Trade Secret Protection: What Every California …

1 Proposal to Provide Legal Services to BJ s Restaurant, Inc. 0 Trade SecretProtection: WhatEvery CaliforniaEmployer Needs toKnowMay 24, 2017 Seyfarth Shaw refers to Seyfarth Shaw LLP (an Illinois limited liability partnership ).Seyfarth Shaw LLPT rade Secret Protection: what Every CaliforniaEmployer Needs to KnowMay 24, 2017 2017 Seyfarth Shaw LLP. All rights reserved. Private and ConfidentialSpeakersJim VaughniDiscovery SolutionsManaging MilliganSeyfarth Shaw SalinasSeyfarth Shaw 2017 Seyfarth Shaw LLP. All rights reserved. Private and Confidential2 what We Will Cover: How to Best Identify and Protect Trade secrets what employers Need to Know About The DTSA The Impact of California Labor Code Section 925 Effective Use of Restrictive Covenants in Employment Agreements How to Catch a Trade Secret Thief Responses to Trade Secret Theft Choosing the Right Court Suing Under the DTSA vs.

2 California Law or Both 2017 Seyfarth Shaw LLP. All rights reserved. Private and Confidential3 How to Best Identify and Protect Trade secrets 2017 Seyfarth Shaw LLP. All rights reserved. Private and Confidential4 what Is a Trade Secret ? Trade secrets = information Generallynot knownto others Economically valuable (actual or potential) Reasonable efforts to maintain secrecy 2017 Seyfarth Shaw LLP. All rights reserved. Private and Confidential5 Statutory Definitions California Uniform Trade secrets Act ( CUTSA ) Definition Civil Code et seq. [I]nformation, including a formula, pattern, compilation, program,device, method, technique, or process, that: (1) Derives independenteconomic value, actual or potential, from not being generally known tothe public or to other persons who can obtain economic value from itsdisclosure or use; and (2) Is the subject of efforts that are reasonableunder the circumstances to maintain its secrecy.

3 (d). Defend Trade secrets Act definition is substantially similar to 18 1839(3). 2017 Seyfarth Shaw LLP. All rights reserved. Private and Confidential6 Identifying Trade secrets Need not be novel or unique No registration needed Must not be published Two or more can independently possess the same Secret May be made up things that are not themselves Trade secrets ,but in aggregate are Trade Secret 2017 Seyfarth Shaw LLP. All rights reserved. Private and Confidential7 Examples of Trade secrets Formulas Manufacturing Processes Marketing Strategies Business Plans Sensitive Financial Information Pricing/CostsInformation Unique Software & Source Code Knowledge About Customers ( , requirements, preferences, orderhistory, purchasing trends) Negative research results Customer Lists Know How 2017 Seyfarth Shaw LLP. All rights reserved.

4 Private and Confidential8 Identifying Trade SecretsFactors That Help Determine Whether Information is Trade Secret : Extent known outside the company Extent known by employees and others inside company Measures taken by company to protect secrecy Value of Trade Secret to company and competitors Time, effort, and money expended in development Ease with which it can be properly acquired or duplicated by others (reverseengineering/independent derivation) 2017 Seyfarth Shaw LLP. All rights reserved. Private and Confidential9 Audit Company Information, Practices, Documents Usually, outside counsel works closely with the appropriate businessteams to identify the company s importantinformation assets,securitypractices, and relateddocumentation Information review: Technical/R&D information Financial information Business Planning/marketing information Compensation information ( , bonus formula) Organizational information Review physical and computer data security practices Review policies and documents Review training procedures/process for onboarding and off-boarding Implement findings/recommendations 2017 Seyfarth Shaw LLP.

5 All rights reserved. Private and Confidential10 protection = Reasonable Efforts to Maintain SecrecyTake actual efforts to maintain secrecy, including: Confidentiality agreements = leading indicator Information security Password protection E-mail and electronic data policies (beware of BYOD) Confidentiality reminders on screens and documents Limit access need to know/tiered access Must take action against breaches (does not always require filing suit) Regular training on policies (consider trackable e-modules) Onboarding, exit interviews, and related documentation (audit this) Limit information made available to vendors and subcontractors andhave appropriate contracts with vendors 2017 Seyfarth Shaw LLP. All rights reserved. Private and Confidential11 The Defend Trade secrets Act: what You Need to Know Enacted and went into effect in May 2016 Created a federal civil cause of action for misappropriation of a Trade secrets that isrelated to a product or service used in, orintended for use in, interstate or foreigncommerce Does not recognize the inevitabledisclosure doctrine and no right to enjoinformer employee s employment BUT does not preempt state law claims 2017 Seyfarth Shaw LLP.

