MA Senate Passes Noncompete Reform Bill

Here is significant news on the MA noncompete reform front.  Yesterday, as the Massachusetts legislature’s Joint Committee on Economic Development and Emerging Technology was hearing testimony on the pros and cons of non-competition agreements, and the Governor’s Secretary of Housing and Economic Development was signalling a willingness to compromise, the Senate somewhat surprisingly passed a recently introduced compromise bill, by a vote of 31 to 7.  This is a significant departure from the outright ban proposed by the Governor and advocated by various groups.  Here is a summary of the bill.  I will post the bill itself soon.

  • Applies to employee non-competition agreements, which… More

Update on Noncompete Legislation

Here is an update on new developments in the few weeks since Governor Patrick introduced legislation that would largely abolish employment-based noncompetes in Massachusetts (described here).

As summarized by Russ Beck here, the MA legislature’s Joint Committee on Labor and Workforce Development has favorably reported out a previously-filed bill very similar to Gov. Patrick’s legislation banning noncompetes.  Interesting, Governor Patrick’s bill is being considered by a different committee, the Joint Committee on Economic Development and Emerging Technologies, apparently because it is part of a larger bill focused on economic development.  The committee has not yet scheduled a hearing of the Governor’s bill.  With the current… More

Is a Federal Trade Secrets Act on the Horizon?

Late last month, Senators Chris Coons (D-Del.) and Orrin Hatch (R-Utah) filed the Defend Trade Secrets Act, a bill that would create a federal trade secrets cause of action for civil litigants.  Currently, trade secrets litigation is a state law matter, meaning that most trade secrets litigation takes place in state courts, with their different statutes and court procedures.  But if this new Act passed, trade secrets protections would be enforced by a uniform law in the federal court system, which has less variations from district to district than the various state courts do.  Federal courts make obtaining discovery easier across state lines… More

MA Governor Pushes to Abolish Noncompetes

In case you missed the news splash over the past 48 hours, MA Governor Patrick this week announced that he is introducing legislation to abolish employee noncompete agreements except in very limited circumstances.  The proposed legislation would have Massachusetts join California as one of the very few states that generally prohibit these post-employment restrictions.   The proposed law is part of a larger bill — the Growth and Opportunity Act of 2014 – focused on economic growth, particularly within the technology sector.  (A description of the various features of the larger bill is here.)

Although the Internet is abuzz with expressions of shock… More

Rare Massachusetts Superior Court Decision Interpreting the CFAA Takes the Narrow View Without Squarely Addressing the Broad

            Judge Peter M. Lauriat of the Massachusetts Superior Court decided late last year that an employee who takes confidential documents from her employer’s electronic document system to use in a discrimination lawsuit against her employer is not liable to the employer under the Computer Fraud and Abuse Act (CFAA), especially when the employer knew about the lawsuit but nonetheless did not restrict the employee’s access to those documents while she was working for the employer.  In so deciding, Judge Lauriat had to grapple with two different interpretations of the CFAA, which generally makes individuals criminally and civilly liable for… More

If You Have a Trade Secret, You Better Protect It

            Late last month, Judge Cornelius J. Moriarty of the Massachusetts Superior Court granted summary judgment for a defendant company and two individual defendants on a trade secret misappropriation claim because the plaintiff company did nothing to protect what it claimed were trade secrets.  One element of a trade secret claim is that the plaintiff must demonstrate that it took sufficient actions to protect its trade secret from unauthorized disclosure.  Among the factors the court considers is (1) whether the plaintiff had agreements with employees and others restricting disclosure, and (2) any security precautions to prevent unauthorized access to the… More

CFAA and Noncompete News

            Over the past two months, several interesting items of Computer Fraud and Abuse Act (CFAA) and noncompete news have crossed my desk.  Below are summaries of the two most important items:

            1. Encryption Can Be a CFAA Violation: In early December, Judge Denise J. Casper of the U.S. District Court in Massachusetts ordered a former employee of a company to, among other things, disclose the password that he put on an important file on the company’s server because the company was likely to prevail on its CFAA claim against the employee under the “preliminary injunction” standard.  In the case, just before the… More

Massachusetts Federal Court Refuses to Dismiss CFAA Claim But Permits the Defendants to Ask Again Later

            Echoing a new theme in the federal district court in Massachusetts, last month Chief Magistrate Judge Leo T. Sorokin refused to dismiss a Computer Fraud and Abuse Act (“CFAA”) claim brought against the former CEO of a company, but did so without prejudice, meaning that the defendants could ask the Court to dismiss the claim again later in the case.  Under the CFAA, “[a] defendant is liable where he or she ‘knowingly and with intent to defraud, accesses a protected computer without authorization, or exceeds authorized access, and by means of such conduct furthers the intended fraud and obtains anything of… More

More on the Noncompete Debate

An Op-Ed in last Sunday’s Boston Globe joins the chorus of advocates for noncompete reform in Massachusetts.  The author, Jeremy Hitchock, CEO of New Hampshire-based Dyn, prefers California’s “prohibition” approach (in which employee noncompetes generally aren’t enforceable) , arguing that California’s model  “has created a unique employment ecosystem that thrives on employee movement.”  Conceding that this model “reduces the protection of an individual company’s business know-how,” Hitchcock asserts that “major trade secrets” are adequately protected by the Uniform Trade Secrets Act (UTSA).  Massachusetts has not yet adopted the UTSA, but there is renewed impetus in the legislature to do so now, perhaps coupled with… More

What an Agreement Says Really Matters

            Earlier this month, Judge Dennis J. Curran of the Massachusetts Superior Court decided that a noncompete clause in an employment agreement that had, by its terms, expired after the employee turned 65 could not be enforced even though the employee continued to work for the employer before moving to another company.  The agreement explicitly stated that it terminated when the employee turned 65, and the noncompete clause in it stated that the employee could not compete with the employer within a 50 mile radius of the employer for two-and-a-half years “after the final termination of this Agreement.”  So Judge Curran reasoned that the agreement ended… More