United States: Top Developments And Headlines In Trade Secret, Computer Fraud, And Non-Compete Law In 2017 And What We Expect In 2018

Continuing our annual tradition, we present the top developments and headlines for 2017 and what we expect in 2018 in trade secret, computer fraud, and non-compete law. 


2017 Trading Secrets Year in Review

Seyfarth's Year in Review is a compilation of our significant trade secrets, non-competes, and computer fraud blog posts throughout 2017. To request a pdf, hard copy, or CD of the Review, here.

1. Notable Defend Trade Secrets Act Developments

Just nearly two years after its enactment, the Defend Trade Secrets Act ("DTSA") continues to be one of the most significant and closely followed developments in trade secret law. The statute provides for a federal civil cause of action for trade secret theft, protections for whistleblowers, and new remedies (e.g., ex parte seizure of property), that were not previously available under state trade secret laws.

The ex parte seizure provision of the DTSA was one of the most controversial provisions of the statute during its drafting. The provision allows a trade secret holder to request, without notice to the alleged wrongdoer, that a district judge order federal law enforcement officials to seize property to prevent the propagation or dissemination of trade secrets. Opponents of the DTSA argued that the ex parte seizure provision would open the door to abuse by purported "trade secret litigation trolls" and increase litigation costs. The cases to date involving the seizure provision suggest that those early concerns may not materialize.

A rising development with the DTSA concerns its application to alleged misappropriation that occurs both before and after the statute's May 11, 2016, effective date. Federal district courts in multiple jurisdictions have allowed plaintiffs to proceed with DTSA claims, at least partially, when the plaintiffs can sufficiently allege that any wrongful misappropriation occurred after the date of the enactment of the DTSA. See, e.g., IA Technologies, Inc. v. ASUS Computer International, No. 14-CV-03586-BLF, 2017 WL 491172 (N.D. Cal. Feb. 7, 2017) (allowing plaintiff to amend complaint to add DTSA claim after discovery revealed alleged continued misappropriation); but see Avago Techs. United States Inc. v. NanoPrecision Products, No. 16-cv-03737, 2017 WL 412524 (N.D. Cal. Jan. 31, 2017) (dismissing DTSA claim because alleged trade secrets were disclosed before the DTSA came into effect).

While the language of the DTSA appears to bar or significantly limit the inevitable disclosure doctrine, some federal district courts have nonetheless used the doctrine as grounds for injunctions. See, e.g., Fres-co Systems USA, Inc. v. Hawkins, 2017 WL 2376568 (3rd Cir. June 1, 2017) ("Given the substantial overlap (if not identity) between Hawkins's work for Fres-co and his intended work for Transcontinental—same role, same industry, and same geographic region—the District Court was well within its discretion to conclude Hawkins would likely use his confidential knowledge to Fres-co's detriment."); Molon Motor and Coil Corp. v. Nidec Motor Corp., No. 16 C 03545 (N.D. Ill. May 11, 2017) ("allegations on the direct competition between the parties, as well as the allegations on the employment breadth and similarity of Desai's quality control work at the two companies, are enough to trigger the circumstantial inference that the trade secrets inevitably would be disclosed by Desai to Nidec.").

The DTSA's whistleblower immunity provision, which protects individuals from criminal or civil liability for disclosing a trade secret if certain conditions are met, continues to be largely untested.

We anticipate cases asserting claims under the DTSA will continue to be a hot trend and closely followed in 2018. For further information about the DTSA, please see our desktop reference: " The Defend Trade Secrets Act: What Employers Should Know Now." 

2. Other Notable Trade Secret Cases

The Waymo v. Uber (N.D. Cal.) case was one of the most closely watched trade secret cases last year. The case involved a former Waymo employee who allegedly misappropriated trade secrets concerning self-driving car technology, which Waymo alleged was worth over $2 billion. The case involved disputes over a wide array of issues, such as trade secret preemption, the attorney-client privilege and Fifth Amendment, and the scope of injunctive relief (and non-competes) in California. The case reportedly settled mid-trial in February 2018, which gave Waymo/Google a .34 percent equity stake (approx. $245M) in Uber.

The Ninth Circuit in U.S. v. Liew held that it was not plain error for the district court not to instruct the jury that disclosure "'to even a single recipient who is not legally bound to maintain [a trade secret's] secrecy' destroys trade secret protection." As a result, the Ninth Circuit upheld criminal convictions under the (pre-Defend Trade Secrets Act) Economic Espionage Act ("EEA") for trade secret misappropriation despite a third-party competitor (who was not bound by any confidentiality obligations) acquiring the trade secret.

The Liew case is significant because it illustrates one of the DTSA's substantial changes to the EEA–the definition of a trade secret. Before the DTSA, trade secrets were defined under the EEA to include information that was subject to reasonable secrecy measures and "derive[d] independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, the public." This case also reminds businesses about the potential risks to trade secrets when selling business assets. Building facilities, electronic devices, and any other equipment sold should be vetted to ensure no valuable company information is inadvertently disclosed.

