions. Less than twenty-four hours later, some franchisors (mostly different ones than those who received the information demands) entered into agreements with the Washington State Attorney General's Office to remove such clauses from their franchise agreements. The recent focus by state law enforcement on franchisors is a new twist, given that restrictive covenant agreements in the franchise industry are typically given more leeway than in the employment context.

   In a settlement with the office of New York Attorney General, a large employer agreed to drop its non-compete requirement for all employees except high-level executives, consistent with a policy in favor of employee mobility.

   On the federal level, Assistant Attorney General Makan Delrahim announced in 2018 that the DOJ had been "very active" in reviewing potential antitrust violations stemming from agreements among employers not to compete for workers. Employers should remain vigilant and confirm their compliance with these laws, as employers may face DOJ enforcement actions and class action litigation.

2. Supreme Court Grants Cert. to Interpret Meaning of "Confidential" or "Trade Secret" Under FOIA

   On January 11, 2019, the Supreme Court accepted certiorari in Food Marketing Institute v. Argus Leader Media to reconcile fractured circuit tests on when the government may withhold information from a Freedom of Information Act ("FOIA") request based on responsive information being confidential or a trade secret. The case has major potential ramifications for the protections given to sensitive information submitted by companies to the government, whether voluntarily, under compulsion (say, via grand jury or administrative subpoena) or as part of reporting obligations. For anyone or entity that does business or interfaces with the government, the Supreme Court's decision in Food Marketing Institute will be one to closely watch.

3. Whistleblower Protection

   In what appeared to be a first under the DTSA, the Eastern District of Pennsylvania federal court in Christian v. Lannett Co., Inc. threw out claims against an alleged trade secret thief on the basis of the DTSA's immunity for confidential disclosures to attorneys in the course of investigating a suspected violation of the law.

   In MMM Holdings, Inc. v. Reich, a California Court of Appeal held that the receipt, retention, and dissemination of confidential information by a whistleblower's attorney is protected under the state's anti-SLAPP statute, adding to the protections for attorneys who in similar factual...