Russell Beck Presented On Trade Secrets At Federal Bar Association’s Annual Meeting

On September 14, 2017Russell Beck was a panelist at the Federal Bar Association’s Annual Meeting in Atlanta, Georgia. The title of the program was “The Defend Trade Secrets Act: Trade Secret Protection Goes Federal.”

The topic was described as follows:

“In May 2016, a major development in trade secrets law for American companies took effect – the Defend Trade Secrets Act (DTSA). The DTSA has been described as “the most significant expansion” of federal intellectual property law in 70 years. Hear an overview of the DTSA, what it means for practitioners, and how trade secret litigation will be impacted by the DTSA.”

Russell presented along with Ben Fink and Neal Weinrich of Berman Fink Van Horn P.C.

For up-to-the-minute analysis of legal issues concerning trade secrets and noncompete agreements in Massachusetts and across the United States, read Russell Beck’s blog, Fair Competition Law.

eck Reed Riden LLP is among the leading authorities in trade secret, noncompete, and unfair competition law, and our experience handling these matters is backed by our extensive employment lawand business litigation experience. Our hand-picked team combines attorneys with complementary expertise and practical experience.

The Wall Street Journal featured Beck Reed Riden LLP’s noncompete agreement experience. In 2016, the White House issued a report entitled, “Non-Compete Agreements: Analysis of the Usage, Potential Issues, and State Responses,” relying in part on Beck Reed Riden LLP’s research and analysis, including its 50 State Noncompete Survey.

Russell Beck’s work in this area is well recognized and includes:

  • Over twenty years of working on trade secret, noncompete, and unfair competition matters

  • Participating in the White House’s working group discussions that led to the development by the White House of a Call to Action on noncompetes. (He was the only private practice lawyer to participate in those discussions.)
  • Authoring the book Negotiating, Drafting, and Enforcing Noncompetition Agreements and Related Restrictive Covenants (5th ed., MCLE, Inc. 2015), used by other lawyers to help them with their noncompete cases

  • Drafting and advising on legislation for the Massachusetts Legislature to define, codify, and improve noncompetition law

  • Assisting several United States Senators on possible federal noncompete legislation
  • Creating and teaching the Trade Secrets and Restrictive Covenants courseat Boston University School of Law

  • Founding and administering the award-winning blog, Fair Competition Law

  • Establishing and administering the Noncompete Lawyers and Trade Secret Protection groups on LinkedIn, with over 2400 members around the world

  • Founded and chaired the Trade Secret / Noncompete Practice for an AmLaw 100 firm

In addition, Russell was honored for his work in this area of law in the 2017 Chambers USA Guide, which stated that Russell is an “excellent attorney,” a “terrific noncompete specialist, and “a skilled litigator with experience representing clients ranging from individuals to large corporations at both trial and appellate levels.”

Beck Reed Riden LLP is Boston’s innovative litigation boutique. Our lawyers have years of experience at large law firms, working with clients ranging from Fortune 500 companies to start-ups and individuals. We focus on business litigation and labor and employment. We are experienced litigators and counselors, helping our clients as business partners to resolve issues and develop strategies that best meet our clients’ legal and business needs – before, during, and after litigation. We’re ready to roll up our sleeves and help you. Read more about us, the types of matters we handle, and what we can do for you here.

Reminder: Employers must use new Form I-9 by September 18 (2017)

On or before September 18, 2017, all employers must begin completing the recently updated Form I-9, Employment Eligibility Verification for each new employee hired in the United States, including citizens and noncitizens.  Form I-9 is used for verifying an individual’s identity and authorization to work in the United States.

The updates to the new Form I-9 include additions to the list of acceptable documents that employers can use to verify an employee’s identity and employment authorization. The revised Form I-9 does not change an employer’s storage and retention obligations. Form I-9 can be stored on paper, on microform, or electronically.  In addition, an employer must retain a Form I-9 for the duration of the employee’s employment and after termination for either three years after the date of hire, or one year after the date an employee’s employment is terminated, whichever is later.

