Insights

On April 23, 2024, the Federal Trade Commission (“FTC” or “the Agency”) voted 3-2 along partisan lines in a special public meeting to adopt the “Non-Compete Clause Rule” (the “Final Rule”), which will prohibit most employee non-competes with retroactive effect, except existing non-compete provisions of “senior executives.”  The Final Rule will also ban future non-compete agreements, including for senior executives, with limited exceptions.  The rule will not become effective until 120 days after publication in the Federal Register, and covered employers will be required to comply with the Final Rule by that effective date, which could come as early as August this year.  By the FTC’s own estimate, this ban could affect up to one-in-five American workers.

On March 25, 2024, the Federal Circuit issued a precedential opinion in Edwards Lifesciences Corporation v. Meril Life Sciences Pvt. Ltd., a case with significant implications for the application of the safe harbor provision of 35 U.S.C. § 271(e)(1). This case involved the importation of two transcatheter heart valve systems by Meril Life Sciences Pvt. Ltd., an India-based medical device company, to San Francisco for a medical conference. According to Meril, these heart valve systems, part of Meril’s Myval System designed to treat heart disease, were never displayed or offered for sale at the conference but were instead stored in a bag in a hotel closet and later in a storage room. The Court’s decision to affirm the district court’s grant of summary judgment of noninfringement in favor of Meril brings to light the nuances of applying the safe harbor provision in patent infringement cases.

A recent Final Initial Determination (“FID”) from newly appointed Administrative Law Judge Hines confirmed the statutory authority of the International Trade Commission (“ITC” or “Commission”) to investigate the alleged importation of goods incorporating misappropriated trade secrets causing injury to a domestic industry, as held by the Federal Circuit in TianRui Grp. Co. Ltd. v. Int’l Trade Comm’n, 661 F.3d 1322 (Fed. Cir. 2011).  The ALJ also held that Complainant had proven its domestic industry had been substantially injured despite the fact that its revenue had increased during the same period.  For Crowell’s previous client alert on TianRui, see here.

On January 5, 2023, President Biden signed into law the Protecting American Intellectual Property Act, a new bill aimed at imposing sanctions on foreign individuals and entities involved in the theft of trade secrets belonging to a U.S. individual or entity. The law provides a new mechanism for the U.S., and potentially U.S. companies, to combat theft of trade secrets committed by foreign entities or individuals.

Yesterday, the Federal Trade Commission proposed a sweeping new rule that would ban employers from including non-compete terms in employment agreements with virtually all of their workers – from janitors to senior executives. Describing such agreements as an “exploitative practice that suppresses wages, hampers innovation, and blocks entrepreneurs from starting new businesses,” the FTC’s rule deems non-compete agreements to be an “unfair method of competition” under Section 5 of the FTC Act, without regard for any business justifications or reasonableness. Potential rulemaking against non-compete clauses has been percolating for some time and has support from the White House, but the breadth of the proposed rule is nonetheless surprising.

The California Office of the Attorney General issued its first opinion interpreting the California Consumer Privacy Act (CCPA) on March 10, 2022, addressing the issue of whether a consumer has a right to know the inferences that a business holds about the consumer. The AG concluded that, unless a statutory exception applies, internally generated inferences that a business holds about the consumer are personal information within the meaning of the CCPA and must be disclosed to the consumer, upon request. The consumer has the right to know about the inferences, regardless of whether the inferences were generated internally by the business or obtained by the business from another source. Further, while the CCPA does not require a business to disclose its trade secrets in response to consumers’ requests for information, the business cannot withhold inferences about the consumer by merely asserting that they constitute a “trade secret.”

The 11th Circuit upheld a decision to unseal “embarrassing internal communications” between members of the United Network for Organ Sharing (“UNOS”) relating to its new policy directing liver transplants to go to the sickest patients within a certain radius of the donor.

On Monday, July 26, 2021, a bipartisan group of senators, led by Sen. Chuck Grassley (R-Iowa), introduced a bill titled “False Claims Amendments Act of 2021” aimed at “beef[ing[ up the government’s most potent tool to fight fraud.”

Crowell & Moring LLP’s 2021 series of client alerts: Whistleblowing – A Guide to Compliance is intended to provide companies with a practical guide to help them comply with their obligations under the EU Whistleblower Directive. Via a monthly alert, Crowell & Moring LLP will explain the different steps that companies need to take for compliance and emphasize various points for consideration. Step #4: Check the steps you should already be taking to ensure your company’s compliance with the EU Whistleblower Directive and the national laws that implement it.

After months of anticipation, the Supreme Court issued its opinion in Van Buren v. United States narrowing the scope of what constitutes “exceeds authorized access” under Section 1030(a)(2) of the Computer Fraud and Abuse Act (“CFAA”). No. 19-783, --- S.Ct. --- (June 3, 2021). The Supreme Court ruled that to be liable under the “exceeds authorized access” prong of the CFAA, a defendant must have accessed information within a computer system they were not permitted to access. It is no longer sufficient under the CFAA to show a defendant had an improper motive to obtain and use information on a computer system which they were permitted to access. 

