DTSA: Temporary Restraining Order for Former Employer

by Dennis Crouch

Henry Schein, Inc., v. Cook (N.D.Cal. 2016)

In one of the first written decisions based upon the Defend Trade Secrets Act (DTSA), Judge Tigar has granted Schein’s motion for a temporary restraining order (TRO) blocking former employee Jennifer Cook “from accessing, using, or sharing” allegedly stolen confidential data.  Cook was a sales representative for Schein’s dental-supplies business and left to join competitor Patterson Dental.  The TRO also prohibits Cook “from soliciting, contacting, or accepting business from any HSI customers assigned to her while she was employed by Plaintiff.”  In addition to the standard fiduciary duty employees owe to their employer, Cook had also signed a confidentiality and non-solicitation agreement.

Here – as with most trade secret cases – the basis for the case begins with a breach of contract. That breach is then used to establish misappropriation.  The trade secret claim gets the plaintiff to Federal Court and offers additional remedies not otherwise accessible.

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In California many non-solicitation agreements are deemed void based upon the state’s Business and Professions Code section 16600 which provides that “Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.”

If it moves forward, this case will be an important test of whether the new federal law protecting trade secret rights preempts this state-law policy.*

Judge Tigar here failed to even consider this issue in his opinion — likely because, as is typical with TROs, the defendant was given no chance or opportunity to respond to the allegations.

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* In looking at the agreement, it recites that NY law will control its interpretation. [CookAgreement]

** Read the decision here: [ScheinTRO Decision]

 

Dennis Crouch

About Dennis Crouch

Law Professor at the University of Missouri School of Law. Co-director of the Center for Intellectual Property and Entrepreneurship.

26 thoughts on “DTSA: Temporary Restraining Order for Former Employer

  1. “Judge Tigar here failed to even consider this issue in his opinion — likely because, as is typical with TROs, the defendant was given no chance or opportunity to respond to the allegations.”

    RIDICULOUS. What sort of nonsense is this issuing forth from courts? What a circus.

    1. … and 6 makes my case about choosing loaded words for a “chum” effect.

      Congrats Prof – mission accomplished. Is that really the level of “ecosystem” you want to be aiming for?

    2. There is nothing wrong with what Dennis said. There is nothing new or unusual about an ex parte TRO in trademark infringement or trade secret cases where the necessity to prevent destruction of evidence is asserted by the requester. Folks who have no compunctions about taking proprietary materials from their employer may also not have any about covering their tracks if tipped off in advance. But the TRO must indeed be temporary. If the TRO was improvidently granted to the requesting party, any bond posted for it could default and the ex parte enjoined party may be able to sue for damages for loss of income and/or reputation, tortuous interference with their new business relationships, etc..

      1. There is nothing wrong with what Dennis said.

        What? You type your reply under 6 – who exemplifies everything that is wrong with the type of careless (with the benefit of the doubt – and much worse without that benefit) chum-style use of hot word language like “failed to give

        Everything else that you have to say is not only true, Paul, it reinforces the point that such emotive words are inapt.

        Maybe you meant the opposite of what you said…

  2. I hope all you technical people see what’s coming. You didn’t realize that patents are what made your life so good. You guys are tools.

    1. Technically speaking, what made our lives so good was lawlyers butting the f out. Especially corporate ones. And it will likely continue to do so if they continue to do so. Frankly all this is appears to be nothing more than the congress taking a big ol dokey right on the little man (or woman as here), as usual.

      1. Yes 6 what made life good is lawyers leaving technical people alone. And guess what. Strong patents weak trade secret does that. I worked for one the better start-ups in the 1980’s and they made us sign our lives away, but patents and the weakening of trade secrets changed all that.

        Now…..the technical people will see. They are about to pay a huge price.

        1. “Strong patents weak trade secret does that.”

          Weak patents and weak trade secrit probably also does that. But the lawlyers just can’t avoid getting their hands in the pie now can they?

          “They are about to pay a huge price.”

          Because the lawlyers picked winners and losers.

      2. LOL – blaming the wrong people again…

        And when the last law was down, and the Devil turned around on you–where would you hide, Roper, the laws all being flat? This country’s planted thick with laws from coast to coast–man’s laws, not God’s–and if you cut them down…d’you really think you could stand upright in the winds that would blow then? Yes, I’d give the Devil benefit of law, for my own safety’s sake.

    2. To add a positive spin on comment 5, among the benefits technical employees gets from seeking patent applications is thereby normally getting their ideas published in 18 months. Whatever is published in their patent applications, to the extent it is fully disclosed, can no longer be asserted as trade secrets or (that ambiguous term) “proprietary.”

      1. Seems like if a claim issues on that subject matter then it would very much be proprietary. But I see what you’re saying.

  3. Concerning the NY law interpretation, what really makes the plot thick is the fact that California courts apply that provision as a right held by the employee, and not just a provision applicable to contract interpretation. For example, if you fire your employee for not signing an employment contract on the basis of it having that non-compete provision in it, you can be liable for wrongful termination, regardless of any choice of law clause in the employment contract. See this paper.

  4. “Many states, including California, Ohio, Pennsylvania, Washington and Texas, follow the rules set out in section 187 of the Restatement of Law 2d (1971) 561, Conflict of Laws, and will enforce the parties’ choice-of-law clause, unless either:
    1. the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties’ choice; or
    2. application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state.”

    1. That may be great for a state versus other state choice of law clause, but what does that have to do with a Federal cause of action?

    2. As noted in the cases cited in the paper cited in 4 above, CA statutes deemed employee protection statutes have been held to trigger exception No. 2 above to contract choice of law provisions to other states.
      The new statute allowing TS cases to be brought in Federal district courts does NOT overrule any of this. Nor will the Fed. Cir. [which has a few judges who think they can make up new Federal contract law in contracts between private parties without regard to what should be state contract law] have appellate jurisdiction.

  5. Not sure if “preemption” is the proper term for the additional, Federal (thus separate) cause of action.

    Especially since the new Federal law was explicitly prefaced that it was NOT preempting state law.

    Hello Federal Common Law.

    1. …also, “failed to give” is an inapt phrase, since one cannot “fail” what is neither required, nor typically even contemplated.

      The 580 nm wavelength effect is not a good one.

    1. To help your employers –the international corporations that pay your paid blogger wages via K Street marketing firms.

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