Litigation and Trial - Max Kennerly : Philadelphia Trial Lawyer Max Kennerly : Business and Commercial Litigation : Civil Attorney : The Beasley Firm : Philadelphia Pennsylvania

As The Legal Intelligencer reported,

When a top-level executive suddenly quits to take a job at a competing firm, the courts have the power to block the start of the new employment if the evidence shows that such an injunction is needed to prevent a likely misappropriation of trade secrets, the 3rd U.S. Circuit Court of Appeals has ruled.

The ruling came in Bimbo Bakeries USA Inc. v. Botticella, in which the appellate court considered whether the manufacturer of Thomas' brand English muffins was entitled to an injunction that barred one of its top-level executives from taking a new job with Hostess Inc.

Bimbo Bakeries won the first round in February when U.S. District Judge R. Barclay Surrick enjoined Chris Botticella, a former senior vice president at Bimbo, from starting the new job on the ground that Botticella's extensive knowledge of Bimbo's trade secrets -- including manufacturing secrets used to make the famous "nooks and crannies" in Thomas' English muffins -- made it substantially likely, if not inevitable, that he would disclose Bimbo's secrets to Hostess.

The Third Circuit affirmed.

The case turned on Pennsylvania law, specifically the Pennsylvania Uniform Trade Secrets Act (“PUTSA”) and the "inevitable disclosure" doctrine established by Air Products and Chemicals v. Johnson, 442 A.2d 1114 (Pa. Super. Ct. 1982):

Essentially, Johnson and Liquid Air remonstrate that the trial court improperly reasoned from Allis-Chalmers, supra,  Emery, supra, and Goodrich, supra, in holding that it was inevitable that Johnson would disclose information to Liquid Air. They contend that inevitability of disclosure is not the proper standard by which the trial court can determine that it was clear that an immediate and irreparable injury would result unless an injunction issued. While we do not adopt the reasoning of the trial court or its use of the term inevitable, we are unable to find that the trial court committed reversible error.

The lower court held that: "It would be impossible [for Johnson] to perform his managerial functions in on-site work without drawing on knowledge he possesses of Air Products' confidential information." (Trial Court Opinion at page 18.) We are satisfied that this expression of its determination of the likelihood of disclosure was proper. The court reasoned that the duties which Johnson was to perform at Liquid Air would make it impossible for Johnson not to disclose trade secrets. This was precisely the reasoning of the court in Emery, supra, which we find persuasive. Both courts held it would be impossible for the employee to perform his duties at the new employer without disclosing trade secrets. Accordingly, we hold that the trial court acted reasonably when it issued a preliminary injunction. Valley Forge Historical Society v. Washington Memorial Chapel, supra; Boyd v. Cooper, supra; Jostan Aluminum Products Co., Inc. v. Mount Carmel Dist. Indus. Fund, supra.

The above from Air Products isn't exactly a model of clarity, prompting the Third Circuit to engage in a bit of extrapolation:

With respect to the probability of disclosure required to warrant an injunction, the Superior Court stated at the outset of its analysis that Pennsylvania law permits the issuance of an injunction where a defendant’s new employment “is likely to result in the disclosure” of a former employer’s trade secrets. Id. at 1120 (emphasis added). The Court then determined that it was reasonable for the trial court to issue an injunction based on the inevitability that Johnson would disclose trade secrets, but the Superior Court explicitly chose “not [to] adopt the reasoning of the trial court or its use of the term inevitable.” Id. at 1124. Based on these statements it seems clear that the Superior Court believed that the trial court permissibly could have granted the injunction even if the disclosure of trade secrets was not inevitable.

...

The Superior Court subsequently stated that the “proper inquiry” in determining whether to grant an injunction to prevent the threatened disclosure of trade secrets is not whether a defendant inevitably will disclose a trade secret in the absence of injunctive relief, but instead whether “there is sufficient likelihood, or substantial threat, of defendant doing so in the future.” Den-Tal-Ez, 566 A.2d at 1232 (citing Air Prods., 442 A.2d at 1122-25; SI Handling Sys.,753 F.2d at 1263-64).

I'll pass over the interesting, but highly technical, question about the precedential effect of Victaulic Co. v. Tieman, 499 F.3d 227, 234 (3d Cir. 2007), which Botticella argued held required the former employer show, as a prerequisite to an injunction, that it "would be 'virtually impossible' for an employee to fulfill his responsibilities for a new employer without disclosing a former employer’s trade secrets." In short, the Third Circuit held that the "virtually impossible" language from Victaluic Co. was dicta, and so did not bind them.

