In 2016, there have been some major developments involving confidentiality and non-compete agreements law, which are likely to have some repercussions in 2017. Here’s a summary of the most important issues that companies should be aware of going into the new year.
1. The Federal Defend Trade Secrets Act. This statute, enacted in May 2016, creates a federal question jurisdiction for misappropriation of trade secrets, allows companies to seize their trade secrets out of the hands of competitors in some circumstances, and provides whistleblower protection to employees when certain conditions are met. In 2017, as companies begin to take advantage of the statute, the courts will begin creating a new body of law interpreting its provisions.
2. SEC Enforcement. The SEC will continue to go after the companies whose confidentiality agreements and policies they may find to violate the SEC’s whistleblowing rules. Making sure that confidentiality agreements include the language specified in the federal Defend Trade Secrets Act may help with SEC’s scrutiny.
3. Choice of Law Issues. Choice of law issues in interstate non-compete and confidentiality disputes will continue to be of major concern to companies who have out-of-state employees. A number of states in 2016 passed statutes dramatically limiting non-competes and California passed a statute that prohibits application of other states’ laws to its employees’ non-compete agreements. Business owners should make sure that their non-competes are enforceable in the jurisdictions in which they intend to enforce them.
4. Disclosure of Trade Secrets During Litigation. This will continue to be a major point of dispute in trade secrets and non-compete lawsuits. For example, earlier this year, the Texas Supreme Court addressed what a trial judge must consider before allowing a competitor’s corporate representative in the courtroom during the testimony that might reveal the adverse party’s trade secrets. Thus, in 2017, those companies that are engaged in trade secrets misappropriation litigation in Texas will need to consider how this balancing test will apply in their particular circumstances. Many other states’ courts faced a similar issue in 2016 and have fashioned their own rules regarding when the disclosure of trade secrets in litigation is appropriate.
Leiza Dolghih is the founder of Dolghih Law Group PLLC. She is board certified in labor and employment law and has 16+ years of experience in commercial and employment litigation, including trade secrets and non-compete disputes. You can contact her directly at firstname.lastname@example.org or (214) 531-2403.