Non-Compete & Trade Secrets

An American Arbitration Association arbitrator recently awarded Black Knight, Inc. (BK) $155M stemming from Pennymac Loan Services, LLC’s (Pennymac) alleged use of its mortgage-loan servicing platform to develop its own competing product. Though the arbitrator did not find Pennymac liable for trade secret misappropriation, they found that the use of BK’s product accelerated the development of Pennymac’s product and caused BK to lose licensing profits.

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.

Proving access to and use of trade secrets are core elements in a trade secrets misappropriation case.  Recent rulings in a trade secrets action filed by Allergan against its competitor Revance Therapeutics (“Revance”) provide helpful guidance on what is sufficient to plead these elements. There, the court explained what facts are—and are not—sufficient to infer access to and use of trade secrets allegedly misappropriated. The court also explained how examining the similarity of design may help in this analysis. Finally, the court clarified that the ability to reverse engineer alone may not always preclude trade secret protection.  

In an era where trade secret misappropriation battles can shape corporate landscapes, the Apple v. Rivos case stands as a stark reminder of the importance of diligent onboarding practices when it comes to trade secrets.  In this case, the court’s scrutiny of employee conduct underscores a crucial lesson: companies should ensure that new hires refrain from carrying confidential information from their previous employers. As exemplified by defendant Rivos, making an effort to remind new hires to avoid retaining confidential information can also go a long way.Here, we discuss the intricacies of the Apple v. Rivos case and provide several takeaways.

The 2016 enactment of the Defend Trade Secrets Act (“DTSA”) has led to an increase in trade secret litigation. The DTSA codified into federal law the right of an owner of a trade secret to sue in federal court when its trade secret had been misappropriated. Prior to the DTSA, with the absence of diversity jurisdiction, aggrieved trade secret owners had to pursue legal remedies under state law, typically under the Uniform Trade Secret Act (“UTSA”), which has been enacted by 47 states. Notably, the DTSA does not preempt state trade secret laws, therefore, aggrieved trade secret holders may seek civil remedies for alleged misappropriation under either state or federal law or both. Both the DTSA and the UTSA requires the trade secret owner to take reasonable measures to keep the trade secret information secret. The term reasonable can have many meanings in different contexts depending on a multitude of factors. As such, what may be considered reasonable efforts under one set of facts may be deemed deficient under another set of facts.

On January 11, 2023, Elizabeth Wilkins, the FTC’s Director of the Office of Policy Planning, spoke to the Capitol Forum about the FTC’s proposed rule to ban non-compete agreements.  This conversation was the most significant discussion of the proposed rule by the FTC since it was announced on January 5.  Below are the four most salient takeaways.

On January 5, 2023, the Federal Trade Commission (“FTC”) proposed an expansive new rule which would impose a near-complete ban on the use of non-competes (the “Proposed Rule”) by employers. The Proposed Rule is the culmination of the FTC’s recent efforts, following President Biden’s July 9, 2021 Executive Order on