There's an underlying theme to the Third Circuit's ruling, which, like Air Products before it, didn't really lay down a rule but instead rejected the hard-and-fast rule suggested by the losing party. That underlying theme is: respect for District Courts' ability to assess the need for entering injunctions, even injunctions that impose a significant hardship, like the injunction here.

Put another way, rather than set a high bar for District Courts — as a ruling which incorporated terms like "inevitable" or "virtually impossible" would have — the Third Circuit set no bar at all, and instead deferred to the judgment and determinations of the District Court.

It's hard to argue with the logic of that; as much as we would like to set hard-and-fast rules to govern all situations, the simple truth is that every case is unique, and we have to leave some discretion in the system, have to have some trust in the trial judges, to make it work right.

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I haven't seen Iron Man 2, but Robert Farley and Davida H. Isaacs have, and they've written a great column about the legal issues at the heart of the story, The Stark Reality of Defense Contracting:

Iron Man 2 is the most expensive movie ever made about an intellectual property dispute....

In the United States, inventors are supposed to profit from their creations, as emphasized in the original comics. But Iron Man 2 takes a different tack. While trying to fend off Vanko, Stark is pressured by the U.S. government to give up the secrets of the Iron Man suit. After Stark refuses a senator's demand that he relinquish his body-armor technology, the government forcibly takes it from him, only to turn it over to a competitor that then uses the technology to fulfill its own defense contract. Consciously or no, this echoes the real world; the United States government can take such actions with almost total legal impunity.

In real life, most inventors aren't trying to "privatize peace." Many just want to get a government contract. Their inventions are kept as trade secrets, like the Iron Man suit, or they are patented. (In the film, Pepper Potts, played by Gwyneth Paltrow, demands action from "patent attorneys," but Stark Industries obviously hadn't patented the technology, or else the government would already have access to the information needed to reproduce the armor.) It is not unheard of for a potential contractor to provide the government with product specifications, only to then watch the government award the contract to a competitor that has suddenly and suspiciously generated remarkably similar technology. For example, Crater Corporation charged that Lucent Technologies improperly used its tennis-inspired coupler to fulfill a Defense Department contract.

These inventors theoretically have their own superpower at their disposal: the Fifth Amendment's "Takings Clause," which requires compensation for government appropriation. But it has one weakness: the military and state secrets privilege, which has been invoked with increasing frequency in the past 25 years.

... [Courts] have treated the privilege as legal Kryptonite, dismissing inventors' lawsuits. In Iron Man 2, Stark's competitor Hammer could have immediately begun production after acquiring the Iron Man suit, insisting that it had generated the technology itself. Had Stark sued, the government could have claimed state-secrets privilege, protecting details of the contract and production design from Stark's lawyers. Stark would have been left without recourse to obtain the evidence needed to prove his case.

I would have quoted more, but for my respect of their intellectual property rights.

Indeed, in Crater Corp. v. Lucent Technologies, the United States officially intervened and tried to halt the case entirely, because, it asserted, "any information to be obtained in [discovery regarding the manufacture or use of the coupler by or on behalf of the United States] was protected by the state secrets privilege." The Court of Appeals for the Federal Circuit didn't rule on that claim, because it dismissed the case under 28 U.S.C. § 1498(a), which:

provides "an affirmative defense for applicable government contractors." Va. Panel Corp., 133 F.3d at 869, 45 USPQ2d at 1232. If a patented invention is used or manufactured for the government by a private party, that private party cannot be held liable for patent infringement. Trojan, Inc. v. Shat-R-Shield, Inc., 885 F.2d 854, 856, 12 USPQ2d 1132, 1134-35 (Fed.Cir.1989); W.L. Gore & Assocs., Inc. v. Garlock, Inc., 842 F.2d 1275, 1282-83, 6 USPQ2d 1277, 1283-84 (Fed.Cir.1988).

And that's just what happened:

We affirm the district court's dismissal of Crater's patent infringement claims because there is no genuine issue of material fact that Lucent's use and manufacture of the allegedly infringing coupler was for the government. Because Lucent established its affirmative defense under 28 U.S.C. § 1498(a), Lucent's activities cannot be held to be infringing.

All's fair in love and war-for-profit.

Let's get back to the patent infringement versus trade secret issue.

Once Tony Stark invents his Iron Man suit, he has two legal options to protect his intellectual property: file for a patent or treat the suit as a trade secret. The law protects both patents and trade secrets, but in different ways.

