SAN FRANCISCO – A preliminary injunction granted June 22 by U.S. District Judge Jon S. Tigar reveals a glimpse at federal courts’ ability to make rulings in trade secret misappropriation cases in connection with the newly enacted Defend Trade Secrets Act (DTSA).
“It’s a preview of what courts may do in the future,” Allan Gabriel, director of Dykema's Intellectual Property and Intellectual Property Litigation Department, told the Northern California Record. “For clients, for litigators…this is a new area.”
Previously, trade secrets-related cases were mostly heard by state courts under the Uniform Trade Secrets Act (UTSA), which was adopted in 48 states, albeit with differences in each state’s interpretation and enforcement of the law. Gabriel said establishing a federal trade secrets law under the DTSA allows attorneys to decide whether the state court or federal courts may be a better venue for filing a case. It also has implications for the courts.
“Federal judges will now have to decide which law they are going to follow,” Gabriel said.
Gabriel said Tigar cites federal cases in his June 22 ruling that grants a preliminary injunction against a former Henry Schein Inc. employee who allegedly violated a confidentiality agreement when she left the company. Gabriel said Tigar interpreted California trade secrets laws in his order, but made federal law.
Gabriel said the decision about whether to file a trade secrets case in federal court or state court partially lies in the individual state’s laws. For example, he said California is known as a “pro-employee state.” In addition, California law only requires nine of 12 jurors to agree on a verdict, while federal law requires a unanimous decision.
“Sometimes appealing to one person or two on a jury can make a difference,” Gabriel said.
In addition, the trial process in federal court is typically faster than in state court, where cases can be put on hold for years. Gabriel said the relative newness of the DTSA could also influence the decision on where to file a trade secrets case. He said the venue decision could be based on how familiar federal judges are with trade secret laws. Differences in rules of evidence could also play a role in the decision, Gabriel said.
Gabriel applauded Tigar’s decision-making process in the Schein case, saying the judge looked at the California cases on the subject and realized that they are not always enforceable.
“The (Schein) preliminary injunction opinion is a very thoughtful review of the law,” Gabriel said.
Gabriel said it is important to watch for developments as the DTSA takes hold to determine how it will impact future cases.
In the Schein case, former sales consultant Jennifer Cook resigned from the company in May and took a job with a Henry Schein competitor. Henry Schein alleged that Cook emailed several customer reports to her personal email using the company’s proprietary software, did not return her work laptop containing customer-related data for several weeks and accessed proprietary ordering and purchasing data from outside the company after she left.
Cook argued that the information in question should not trade be classified as secrets because they can be “readily ascertained through public sources and/or [are] generally known in the industry.”
On June 9, Henry Schein filed a lawsuit alleging misappropriation of trade secrets under the DTSA and asked the court to grant a temporary restraining order and preliminary injunction to keep Cook from accessing, using, or disclosing the allegedly misappropriated information.
Although Tigar granted the temporary restraining order and preliminary injunction, he ruled that Henry Schein is not entitled to an injunction that prevents Cook from contacting or doing business with Schein customers.