Confidential Information

Seyfarth Synopsis: Given recent headlines, a storm could be brewing over the boundaries of the attorney-client privilege in some parts of the country. California employers can avoid this vortex, at least when dealing with their current and former employees. Both can be part of the “corporate client” for purposes of attorney-client privilege, so long as

Seyfarth Synopsis: Even if bad Glassdoor reviews have you feeling like you need to fight back, employers should stay out of the ring, and instead implement social media policies that clearly define prohibited behavior and disclosures, while spelling out the consequences for violations. Employers must not retaliate against employees for their lawful out-of-office behavior.

People

Seyfarth Synopsis:  Protecting trade secrets from employee theft requires more than using an NDA when onboarding employees. If businesses want to protect confidential information, they need a cradle-to-grave approach, reiterating employee obligations regularly, including during exit interviews. (Yes, you need to do exit interviews!)

Headline stories in intellectual property theft tend to involve foreign hackers

Company information that is sensitive, but may not rise to the level of a trade secret is protectable in California, isn’t it? 

Not necessarily.  Some recent California decisions have significantly limited an employer’s ability to pursue certain claims and remedies based upon the theft of mere confidential or proprietary information by rogue employees. 

Defendants (often individual former employees) who are sued in California for stealing a company’s data are increasingly using the trade secret preemption doctrine to seek dismissal of non-trade secret claims, which are often pled alongside trade secret misappropriation claims, that allegedly fall within the scope of the California Uniform Trade Secrets Act (“CUTSA”).

Non-trade secret claims advanced by the employer typically include:

  • conversion
  • interference with contract
  • interference with prospective economic advantage
  • breach of fiduciary duty
  • unjust enrichment
  • fraud
  • statutory claims brought under Bus. & Prof. Code section 17200.   

These claims are typically made because they are often easier to prove than the elements of trade secret misappropriation.

While trade secret preemption does not displace breach of contract claims, it can significantly limit the claims and remedies that companies may seek when their confidential or proprietary information is stolen.

 Differences Among the States:

Other States: The breadth and scope of trade secret preemption varies from state to state. While some states have held that preemption eliminates alternative causes of action for misuse or theft of confidential, proprietary or trade secret information, other states allow common law claims to be brought for the theft of confidential or proprietary information alone or along with trade secret misappropriation claims.

California state courts:  In California, CUTSA generally preempts causes of action that rely on the same “nucleus of facts” as a trade secret misappropriation claim. A recent California Court of Appeal decision reaffirmed that CUTSA provides the exclusive civil remedy for conduct falling within its terms, so as to supersede other civil remedies based upon misappropriation of a trade secret. Accordingly, California state courts typically do not allow both trade secret and non-trade secret claims to be brought for the theft of company information.


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