With a patent, the inventor publicly discloses the invention by filing a patent. If the patent is granted, the inventor is granted exclusive legal domain over the use of the patent for a limited amount of time. If someone wants to build the same device, they can do so by simply reviewing the patent, but they will have to pay the inventor for the use or sale of that device. As a reward for making the instructions public, the inventor is granted a plethora of legal protections, such as the ability to file for injunctions against infringement, and to recover attorney's fees and treble damages in a lawsuit.

With a trade secret, the inventor is required to "take reasonable measures to keep the information secret." If they do that, and "the information derives independent economic value... from not being generally known to, and not being readily ascertainable through proper means by, the public," then federal law makes it a crime to misappropriate that information. Here's an example of the types of things that can get you indicted, such as under the Economic Espionage Act:

Taking the allegations in the Superseding Indictment as true, the defendant engineers were to design tire manufacturing equipment for "off the road" (OTR) tires for their employer Wyko. The defendants formed a plan to take unauthorized photographs of Goodyear's OTR manufacturing equipment under the guise of evaluating Wyko equipment. While at the Goodyear facility, defendant Roberts falsely told the security guard that he had signed a nondisclosure agreement within the past year. The defendants then falsely stated to the Goodyear engineer that they were there to evaluate Wyko-made equipment. Defendant Howley used his cellular telephone to take photographs of Goodyear's OTR manufacturing equipment while defendant Roberts acted as lookout. Defendant Howley emailed the photographs to his work email account and then sent them to defendant Roberts' work email account. Defendant Roberts emailed the photographs to Wyko employees in England.

With a trade secret, state common law allows compensatory relief, through typically not attorney's fees or treble damages. Similarly, it's harder to get an injunction for misuse of a trade secret than for infringement of a patent. (Here's an example in the Second Circuit of misappropriation being clear, but there being no clear risk of "irreparable harm," and so no injunction.)

So, Tony Stark gets to choose: disclose the details of the invention in a patent and correspondingly get superior civil (i.e. monetary) relief if someone copies it, or try to keep the invention secret himself and hope that criminal law dissuades people from stealing it.

In his case it's a no-brainer. He has no intent to sell the technology and he'd lose his advantage if others had it, too. A trade secret it is.

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[Update I: There's some additional discussion of this post in the comments at Hacker News.]

[Update II: Making matters worse, the warrant itself was patently overbroad and may have lacked probable cause for many of the items seized. My trusty copy of Criminal Defense Tools and Techniques refers to US v. SDI Future Health, Inc., 568 F.3d 684, 702-704 (9th Cir. 2009), which talks about prohibitions on "exploratory rummaging in a person's belongings" and how "there must be probable cause to seize the particular things named in the warrant."]

Remember when Shepard Fairey was criminally investigated for a humdrum instance of perjury in a civil suit? Fairey committed the type of perjury that is routine in our courts and is never investigated or prosecuted. Yet, because the victim there was the Associated Press, they were entitled to more justice than common folk like you and me, and so got themselves a federal investigation.

It seems that we have a new example of some crimes being more worthy of justice than others:

The Net is buzzing about San Mateo, California law enforcement officials’ search and seizure of Gizmodo Editor Jason Chen’s computers. Acting under a search warrant issued by California’s Superior Court, agents of the Rapid Enforcement Allied Computer Team (REACT), broke down Chen’s door this past Friday and searched his home, confiscating 24 items, including four computers, two severs, and several external hard drives. The authorities were  searching for evidence regarding how Chen and Gizmodo came to purchase an  iPhone prototype.

...

The Electronic Frontier Foundation, the Internet’s leading digital rights advocacy group, has also taken a public position on the search, telling us that California’s search warrant is illegal and should never have been issued. In a phone interview this afternoon, EFF Civil Liberties Director Jennifer Granick told us: “There are both federal and state laws here in California that protect reporters and journalists from search and seizure for their news gathering activities. The federal law is the Privacy Protection Act and the state law is a provision of the penal code and evidence code. It appears that both of those laws may be being violated by this search and seizure.”

I'll leave the details to others. Here's the EFF's official position on the invalidity of the search.

I have but one simple question: where was Jessica Gonzales' 'rapid team' when she needed it?