Beck Reed Riden LLP is Boston’s innovative litigation boutique. Our lawyers have years of experience at large law firms, working with clients ranging from Fortune 500 companies to start-ups and individuals. We focus on business litigation and labor and employment. We are experienced litigators and counselors, helping our clients as business partners to resolve issues and develop strategies that best meet our clients’ legal and business needs – before, during, and after litigation. We’re ready to roll up our sleeves and help you. Read more about us, the types of matters we handle, and what we can do for you here.

 

Massachusetts Court Warns Employers Not to Coast on Forum Selection Clause

he Business Litigation Session of the Massachusetts Superior Court recently dismissed a noncompete case against a California employee on the basis of forum non conveniens, notwithstanding a Massachusetts forum selection clause and a Massachusetts choice-of-law provision in the defendant’s employment agreement. The case is titled Oxford Global Resources, LLC v. Hernandezand it was issued on June 9, 2017.

This decision calls into question the enforceability of forum selection and choice-of-law provisions in employment agreements with California employees. The decision also characterizes employment agreements (especially with low-level employees) as “contracts of adhesion” that may be subject to more careful judicial scrutiny. Finally, as discussed below, the Hernandez opinion takes a dim view of what constitutes an employer’s “confidential information,” highlighting existing tension in Massachusetts case law.

Background

efendant Jeremy Hernandez was a California resident who was recruited, hired, and employed by Plaintiff Oxford Global Resources, LLC, in California. Hernandez’s employment with Oxford was conditioned on his signing a “protective covenants agreement,” which contained confidentiality, noncompete, and nonsolicitation obligations, as well as a Massachusetts choice-of-law provision and a Massachusetts forum selection clause. Oxford filed the case claiming that Hernandez breached his agreement when he used Oxford’s confidential information to solicit its clients on behalf of a competitor. Hernandez moved to dismiss the case on the basis of forum non conveniens.

As an initial matter, the Court found that because Hernandez had no meaningful opportunity to negotiate the terms of his employment agreement, it was a contract of adhesion that was subject to careful scrutiny. The Court based its finding on the following facts:

  1. Oxford would not have hired Hernandez if he did not sign the agreement.
  2. Oxford did not allege or offer any evidence suggesting that the parties negotiated the choice-of-law or forum selection provisions, or that Oxford had even demonstrated a willingness to discuss the issues.
  3. Hernandez started as an entry-level employee at $50,000 annual salary.
  4. Hernandez possessed no prior industry skill or experience that would have given him bargaining power to negotiate the agreement.

Notably, the Court did not give any weight to “boilerplate language” in the agreement stating that Hernandez had read the agreement and had the opportunity to have his own lawyer review it.

The Court next found that enforcing the agreement’s Massachusetts choice-of-law provision would result in “substantial injustice” to Hernandez. Because Hernandez was a California resident who was recruited, hired, and employed there, California law (generally voiding noncompetes) would otherwise govern the dispute absent a choice-of-law provision. The court ruled that enforcing the provision would deny Hernandez the protections of California law and subject him to a noncompete.

Although some California courts recognize a trade secret exception that permits the enforcement of agreements that are “necessary to protect the employer’s trade secrets,” the Court nevertheless found that the agreement, which provided that Hernandez could not compete against Oxford using its trade secret information, was not enforceable because it defined confidential information so broadly as to include the identities of Oxford’s customers, prospective customers, and consultants. The Court stated:

The non-competition restriction that Oxford seeks to enforce therefore goes far beyond what is permitted under California law or, for that matter, under Massachusetts law.

An employee is free to carry away his own memory of customers’ names, needs, and habits and use that information, even to serve or to solicit business from those very customers. Such “remembered information” is not confidential because the information itself, as distinguished from an employer’s compilation of such information into a list or database, is known to the customers and thus not kept secret by the employer

The Court concluded that:

Since the mere identity of customers is not confidential, the Agreement that Oxford seeks to enforce is the kind of non-competition agreement that is void under California law. Accordingly, the Court held that the choice-of-law provision was not enforceable.