The Wisconsin Supreme Court in North Highland Inc. v. Jefferson Machine & Tool Inc., 2017 WI 75 (July 6, 2017) affirmed the high summary judgment bar to trade secret misappropriation claims. There, the Court found that the plaintiff had failed to present sufficient evidence of misappropriation or conspiracy to proceed beyond the summary judgment stage. This case puts parties in Wisconsin on notice as to the importance of finding some direct evidence of misappropriation in defeating a motion for summary judgment.

The decision in Zenimax Media, Inc. v. Oculus VR, LLC, No. 3:14-CV-1849 (N.D. Texas 2017) illustrates that nondisclosure agreements remain important and can be a powerful alternative when trade secret claims are not successfully. The jury in that case found no liability on the plaintiff's trade secret claim but awarded the plaintiff $200 million in damages for the breach of a nondisclosure agreement. The jury was charged with determining, "[w]hat sum of money would fairly and reasonably compensate ZeniMax and ID Software for their injuries that resulted from Oculus's failure to comply with the Non-Disclosure Agreement?"

For a 50 state survey of non-compete laws, please see our recently updated: " 50 State Desktop Reference: What Businesses Need To Know About Non-Compete and Trade Secrets Laws."

3. Notable Restrictive Covenant and Forum Selection Clause Cases

The Wisconsin Supreme Court heightened the scrutiny for employee non-solicitation agreements in the state. Manitowoc Company, Inc. v. Lanning, 2018 WL 472928 (Jan. 19, 2018). The case involved an engineer who had been with the plaintiff employer for over 25 years until he left to become a director of engineering with a competitor. The former employee had a non-solicitation of employees covenant with his former employer, which provided: "for a period of two years ... (either directly or indirectly) solicit, induce or encourage any employee(s) to terminate their employment with Manitowoc or to accept employment with any competitor, supplier or customer of Manitowoc...." The Court found the covenant was an unreasonable restraint of trade and, thus, unenforceable. The Court reasoned that the former employee did not have specialized knowledge about all of employer's 13,000 world-wide employees and he did not have a relationship with every employee.

Illinois federal district courts continue to reject the controversial Fifield v. Premier Dealer Service, 993 N.E.2d 938 (Il. App (1st) 2013) decision by the Illinois Appellate Court. The court in Fifield held that a restrictive covenant executed by an at-will employee is unenforceable, for lack of adequate consideration, unless the employment relationship lasts at least two years beyond the date of execution. The federal district court for the Northern District of Illinois in Stericycle, Inc. v. Simota, Case No. 16 C 4782 (Oct. 20, 2017) rejected Fifield's two-year bright line test and instead held that the enforcement of a non-compete supported by continued employment requires an individualized, case-by-case assessment. The court reasoned that the Illinois Supreme Court would likely reject the "bright line" test. The federal district court for the Southern District of Illinois in Apex Physical Therapy v. Ball et al., Case No. 3:17-cv-119 (Nov. 3, 2017) refused to dismiss claims against two former employees for breach of their restrictive covenants finding the Illinois Supreme Court would most likely reject the arbitrary two year bright-line rule in favor a fact-specific, totality-of-the-circumstances approach to the question of whether there was adequate consideration for the restrictive covenant agreement.

Effective January 1, 2017, California's enacted Labor Code Section 925 restrains the ability of employers to require employees to litigate or arbitrate employer disputes outside of California or under the laws of another state, subject to certain exceptions. The statute applies to any agreement that is a condition of employment. Few courts have yet to address the statute because it applies only to agreements entered into, modified, or extended on or after January 1, 2017. One court found the statute inapplicable because the former employee did not agree to the forum selection clause at issue while he was a resident of California. See Mechanix Wear, Inc. v. Performance Fabrics, Inc., No. 2:16-cv-09152-ODW (SS), 2017 WL 417193 (C.D. Cal., Jan. 31, 2017).

Nonetheless, federal district courts continue to uphold valid and enforceable forum selection clauses regardless whether the agreement at issue involves non-competition or other restrictive covenants, even over objections that the forum selection clause purportedly violates any applicable state policies against non-competes. See, e.g., Mostipak v. Badger Daylighting Corp., No. 217CV00247MCECKD, 2017 WL 4310677 (E.D. Cal. Sept. 28, 2017).

4. New State Legislation Regarding Restrictive Covenants

Oregon enacted new legislation in 2017 that renders non-competition and non-solicitation covenants void and legally unenforceable for home care workers. West Virginia enacted new legislation that limits non-competes for physicians to one year durations and with geographical restrictions of 30 road miles from the physician's primary place of practice. West Virginia's new law provides exemptions for physicians who are shareholders, owners, partners, members, or directors of a health care practice.

