College Football Trade-Secrets Scandal

A scandal involving Wake Forest University’s football team offers lessons for companies protecting their trade secrets. And a phenomenal name.

The Wake Forest coaches gave one of their radio broadcasters, Tommy Elrod, full access to the football team’s game plans. And Elrod has been leaking those game plans to Wake’s opponents — for years. Thus: “WakeyLeaks.”

Since the story broke, several universities have admitted receiving game plans, and the Atlantic Coast conference has fined Louisville and Virginia Tech.

A college-football game plan can be a trade secret. After all, it is information that, if kept secret, arguably offers economic advantage. Given the amount of money at stake, it’s remarkable that college and professional teams don’t adopt the same level of protections as a company guarding its trade secrets.

This episode shows that when it comes to trade secrets, access must be on a “need to know” basis. Wake Forest had no reason to share the full details of its game plans with a  radio broadcaster. When only give your trade secrets to those who need them for their jobs, you reduce the chance of unwanted disclosure.

Also, like Louisville and West Virginia, many companies encounter a competitor’s trade secrets, most often through new hires that bring a former employer’s information with them. But using this information creates a huge risk. Here, Louisville and West Virginia are facing fines and bad PR (and, though unlikely, a possible lawsuit for trade-secrets misappropriation). Use your employee-onboarding process to ensure that new employees don’t have, and don’t use, a prior employer’s trade secrets.

Trade-secret issues arise in all businesses and industries, including college and professional sports. And all companies face the risk of unwanted theft or disclosure of their proprietary information. It is critical to work with an attorney to protect your trade secrets.

Donald Trump: Unprecedented Threat to U.S. Companies’ Trade Secrets?

Last week, I wrote about how state-sponsored cyber attacks could increase dramatically under President Trump. As a result, U.S. businesses, and our overall economy, are facing substantial risks that very few are talking about. Now is the time to take action. Below are five steps you should consider now to protect your trade secrets.

Since my last post, the anti-China rhetoric emanating from President Elect Trump’s circle has escalated. For example, just today, Carly Fiorina had the following comments after meeting with Trump:

We then got down to more serious business, and spent a fair amount of time talking about China as probably our most important adversary and a rising adversary. We talked about hacking, whether it’s Chinese hacking or purported Russian hacking.

Assuming she is accurately conveying Trump’s comments, this is a remarkable statement. It speaks to Trump’s hostile attitude towards China. As I’ve mentioned previously, I am not a geopolitics expert. But all U.S. companies need to be very concerned about the possibility of a breakdown in U.S.-China relations. China almost certainly has the capacity to initiate cyber attacks against the U.S.’s internet infrastructure. And China has proven its ability to successfully steal trade secrets from U.S. companies.

All companies, regardless of size, need to be prepared. Given the uncertainty, I recommend the following steps to protect your trade secrets:

  1. Determine whether any of your trade secrets can be maintained offline, even at the cost of organizational efficiency. In the past, most companies I’ve encountered strongly resist this type of protection. But given the unprecedented risk, companies need to at least explore offline storage of trade secrets.
  2. At a minimum, securely maintain offline copies of all trade-secret documents that can be accessed if a cyber attack disrupts internet access.
  3. Invest in backup solutions that will allow you to restore lost data.
  4. Implement a disaster plan that can be initiated in the event of widespread loss of internet connectivity.
  5. Work with an attorney specializing in trade secrets to make sure you are taking all reasonable efforts to protect your trade secrets and to prepare for the possibility of misappropriation.

We are entering a highly unpredictable period in foreign relations. And with unpredictability comes risk. This risk is on top of the already business-critical threats of cyber attacks and trade-secret theft that have accompanied our increasingly interconnected world. Companies need to act immediately to secure their information assets.

 

Florida Appellate Court Limits Damages for Wrongful Injunction in Non-Compete Case

Under Florida law, an injunction cannot issue unless the movant first posts a bond. See Fla. R. Civ. P. 1.610(b). This week, in Vital Pharmaceuticals Inc. v. Professional Supplements, LLC, et al., Florida’s Fourth District Court of Appeal addressed a situation where the trial court did not require the movant to post a bond when it enjoined the defendants from violating their non-compete agreements. A copy of the opinion can be downloaded here.

In this case, the plaintiff sued its former employees and their new employer for tortious interference and breaching restrictive covenants. The plaintiff also sought, and obtained, an injunction, though the court did not require a bond. Later, the court dissolved the injunction for reasons unknown to the appellate court. The court awarded the defendants damages resulting from the injunction.

The appellate court reversed the damages award. The court first held that the injunction was never effective, since no bond was posted.

Next, the court ruled that any damages for a wrongful injunction are limited to the amount of the bond. So since there was no bond, the defendants were not entitled to any damages.

This case offers lessons to plaintiffs and defendants alike. If you are representing a party that has obtained an injunction in a Florida case, make sure the injunction order requires a bond — and be prepared to post the bond immediately. Similarly, both parties need to be prepared to offer evidence at the injunction hearing about the proper amount of a bond. This sometimes becomes an afterthought, with both sides focusing instead on the evidence needed to obtain/defeat the injunction.

 

Trade Secrets Under Donald Trump: Prepare for Cyber War?

Once Donald Trump takes office, dramatic policy changes will reverberate throughout our economy. Trade secrets are no different. While the Trump administration’s policy objectives remain largely unknown in this area, it’s worth considering how companies should prepare to protect their trade secrets during the Trump presidency.

To start, I expect President-Elect Trump to, at a minimum, back off of President Obama’s call for a dramatic reduction in the use of noncompete agreements. While President Obama took a pro-employee viewpoint, Trump seems more inclined to favor the employer’s perspective. But since noncompetes are legislated at the state level, this policy change will not have immediate results. At most, the pace of noncompete reform may slow. Companies still need to carefully consider their use of noncompete agreements, as I discussed in a previous post.

In the short term, however, Trump’s policies may impact the frequency and scope of state-sponsored trade-secret theft and cyber attacks. Already, Trump is making waves by communicating with Taiwan’s president. If Trump rejects the U.S.’s longstanding “One China” policy (i.e., no direct contact with Taiwan’s government), China may retaliate — including by increasing its efforts to raid U.S. companies’ intellectual property.

I’m no expert in geopolitics, but it seems obvious that Trump’s election has added substantial uncertainty to the U.S.’s foreign policy. Trump’s statements thus far suggest that he will abandon, or at least dramatically reduce, multinational treaty efforts in favor of direct negotiation between the U.S. and other nations. And he has already said that he wants to bolster the U.S.’s capacity to initiate cyber attacks.

It wouldn’t surprise me if Trump follows the old advice you hear in the movies about prison: as soon as you get there, find the biggest, meanest guy and punch him in the face. Should President Trump take this attitude towards a nation like China, such as by establishing direct diplomacy with Taiwan, cyber warfare is not out of the question. At a minimum, I see an increased likelihood of state-sponsored cyber attacks and trade-secret theft during the Trump Administration. This creates risks for businesses of all sizes, not just large corporations.

But this is all just conjecture. We will all find out together how President Trump’s policies impact companies trying to protect their trade secrets. While it’s not time to start stockpiling canned goods, the increased uncertainty justifies even greater urgency for companies—regardless of size—to invest in IT solutions to protect against hacking, legal solutions that address theft or improper disclosure of trade secrets, and backup/redundancy systems that minimize damage in the event of a hack.

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