Finding that it was evident that Oxford sought to include a Massachusetts forum selection clause in order to avoid the application of California law, the Court also held that the forum selection clause was not enforceable under California law.

Ultimately, the Court dismissed the case on grounds of forum non conveniens, finding that it would be unfair to compel Hernandez to defend in Massachusetts and that California had a stronger interest in the case.

Import of the Hernandez Decision

ernandez not only underscores the difficulty of enforcing restrictive covenants against California residents, but also generally calls into question the validity of choice-of-law and forum selection clauses, especially where the employee has had no meaningful opportunity to negotiate the terms of his employment agreement.

Notably, in characterizing the employment agreement as a “contract of adhesion,” the Court in Hernandez gave no weight to the affirmative representations in the agreement (stating that the employee had read and had opportunity to have his attorney review the agreement). Historically, the Superior Court has given varying degrees of weight to these types of affirmative representations.

Moreover, Hernandez adds to the argument that (in some instances) employees are permitted to use their employer’s confidential information concerning client names, needs, and habits, as long as that information is “remembered” rather than compiled into a list or database. In this respect, Hernandez highlights the tension that exists in Massachusetts case law regarding confidential information that is stored in an employee’s memory.

Given the evolving case law on these issues, businesses seeking to protect their confidential information should consult with their attorneys before drafting or enforcing these types of agreements.

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Hannah T. Joseph, the author of this article, is a lawyer in the firm’s litigation practice, whose work in intellectual property has been recognized by, among others, the Boston Bar Association (where she serves as Co-Chair of the Boston Bar Association’s Intellectual Property Committee). Thank you to Monika Zarski for contributing to this article.

Beck Reed Riden LLP is Boston’s innovative litigation boutique. Our lawyers have years of experience at large law firms, working with clients ranging from Fortune 500 companies to start-ups and individuals. We focus on business litigation and labor and employment. We are experienced litigators and counselors, helping our clients as business partners to resolve issues and develop strategies that best meet our clients’ legal and business needs – before, during, and after litigation. We’re ready to roll up our sleeves and help you. Read more about us, the types of matters we handle, and what we can do for you here.

Matal v. Tam: SCOTUS Brings a New Slant to Disparaging Trademarks

On June 19, 2017, in an 8-0 ruling, the United States Supreme Court in Matal v. Tam struck down the Lanham Act’s disparagement clause, prohibiting the registration of disparaging trademarks, as unconstitutional under the First Amendment’s Free Speech Clause. 582 U.S. __, No. 15-1293, 2017 WL 2621315 (U.S. June 19, 2017).

Following Tam, the U.S. Patent and Trademark Office (USPTO) may no longer deny trademark registrations on the basis that the marks may be disparaging. Accordingly, Tam will undoubtedly have far-reaching consequences in the business community (and, not to mention, finally resolve the Washington Redskins case).

The Lanham Act’s Disparagement Clause

Prior to Tam, the Lanham Act’s disparagement clause prohibited the registration of trademarks “which may disparage . . . persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt, or disrepute . . . .” 15 U.S.C. § 1052(a).

The USPTO would find a prima facie case of disparagement where (1) the trademark referred to “identifiable persons, institutions, beliefs or national symbols,” and (2) a substantial percentage of the referenced group, “in the context of contemporary attitudes,” would consider the mark to be disparaging. Once a prima facie case was made, the burden shifted to the applicant of the mark to prove that the mark was not disparaging. An applicant’s good intentions for the trademark, and his or her status as a member of the referenced group, would have no impact on the USPTO’s analysis in this regard.

The Case

Simon Tam is the lead singer of “The Slants,” an Asian-American rock band. He chose the name “The Slants,” a variant of an ethnic slur, in order to reclaim stereotypes about people of Asian ethnicity.