6 All rights reserved. Private and Confidential12 DTSA Whistleblower Notice Requirement To whom/ what agreement types it applies Legally compliant notice language Consequences of failure to include Whistleblower notice best practices limited decisions to date related towhistleblower immunity 2017 Seyfarth Shaw LLP. All rights reserved. Private and Confidential13 DTSA Whistleblower Notice: Employer Requirements An employer shall provide notice of theimmunity set forth in this subsection in anycontract or agreement with an employee thatgoverns the use of a Trade Secret or otherconfidential information An employer shall be considered to be incompliance with the notice employer provides a cross-reference to apolicy document provided to the employeethat set forth the employer s reporting policyfor a suspected violation of law 2017 Seyfarth Shaw LLP.

7 All rights reserved. Private and Confidential14 DTSA Whistleblower Notice Requirement: Employee Employee Defined For purposes ofthis subsection, the term employee includes any individual performing workas a contractor or consultant for anemployer Traditional employee Contractor Consultant 2017 Seyfarth Shaw LLP. All rights reserved. Private and Confidential15 DTSA Whistleblower Notice Requirement: NoticeLanguage Notice of Immunity under theDefend Trade secrets acknowledges andagrees that the Company hasprovided Employee with writtennotice below that the Defend TradeSecrets Act, 18 1833(b),provides an immunity for thedisclosure of a Trade Secret to reporta suspected violation of law and/orin an anti-retaliation lawsuit, asfollows: 2017 Seyfarth Shaw LLP. All rights reserved. Private and Confidential16 DTSA Whistleblower Notice Requirement: NoticeLanguage1.

8 IMMUNITY. An individual shall not be held criminally or civilly liableunder any Federal or State Trade Secret law for the disclosure of atrade Secret that A. is made (i) in confidence to a Federal, State, or local government official,either directly or indirectly, or to an attorney; and(ii) solely for the purpose of reporting or investigating asuspected violation of law; orB. is made in a complaint or other document filed in a lawsuit or otherproceeding, if such filing is made under seal. 2017 Seyfarth Shaw LLP. All rights reserved. Private and Confidential17 DTSA Whistleblower Notice Requirement: NoticeLanguage2. USE OF Trade Secret INFORMATION IN ANTI-RETALIATION LAWSUIT. An individual who files a lawsuit forretaliation by an employer for reporting a suspected violationof law may disclose the Trade Secret to the attorney of theindividual and use the Trade Secret information in the courtproceeding, if the individual A.

9 Files any document containing the Trade Secret under seal;andB. does not disclose the Trade Secret , except pursuant to courtorder. 2017 Seyfarth Shaw LLP. All rights reserved. Private and Confidential18 DTSA Whistleblower Notice Requirement: NoticeLanguage Example Alternative Language You are hereby notified in accordance with the Defend Trade SecretsAct of 2016 that you will not be held criminally or civilly liable under anyfederal or state Trade Secret law for the disclosure of a Trade secretthat: (a) is made (i) in confidence to a federal, state, or localgovernment official, either directly or indirectly, or to an attorney; and(ii) solely for the purpose of reporting or investigating a suspectedviolation of law; or (b) is made in a complaint or other document that isfiled under seal in a lawsuit or other proceeding. You are further notified that if you file a lawsuit for retaliation by anemployer for reporting a suspected violation of law, you may disclosethe employer's Trade secrets to your attorney and use the Trade secretinformation in the court proceeding if you: (a) file any documentcontaining the Trade Secret under seal; and (b) do not disclose thetrade Secret , except pursuant to court order.

10 2017 Seyfarth Shaw LLP. All rights reserved. Private and Confidential19 Failure to Provide DTSA Whistleblower Notice:Consequences If an employer does notcomply with the employermay not be awardedexemplary damages orattorney an actionagainst an employee to whomnotice was not provided. 2017 Seyfarth Shaw LLP. All rights reserved. Private and Confidential20 Failure to Provide DTSA Whistleblower Notice:Consequences Failure to include whistleblower noticelanguage may invite more judicialscrutiny of important employerdocuments containing provisions thatprotect confidential information: Non-disclosure/confidentiality agreements Non-competition/non-solicitationagreemen ts Invention assignment agreements May invite government scrutiny of thecontract or set up arguments for unfairbusiness practices 2017 Seyfarth Shaw LLP. All rights reserved. Private and Confidential21 DTSA Whistleblower Notice Requirement: UpdateAgreements Update non-disclosure (and otherrelevant) agreements with newemployees, contractors, and consultants Should contain immunity provision noticeand/or cross-reference to compliant policy Express notice preferable Otherwise, foregoing significant remediespotentially available under the DTSA 2017 Seyfarth Shaw LLP.