The Reading List (2017, No. 9): The First Defend Trade Secrets Act Verdict Arrives

Non-Compete and Trade Secrets News for the week ended March 3, 2017

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Defend Trade Secrets Act

On February 24, 2017, a jury in the Eastern District of Pennsylvania rendered a verdict in favor of Dalmatia Import Group and against FoodMatch, Inc. under the Defend Trade Secrets Act. As of this posting date, the verdict is not available for viewing, but McDermott Will & Emery (counsel for plaintiff) reports that the judgment will exceed $5 million.

The case grew out of FoodMatch's product launch of what Dalmatia called a "copycat line of fruit spreads." FoodMatch previously had been a Dalmatia distributor in the United States but terminated that relationship and began its own competing line of products. FoodMatch also purportedly engaged Dalmatia's contract manufacturer, who apparently knew of the fruit spread recipes, to develop a competing product line.

The DTSA is largely consistent with state law in terms of the damages remedies available to aggrieved plaintiffs like Dalmatia. It is important to note, too, that this was not just a DTSA case; Dalmatia claimed counterfeiting under the Lanham Act. And though the case seemed to progress quickly to verdict given the DTSA's short history (it was signed into law on May 11, 2016), Dalmatia filed the case well before then and added the DTSA claim later.

Nevada Legislator Introduces Non-Compete Bill

Nevada made news last year for soundly rejecting the blue-pencil doctrine. This year, an Assemblyman has introduced Bill No. 149, which would limit non-competition agreements to a duration of 3 months after the end of employment. The bill further codifies the rule-of-reason analysis used by Nevada courts currently. If a company entered into an agreement with a longer, and therefore statutorily unreasonable, duration, it would be subject to a fine of up to $5,000.

The bill has been referred to the Committee and Commerce and Labor. A PDF copy of the bill is available here.

Fee Awards in Texas

Try making sense of this development. A Harris County, Texas jury awarded an employee nearly $200,000 in attorneys' fees after the jury found his ex-employer pursued a trade secrets misappropriation claim in bad faith.

But the same jury awarded the employer nearly $500,000 in attorneys' fees after finding the employee failed to comply with a confidentiality clause. It's hard for me to understand how to reconcile the two awards. A blog post further describes this rather contentious suit.

Overbroad Non-Competes in Louisiana

As I've discussed several times in the past, Louisiana has a very nuanced framework for non-compete agreements. Most importantly, non-competes must specify a parish or municipality where the restriction applies, and the employer must do business there. Courts have been strictly applying this language.

In Affordable Roofing v. Artigues, 2:16-cv-16872 (E.D. La.), a federal district court determined that a non-compete applying "in any state" where the employer conducts business was void. The employer conceded this but argued the employee in any event knew precisely where the employer did business. As is fairly obvious, such an interpretation would violate the plain language of the statute. A copy of the Order is available here.