In 2010, Tam applied to register the band name with the USPTO’s principal register. The USPTO rejected the application, finding that “there is . . . a substantial composite of persons who find the term in the applied-for mark offensive.” Tam contested the decision before the examiner and the USPTO’s Trademark Trial and Appeal Board (TTAB), but was denied.

Tam took the case to court, and the Federal Circuit ultimately held that the disparagement clause was facially unconstitutional under the First Amendment’s Free Speech Clause. The court held that the clause engaged in viewpoint-based discrimination, regulating the expressive component of trademarks which cannot be treated as commercial speech, and that the clause could not survive strict scrutiny.

The government filed a petition for certiorari, which the U.S. Supreme Court granted on the issue of whether the disparagement clause is facially invalid under the First Amendment.

Supreme Court Rules that the Disparagement Clause is Unconstitutional

As a threshold matter, the Court addressed Tam’s argument that the disparagement clause did not apply to marks that disparage racial or ethnic groups. Tam argued that the clause prohibited the registration of marks that disparage “natural persons,” not groups. The Court dismissed Tam’s definitional interpretation as “meritless” and refuted by the “plain terms” of the clause (noting that “every person is a member of a ‘non-juristic’ group, e.g., right-handers, left-handers, women, men, people born on odd-numbered days, people born on even-numbered days”). The Court also found that the clause applied broadly to encompass not only marks that disparage natural persons, but also marks that disparage “institutions” and “beliefs.”

Next, the Court addressed the government’s arguments that: (1) trademarks are government speech, (2) trademarks are a form of government subsidy, and (3) the disparagement clause should be tested under the “government-program” doctrine.

With respect to the government’s first argument, the Court unanimously held that trademarks are private, not government, speech” that are entitled to free speech protections. The Court specifically found that, because the government does not create, edit, or have the authority to arbitrarily reject marks, trademarks are not government speech and federal registration does not constitute approval of a mark. The Court stated: “it is far-fetched to suggest that the content of a registered mark is government speech. If the federal registration of a trademark makes the mark government speech, the Federal Government is babbling prodigiously and incoherently . . . For example, if trademarks represent government speech, what does the Government have in mind when it advises Americans to . . . ‘Just do it’ . . . ?”

As to the exact basis upon which to strike down the disparagement clause, the Court was evenly split, 4-4.

Justice Alito, joined by the Chief Justice, Justice Thomas, and Justice Breyer, rejected the government’s next argument that this case was governed by cases in which the Court had previously upheld the constitutionality of government programs that subsidized speech expressing a particular viewpoint. Those cases stand for the rule that, while the government “may not deny a benefit to a person on the basis that infringes his constitutionally protected . . . freedom of speech,” the government “is not required to subsidize activities that it does not wish to promote.” If the government could convince the Court that the federal registration of a trademark was a type of subsidy that the government could withhold, it might be able to salvage the disparagement clause on this basis. Justice Alito rejected the argument, however, reasoning that federal trademark registration is nothing like the programs at issue in the subsidies cases (e.g., tax benefits). In this vein, Justice Alito observed that the USPTO does not pay applicants seeking to register a mark – rather, applicants pay the USPTO filing and other fees.

The Alito Opinion similarly found that “government-program” cases involving the collection of union dues by public employers were inapplicable to the registration of trademarks.

Finally, Justice Alito addressed the parties’ dispute regarding whether or not trademarks are commercial speech, which should be subject to relaxed scrutiny. Justice Alito declined to resolve the issue, instead finding that the disparagement clause could not even withstand a relaxed scrutiny analysis. Specifically, Justice Alito held that the disparagement clause was not sufficiently “narrowly drawn” to “drive out trademarks that support invidious discrimination.” Because the clause applied to trademarks that disparage any person, group, or institution, and would therefore apply to trademarks like “Down with racists,” “[i]t is not an anti-discrimination clause; it is a happy-talk clause.” “In this way, it goes much further than is necessary to serve the interest asserted.”

