Recent Decisions and Case Developments

The Court of Appeals of North Carolina overturned a trial court's ruling that an assigned non-compete was unenforceable.

TSG is a company that specializes in "fabric finishing," or the use of chemicals to effect the color and textures of various textiles. Former employee Bollinger had signed a non-compete agreement with TSG in 2007, and TSG subsequently filed for bankruptcy, and transferred its assets to a subsidiary corporation with a similar name. While Bollinger's job remained the same, he technically now worked for a different company, who had been assigned his employment contract including the non-compete agreement. When Bollinger decided to go work for American Custom Finishing, a competitor located just 5 miles down the road, TSG sued to enjoin him from doing so based on the non-compete agreement. The trial court, however, decided that the agreement was unenforceable, primarily because there was no explicit assignability clause in the non-compete, and the trial court found that a balancing of the equities weighed against enforcement.

The Appellate Court disagreed with the trial court's approach. The Court explained that the case relied on by the trial court, Hess v. Gebhard & Co., 808 A.2d 912 (PA 2002), was different from the present case in that the assignor and the assignee were basically strangers, while here the assignment was just part of a restructuring following a bankruptcy. Thus the non-compete is being enforced by TSG who is certainly not a "stranger to the original undertaking," as was the case in Hess, and so the requirement that there be an assignability clause is substantially relaxed. Further, the fact that Bollinger was given an annual raise of $1,300 and a signing bonus of $3,500 for signing the non-compete, and that he left abruptly after 27 years of service at TSG to work at a competitor 5 miles down the road, both weigh strongly in favor of enforcing the non-compete. While the trial court was persuaded by Bollinger's argument that he is unemployable outside the textile industry, and so enforcing the non-compete would be particularly burdensome on him, the Appellate Court was far less sympathetic.

On December 10, the 3rd Circuit upheld a district court decision dismissing Microbilt Corporation's claims for misappropriation of trade secrets under the Florida Uniform Trade Secrets Act ("FUTSA"). Microbilt claimed that Gunster violated the FUTSA when they attached copies of invoices from customers of a Microbilt subsidiary as an exhibit in a complaint alleging breach of contract, filed in the Middle District of Florida.

On appeal, the 3rd Circuit explained that it is "well-settled under Florida law that the absolute litigation privilege applies to statements in pleadings filed with the court." Thus the court reasoned, foreign state exceptions to the privilege, relied on by Microbilt, are irrelevant to the case at present. Further, since the privilege is settled law, the court need not submit it as a certified question to Florida Supreme Court.

Reminding all that misappropriating a trade secret can not only constitute a crime, but also that the intent to reap an economic benefit is sufficient to sustain a conviction under 18 USC Section 1832, the Ninth Circuit upheld the criminal conviction of Suibin Zhang for the theft of Marvell Semiconductor Inc.’s trade secrets.

After a bench trial, Zhang was found guilty and sentenced to three months in prison followed by three months of supervised release, 200 hours of community service, and $75,000 in restitution. Zhang appealed, challenging the sufficiency of the evidence and contending that his Sixth Amendment right to a public trial was violated.

On appeal, the Ninth Circuit held that there was, in fact, sufficient evidence, beyond a reasonable doubt, that Marvell took “reasonable measures” to protect its trade secrets. Marvell did so by advising users of the existence of their trade secrets and by limiting access on a need to know basis and controlled access through passwords. The Court also held that, although Zhang did not personally sign the Marvell non-disclosure agreement, he accepted a limited license agreement that incorporated its terms.

The Court further held that even though Zhang never sold the documents or sent around economically valuable secrets, sufficient evidence established that he intended to reap an economic reward. The Court held this same evidence established an intent to injure Marvell, enough to uphold the criminal conviction. Intent, this case, was key.

Medical Device Company Globus met with Dr. Bianco back in 2007 to tell them about his idea for a new device to be used as an interbody spacer. The spacers that existed at the time did not have the ability to expand and contract at the surgeon's will, and thus Dr. Bianco's innovation was to create a design that was capable of doing so. Globus told Dr. Bianco that they would let him know whether they wanted to pursue his invention, but after a short period, they told him they were not interested. In 2011, however, Dr. Bianco learned that they had pursued his idea, when Globus tried to sell one of their products employing the technology to Dr. Bianco.

Ultimately, the jury awarded over $4 million to Dr. Bianco for the theft of his Trade Secrets. No recovery would have been possible if not for the mutual NDA both parties had agreed to prior to their initial meeting. Followings the jury's award, Globus filed for a judgment as a matter of law, but Judge Bryson was unconvinced by Globus' numerous legal arguments, and denied the motion in a decision issued on October 27.