On November 1, 2023, a jury in the U.S. District Court for the Central District of California awarded damages to Skye Orthobiologics, LLC (“Skye”) and Human Regenerative Technologies, LLC (“HRT”) for breach of contract, breach of fiduciary duty, and breach of duty of loyalty by Skye’s former employee (“Defendant”). While Plaintiffs Skye and HRT did not succeed on their claim of trade secret misappropriation, they were able to succeed in showing Defendant misappropriated confidential information in breach of his employment agreements.

HRT manufactures tissue biologic products under various trade names, which are used in both surgical and non-surgical contexts for wound care, plastics, cosmetics, and other medical care. HRT manufactures exclusively for Skye, which sells the products through independent contractors. In 2012, Defendant began working for Skye as an independent contractor, during which time he worked closely with HRT products and signed a consulting contract with HRT in 2014 that included confidentiality clauses. In April 2018, Defendant was promoted to Vice President of Business Development, at which time he signed an employment agreement stating that Skye was his “sole job and focus,” and another confidentiality agreement that contained a covenant not to solicit or compete.

Skye and HRT alleged that Defendant started a competing business in June 2018, just a month before he resigned from Skye. He allegedly used Plaintiffs’ resources and equipment to form the CTM entities, (collectively “CTM”), naming these corporate entities after the phrase “connective tissue matrix,” which Skye’s salespersons used exclusively to describe HRT’s products. Defendant, through CTM, began distributing competing products and, according to Plaintiffs, used promotional materials referring to “connective tissue matrix” to capitalize on Plaintiffs’ goodwill and recognition in the marketplace.

Skye and HRT filed suit against Defendant and his CTM entities with multiple claims, including trade secret misappropriation under the Defending Trade Secrets Act (“DTSA”). HRT had identified as trade secrets parts of its product development and manufacturing process, including its “unique product formulas.” Though Plaintiffs pleaded safeguards to prove existence of their trade secrets—such as confidentiality agreements for their employees, control of physical access to offices and information, network firewalls, password protection, security credentials, and revocation of authorization at the end of employment—the court found that HRT did not plead its trade secrets with sufficient particularity. Thus, the court dismissed it from the DTSA claim on summary judgment.

However, during trial, Plaintiffs filed a brief arguing that HRT’s manufacturing process should still be allowed as evidence on its claims of breach of fiduciary duty and breach of duty of loyalty. Plaintiffs argued that the process was still confidential information that Defendant agreed to keep confidential while he was employed there, so they should be allowed to show evidence of him disclosing or using the process as support for breaching his fiduciary duties. The court agreed, and allowed the jury to hear evidence of Defendant using or disclosing HRT’s manufacturing process while employed at Skye, as support for these claims.

After trial, the jury returned its special verdict finding that Defendant had breached his contracts (with respect to the confidentiality provisions) with Skye and HRT, and he had breached both his fiduciary duties to Skye and his duty of loyalty to Skye. The court entered judgment for the case, declaring that Defendant owes Skye $29,195,796 in lost profits and $25,560,000 in punitive damages, and owes HRT $7,298,949—totaling over $62 million.

This verdict serves as a vivid example of legal protections for confidential and proprietary information beyond trade secret misappropriation.

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Photo of Isaiah D. Anderson Isaiah D. Anderson

Isaiah Anderson is an associate in the Litigation Department.

Isaiah Anderson earned his J.D. degree from New York University, where he was a Senior Executive Editor of the New York University Law Review, the Alumni Relations Committee Co-Chair for the Black Allied Law…

Isaiah Anderson is an associate in the Litigation Department.

Isaiah Anderson earned his J.D. degree from New York University, where he was a Senior Executive Editor of the New York University Law Review, the Alumni Relations Committee Co-Chair for the Black Allied Law Students Association (BALSA), the Community Chair for the Christian Legal Students Association (CLSA), and a member of the Asian-Pacific American Students Association (APALSA). While at NYU, he worked with the Center on Race, Inequality, and the Law on efforts to advocate for racial and economic justice.

Prior to law school, Isaiah worked as a litigation paralegal at another New York law firm, supporting two commercial litigation trial teams and working on several pro bono cases focused on education and immigration. At Proskauer, Isaiah continues to have an active pro bono practice and leverages his experience and studies in litigation for all his matters.

Photo of Steven J. Pearlman Steven J. Pearlman

Steven J. Pearlman is a partner in the Labor & Employment Law Department and Co-Head of the Whistleblowing & Retaliation Group and the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Steven’s practice covers the full spectrum of employment law, with a particular…

Steven J. Pearlman is a partner in the Labor & Employment Law Department and Co-Head of the Whistleblowing & Retaliation Group and the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Steven’s practice covers the full spectrum of employment law, with a particular focus on defending companies against claims of employment discrimination, retaliation and harassment; whistleblower retaliation; restrictive covenant violations; theft of trade secrets; and wage-and-hour violations. He has successfully tried cases in multiple jurisdictions, and defended one of the largest Illinois-only class actions in the history of the U.S. District Court for the Northern District of Illinois. He also secured one of only a few ex parte seizures orders that have been issued under the Defend Trade Secrets Act, and obtained a world-wide injunction in federal litigation against a high-level executive who jumped ship to a competitor.

Reporting to boards of directors, their audit committees, CEOs and in-house counsel, Steven conducts sensitive investigations and has testified in federal court. His investigations have involved complaints of sexual harassment involving C-suite officers; systemic violations of employment laws and company policies; and fraud, compliance failures and unethical conduct.

Steven was recognized as Lawyer of the Year for Chicago Labor & Employment Litigation in the 2023 edition of The Best Lawyers in America. He is a Fellow of the College of Labor and Employment Lawyers.  Chambers describes Steven as an “outstanding lawyer” who is “very sharp and very responsive,” a “strong advocate,” and an “expert in his field.” Steven was 1 of 12 individuals selected by Compliance Week as a “Top Mind.” Earlier in his career, he was 1 of 5 U.S. lawyers selected by Law360 as a “Rising Star Under 40” in the area of employment law and 1 of “40 Illinois Attorneys Under Forty to Watch” selected by Law Bulletin Publishing Company. Steven is a Burton Award Winner (U.S. Library of Congress) for “Distinguished Legal Writing.”

Steven has served on Law360’s Employment Editorial Advisory Board and is a Contributor to Forbes.com. He has appeared on Bloomberg News (television and radio) and Yahoo! Finance, and is regularly quoted in leading publications such as The Wall Street Journal.

The U.S. Chamber of Commerce has engaged Steven to serve as lead counsel on amicus briefs to the U.S. Supreme Court and federal circuit courts of appeal. He was appointed to serve as a Special Assistant Attorney General for the State of Illinois in employment litigation matters. He has presented with the Solicitor of the DOL, the Acting Chair of the EEOC, an EEOC Commissioner, Legal Counsel to the EEOC and heads of the SEC, CFTC and OSHA whistleblower programs. He is also a member of the Sedona Conference, focusing on trade secret matters.