On June 3, 2017, Nevada amended Revised Statute 613, which governs non-competition agreements. The new law adds requirements to the enforceability and validity of non-competition agreements, and importantly, now allows courts to "blue-pencil" non-competition agreements, overturning Nevada Supreme Court's recent decision in Golden Road Motor Inn, Inc. v. Islam. The new law also provides certain limitations on the scope of customer non-solicitation covenants. The new law further provides that a non-competition agreement is only enforceable during the time in which the employer is paying the employee's salary, benefits, or equivalent compensation if an employee is terminated because of a reduction in force, reorganization, or similar restructuring.

Pennsylvania and New Jersey both introduced bills that would dramatically limit businesses' powers to sign workers to non-competes. These proposed bills are longshots to pass but could be models for other states to follow or for defendants to argue against non-competes.

5. Vermont's New Social Media Legislation

Vermont joined the growing number of states that have enacted social media privacy laws regulating the use of social media by employers and educational institutions. The bill was signed by Governor Phil Scott on May 17, 2017, and went into effect on January 1, 2018.

For applicants and employees, Vermont's new social media law prohibits the required or requested (i) turnover of employee personal account login; (ii) access of account in employer's presence; (iii) divulging of social media content to employer; or (iv) change of privacy settings. An employer may not require an employee or applicant to add anyone to a contacts list. Retaliation against an employee who exercises these rights is also prohibited.

Vermont's new social media law does allow, however, social media access when required for compliance with legal and regulatory obligations or investigating alleged unauthorized transfer or disclosure of proprietary information, unlawful harassment, threats of violence, or discrimination. Law enforcement agencies are also permitted to request or require access for screening or fitness determinations and investigations. Employers may request or require turnover of login information for an employer-issued device.

There are no remedies mentioned under Vermont's social media law. One notable aspect of the law is that any agreement by an employee to waive his or her rights under the statute is invalid.

Given the increasing pervasiveness of social media in the workforce, employers need to stay informed of the varied and ever-evolving legal requirements governing employee use of social media. To provide a starting point for that analysis, we have updated our convenient, one-stop Desktop Reference surveying existing social media privacy laws: " Social Media Privacy Legislation: What Employers Need to Know Desktop Reference."

6. The U.S. Supreme Court Declines Review of Two Notable 9th Circuit CFAA Cases

One of the significant developments in 2017 regarding computer fraud law involved things that didn't happen. Specifically, the U.S. Supreme Court declined to review two closely watched computer hacking cases, Nosal v. U.S., 828 F.3d 865 (9th Cir. 2016) and Power Ventures, Inc. v. Facebook, Inc., 844 F.3d 1058 (9th Cir. 2016).

In Nosal, the 9th Circuit Court of Appeals held that an employee whose computer access credentials were affirmatively revoked by his employer acted "without authorization" in violation of the Computer Fraud and Abuse Act ("CFAA") when he and/or his former employee co-conspirators used the login credentials of a current employee to gain access to the employer's computer systems.

In Power Ventures, the 9th Circuit found that Power Ventures (a third-party platform that aggregated information from users' various social media accounts) violated the CFAA when it continued to access and scrape data from Facebook's servers "after receiving written notification from Facebook" and circumventing certain network barriers implemented by Facebook.

These cases had the potential to have a significant influence on scope and interpretation of what constitutes authorized access under the CFAA. Indeed, the Supreme Court has yet to weigh in on the over 30-year old computer fraud statute. By declining to review Nosal, the Supreme Court leaves a growing circuit split involving the scope and applicability of the CFAA to former employees that access and/or misuse computer data without permission.

7. ABA Encourages Encryption of Emails When Transmitting Confidential Client Information

The American Bar Association issued an Ethics Opinion in the Spring of 2017 stressing that lawyers must make reasonable efforts to prevent inadvertent or unauthorized access to confidential information relating to the representation of their clients. The ABA recognized that in the age of constant cybersecurity threats, law firms are targets for hackers for two reasons: (1) they obtain, store and use highly sensitive information about their clients while at times utilizing safeguards to shield that information that may be inferior to those deployed by the client, and (2) the information in their possession is more likely to be of interest to a hacker and likely less voluminous than that held by the client.

In examining the applicable Model Rules to explain what factors constitute reasonable efforts when using technology to communicate with clients, the Opinion specifically mentions trade secrets lawyers, noting that they handle client matters involving proprietary information that "may present a higher risk of data theft." Trade secrets lawyers must, on a case-by-case basis, analyze how they communicate electronically about client matters and "particularly strong protective measures, like encryption, are warranted in some circumstances."

The Opinion makes clear that lawyers must have an open exchange of communication with their clients about the security measures their firms are taking to safeguard the clients' confidential information. They must recognize that the determination of whether they are making reasonable efforts in enhancing their cybersecurity is a fact-based analysis to be made on a case-by-case basis and may not be uniformly employed.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Practice Guides
by Mondaq Advice Centers
Relevancy Powered by MondaqAI
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions