Bryce K. Earl, Esq. and Thomas G. Grace, Esq
Presentation To:Association of Corporate Counsel
January 26, 2010______________________________
Covenants Not to Compete and Trade Secrets
______________________________
Three CertaintiesFor The Future
Death, Taxes, and…
Non-Compete/ConfidentialityAgreements
Myths About Non-Competes
If you didn’t sign a non-compete agreement, thenyou’re free to work anywhere.
If you didn’t sign a writtencontract, you’re free to workanywhere
Since you signed before themerger (or sale), that oldcontract can’t be enforced
If you were fired, then yournon-compete is unenforceable
If anyone in the industry hasthe info, you can take it withyou.
California has no restrictionsregarding where you can gowork.
Where to Find the Restrictions
Non-Compete Agreements Confidentiality/Non-Disclosure Agreements Employee Handbook/Company Policies IP Agreement/Work-For-Hire Training Agreements Stock Options/Compensation Agreements Transfer/Relocation Agreements
Types of Restrictions
Non-Compete Non-Solicitation ofCustomers
Non-Solicitation ofEmployees
Confidentiality
Trade Secrets/Covenants Not to Compete Impact…
All IndustriesEmployees at Every LevelMany Business Transactions
Guidelines Regarding Enforceability
Protection of Legitimate Business Interests? Reasonable Geography? Reasonable Duration? Other Equities? (Wild Card)
Potential Related Claims Inevitable Disclosure Violation of UTSA “Unfair Competition” Conversion Breach of Duty of Loyalty Economic Espionage Act Computer Fraud And Abuse Act Breach of Good Faith &Fair Dealing Accounting Corporate Raiding
Claims Against Third Parties
Tortious Interference with Contract Tortious Interference with Prospective
Business Relations Aiding and Abetting
The Uniform Trade Secret Act has been enacted in 43 states . . .
Not enacted in:
VT
NY
MA
PA
NJ
AR
WY
Trade Secret Definition
“TRADE SECRET” means information, including, without limitation, a formula, pattern, compilation, program, device, method, technique, product, system, process, design, prototype, procedure, computer programming instruction or code that:
Trade Secret Definition (cont.)
Derives independent economic value, actual or potential, form not being generally known to, and being readily ascertainable by proper means by the public or any other persons who can obtain commercial or economic value from its disclosure or use; and
Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
Trade Secret? Customers
Contact Information Purchasing History Credit / Payment History
Potential Customers Pricing
Discounts Incentives Programs
Personal Information (NV Amendment)
Periodic Sales Figures Profitability Sales Commission
Programs / Compensation Inventories Product Profitability Suppliers
Discount Programs Product Quality
Nevada’s Privacy Amendment
Made Effective January 1, 2010 Applies to all “data collectors doing
business in this State” Requires implementation and maintenance
of reasonable security measures Requires compliance with PCI standards Specifically defines “encryption”
Nevada’s Privacy Amendment
Requires encryption any electronic transmissionAny movement of a data storage device
Includes data storage contractor Excludes certain telecommunications
providers 2005 – requires disclosure of any security
breach
Nevada’s Privacy Amendment“Data collector” means any governmental
agency, institution of higher education, corporation, financial institution or retail operator or any other type of business entity or association that, for any purpose, whether by automated collection or otherwise, handles, collects, disseminates or otherwise deals with nonpublic personal information.
Nevada’s Privacy Amendment“Personal information” means a natural person’s first name or
first initial and last name in combination with any one or more of the following data elements, when the name and data elements are not encrypted: Social security number. Driver’s license number or identification card number. Account number, credit card number or debit card number, in
combination with any required security code, access code or password that would permit access to the person’s financial account.
The term does not include the last four digits of a social security number or publicly available information that is lawfully made available to the general public.
Confidentiality Agreements
Trade Secret or Confidential Information Definition of:
Trade SecretConfidential Information
Durational Term Enforceability
Potential Defenses Unreasonable Lack of Consideration Not “Competing” With Prior Employer Breach of Agreement by Prior Employer Does Not Protect Legitimate Business Interest of Prior
Employer Antitrust Labor Practices Declaratory Judgment
Other Key Issues
Choice of Law Forum Selection Arbitration Assignment Settlement Terms
Return of All Documents Exit Interview Regular
Acknowledgement of Obligations
Marking Documents (electronic and Hard Copy)
Notification to New Employer
New Employee Risks
Confidentiality Trade Secret Noncompete Nonsolicitation
CustomersEmployees
Related Company Policies
Review and Update
Trade Secrets / Protection ProgramsPrivacy ProgramsCovenants Not to CompeteConfidentiality and Non-Disclosure
AgreementsDeceptive Trade PracticesEmployee Disloyalty
Bryce K. Earl Thomas G. [email protected] [email protected]
400 South 4th Street3rd Floor
Las Vegas, NV 89101tel: 702.791.0308fax: 702.791.1912
www.santorodriggs.com