Crowell & Moring LLP’s 2021 series of client alerts: Whistleblowing – A Guide to Compliance is intended to provide companies with a practical guide to help them comply with their obligations under the EU Whistleblower Directive. Via a monthly alert, Crowell & Moring LLP will explain the different steps that companies need to take for compliance and emphasize various points for consideration.

Recent confirmations of the U.S. Department of Justice’s (“DOJ’s”) senior leadership and enforcement actions coupled with the continued tough stance that the Biden administration is taking towards China signal that the DOJ’s China Initiative will likely remain a strategic priority. Announced in 2018, the China Initiative, led by the DOJ’s National Security Division, seeks to counter national security threats presented by the government of China by investigating and prosecuting economic espionage, trade secret theft, hacking, and other economic crimes. The China Initiative also focuses on protecting the nation’s critical infrastructure against external threats through foreign direct investment and supply chain compromises, as well as combatting covert efforts to influence the American public and policymakers without proper transparency. According to DOJ, “[a]bout 80 percent of all economic espionage prosecutions brought by the U.S. Department of Justice (DOJ) allege conduct that would benefit the Chinese state, and there is at least some nexus to China in around 60 percent of all trade secret theft cases.”

On January 11, Mayor Muriel Bowser signed “The Ban on Non-Compete Agreements Amendment Act of 2020” (the “Act”).  Though some other states and municipalities have restricted the use of non-compete agreements, the District of Columbia’s new ban – once it is applicable – will go further than similar laws in any other jurisdiction.  With few exceptions, employers in the District of Columbia will not be allowed to include non-compete provisions in employment agreements or maintain workplace policies that prohibit employees from simultaneously working for a competitor of the employer.  Employers with operations in the District of Columbia also must be aware of the notice and non-retaliation requirements, as well as the penalties for non-compliance.

The COVID-19 pandemic presents unique and unprecedented challenges to the ongoing need to protect confidential information and trade secrets. The massive business disruptions that enterprises of all kinds now face include (1) entire workforces forced to work remotely, accessing and using confidential information and trade secrets from home; (2) exigent circumstances created by the cessation or substantial slowing of commercial activity that may result in the disclosure of confidential information or trade secrets to third parties outside normal procedures; and (3) the off-boarding of remote employees who are accessing confidential information and trade secrets remotely.

On August 12, 2019, a jury in Delaware federal court found L’Oreal USA Inc. liable for misappropriating Olaplex LLC’s trade secrets, infringing two patents relating to hair-coloring, and breaching a nondisclosure agreement between the two parties. The jury awarded $91.3 million to Olaplex. Olaplex’s victory demonstrates the importance of entering into nondisclosure agreements before disclosing potential intellectual property to a competitor – especially a large one.

On April 18, the U.S. District Court for the Northern District of New York unsealed an indictment accusing Zheng Xiaoqing, a former senior engineer for steam turbine design at GE, and Zhang Zhaoxi, a Chinese national, of conspiring to steal GE’s design data and models, engineering drawings, material specifications, configuration files, and other proprietary trade secret information related to GE’s turbine technology. The indictment provides yet another cautionary tale to companies trying to protect their trade secrets.

A recent decision from the Eighth Circuit serves as a reminder that trade secret holders must not sleep on their rights when presented with information that would put a reasonable person on notice of potential misappropriation. See CMI Roadbuilding, Inc. v. Iowa Parts, Inc., No. 18-1075, 2019 WL 1474022 (8th Cir. Apr. 4, 2019). The Eighth Circuit affirmed the district court’s grant of summary judgment in favor of the defendant, confirming that the plaintiff’s claims under the Defend Trade Secrets Act (DTSA) and Iowa Uniform Trade Secrets Act (UTSA) were time barred, and rejecting the plaintiff’s tolling argument as a matter of law.

The Federal Circuit has revived a complaint to correct inventorship in another case involving the intersection of patent and trade secret law. In Coda Development v. Goodyear Tire & Rubber, Plaintiffs asserted that Defendants misappropriated trade secrets and breached a non-disclosure agreement (NDA) by seeking patent protection for Plaintiff’s inventions related to self-inflating tire (SIT) technology. The district court dismissed the case on a Rule 12(b) motion. But the Federal Circuit reversed holding that the district court improperly made underlying factual findings on the inventorship issue at the pleading stage.

In an indictment unsealed last week, the U.S. Department of Justice charged two companies – one based in China and the other in Taiwan – as well as three individuals, with trade secret theft, conspiracy to commit trade secret theft, economic espionage, and other related crimes. These charges are the latest in a recent string of similar prosecutions, as U.S. officials have sought to combat the threat of Chinese economic espionage against American technology companies, defense contractors, and other entities. 

On January 11, 2018, the Federal Circuit issued a game-changing decision that addressed the pitfalls of an entity’s attempt to secure the ownership of intellectual property rights through an employment agreement. The Court held that three different provisions that the employer argued effected an assignment of intellectual property rights were not sufficient to convey those rights to the employer.