Concluding its opinion, Justice Alito noted:

There is also a deeper problem with the argument that commercial speech may be cleansed of any expression likely to cause offense. The commercial market is well stocked with merchandise that disparages prominent figures and groups, and the line between commercial and non-commercial speech is not always clear, as this case illustrates. If affixing the commercial label permits the suppression of any speech that may lead to political or social “volatility,” free speech would be endangered.

In his concurring opinion, Justice Kennedy agreed with Justice Alito that the disparagement clause constituted viewpoint discrimination, “a form of speech suppression so potent that it must be subject to rigorous constitutional scrutiny.”

Joined by Justice Ginsburg, Justice Sotomayor, and Justice Kagan, Justice Kennedy wrote separately to submit that, because the disparagement clause constituted viewpoint discrimination, the Court need not entertain the government’s other arguments.

The Kennedy Opinion emphasized:

At its most basic, the test for viewpoint discrimination is whether—within the relevant subject category—the government has singled out a subset of messages for disfavor based on the views expressed. . . . In the instant case, the disparagement clause the Government now seeks to implement and enforce identifies the relevant subject as “persons, living or dead, institutions, beliefs, or national symbols.” 15 U.S.C. § 1052(a). Within that category, an applicant may register a positive or benign mark but not a derogatory one. The law thus reflects the Government’s disapproval of a subset of messages it finds offensive. This is the essence of viewpoint discrimination.

Justice Kennedy continued:

The First Amendment’s viewpoint neutrality principle protects more than the right to identify with a particular side. It protects the right to create and present arguments for particular positions in particular ways, as the speaker chooses. By mandating positivity, the law here might silence dissent and distort the marketplace of ideas.

For these reasons, the Kennedy Opinion held that, “the Court’s cases have long prohibited the government from justifying a First Amendment burden by pointing to the offensiveness of the speech to be suppressed.”

Justice Kennedy reasoned that, because the disparagement clause constituted viewpoint discrimination, regardless of any “corporate speech” or “federal subsidy” designation, it must be subject to heightened scrutiny – a test it could not survive.

Justice Thomas, who mostly joined the opinion of Justice Alito, added “I continue to believe that when the government seeks to restrict truthful speech in order to suppress the ideas it conveys, strict scrutiny is appropriate, whether or not the speech in question may be characterized as ‘commercial.’”

Import of the Decision

With the disparagement clause of the Lanham Act struck down, the USPTO may no longer reject trademark registration applications because the trademarks are disparaging or offensive to a specific group, institution, belief, or symbol. This will undoubtedly result in the registration of myriad words, phrases, and marks that are considered by many to be derogatory. This also leaves the door open for the government to draft a more narrowly-tailored disparagement clause if it chooses to do so.

The Tam case also signals a new chapter that calls into doubt other aspects of well-established trademark law. See 15 U.S.C. § 1052(a) (addressing immoral, deceptive, or scandalous matter). The full import of this case and its effect on the future of trademark law is uncertain.

Related Reading: Landmark SCOTUS Decision Opens Door to “Immoral or Scandalous” Trademarks

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Hannah T. Joseph, the author of this article, is an attorney with the firm’s litigation group, whose work in intellectual property has been recognized by, among others, the Boston Globe and at the Boston Bar (where she serves as Co-Chair on the Boston Bar Association’s Intellectual Property Committee).

eck Reed Riden LLP is Boston’s innovative litigation boutique. Our hand-picked team of lawyers have years of experience at large law firms, working with clients ranging from Fortune 500 companies to start-ups and individuals. We focus on business litigation and labor and employment, and are recognized as a leading authority in trade secret, noncompete, and unfair competition law. We are experienced litigators and counselors, helping our clients as business partners to resolve issues and develop strategies that best meet our clients’ legal and business needs – before, during, and after litigation. We’re ready to roll up our sleeves and help you. Read more about us, the types of matters we handle, and what we can do for you here.

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