Here's what happened to Jessica:

[A]t about 5 or 5:30 p.m. on Tuesday, June 22, 1999, respondent's husband took the three daughters while they were playing outside the family home. No advance arrangements had been made for him to see the daughters that evening. When respondent noticed the children were missing, she suspected her husband had taken them. At about 7:30 p.m., she called the Castle Rock Police Department, which dispatched two officers. The complaint continues: "When [the officers] arrived ... , she showed them a copy of the TRO and requested that it be enforced and the three children be returned to her immediately. [The officers] stated that there was nothing they could do about the TRO and suggested that [respondent] call the Police Department again if the three children did not return home by 10:00 p.m." 

At approximately 8:30 p.m., respondent talked to her husband on his cellular telephone. He told her "he had the three children [at an] amusement park in Denver." She called the police again and asked them to "have someone check for" her husband or his vehicle at the amusement park and "put out an [all points bulletin]" for her husband, but the officer with whom she spoke "refused to do so," again telling her to "wait until 10:00 p.m. and see if " her husband returned the girls. 

At approximately 10:10 p.m., respondent called the police and said her children were still missing, but she was now told to wait until midnight. She called at midnight and told the dispatcher her children were still missing. She went to her husband's apartment and, finding nobody there, called the police at 12:10 a.m.; she was told to wait for an officer to arrive. When none came, she went to the police station at 12:50 a.m. and submitted an incident report. The officer who took the report "made no reasonable effort to enforce the TRO or locate the three children. Instead, he went to dinner."

At approximately 3:20 a.m., respondent's husband arrived at the police station and opened fire with a semiautomatic handgun he had purchased earlier that evening. Police shot back, killing him. Inside the cab of his pickup truck, they found the bodies of all three daughters, whom he had already murdered.

She sued the police department, alleging her rights and her daughters' rights had been violated.

The Supreme Court dismissed her case, holding that she had no "property interest" in the temporary restraining order, and thus no right worthy of enforcement.

I've seen some hoopla about how the prototype iPhone was a "trade secret" and thus worth millions of dollars. It's not and it wasn't. Apple had no intention of keeping the iPhone and its features secret — the whole plan was to sell it to millions just a few months from now — and Gawker Media didn't discover or publish anything more than information about the appearance of the phone. "A trade-secret claim based on readily observable material is a bust." IDX Systems Corp. v. Epic Systems Corp., 285 F. 3d 581, 584 (7th Cir. 2002). Apple thus didn't lose a "trade secret," it just lost some control over the course of its marketing.

So all we're really talking about is the alleged theft of a single phone, a phone that was returned a few days after it was "stolen."

Assuming Gawker Media "stole" the phone or failed its duty to return the phone, is that a crime? Maybe so. It was, after all, Apple's "property." But it's a trivial crime, the type of "crime" that gets ignored by police departments and district attorneys with better things to do.

Do you think that I'd get a 'rapid team' busting down doors if I reported my phone stolen? Would you get one?

As Robert Jackson — Nuremberg Prosecutor, Supreme Court Justice, and Attorney General — said:

The prosecutor has more control over life, liberty, and reputation than any other person in America. His discretion is tremendous. He can have citizens investigated and, if he is that kind of person, he can have this done to the tune of public statements and veiled or unveiled intimations. Or the prosecutor may choose a more subtle course and simply have a citizen’s friends interviewed. The prosecutor can order arrests, present cases to the grand jury in secret session, and on the basis of his one-sided presentation of the facts, can cause the citizen to be indicted and held for trial. He may dismiss the case before trial, in which case the defense never has a chance to be heard. Or he may go on with a public trial. If he obtains a conviction, the prosecutor can still make recommendations as to sentence, as to whether the prisoner should get probation or a suspended sentence, and after he is put away, as to whether he is a fit subject for parole. While the prosecutor at his best is one of the most beneficent forces in our society, when he acts from malice or other base motives, he is one of the worst.

One of the greatest powers exercised by the government is the discretion with which it investigates and prosecutes crimes. Why is Apple's iPhone prototype entitled to more justice than Jessica Gonzales' daughters?

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"Once the lawyers get involved..."

There are a hundred ways to end that sentence. Once the lawyers get involved, everything falls apart. It takes ten times as long to finish a deal. A lawsuit is inevitable. The hysterics start.

Few of the potential endings are favorable towards lawyers. Perhaps the most common sentiment is: once the lawyers get involved, the truth gets buried.

To some extent, it's true. The first thing a criminal defense lawyer says to a new client? Remain silent. The first thing a litigator says to a new client? Let's get your story straight. The first thing a transactional lawyer says to a new client? Let me do the talking.

Once the lawyers get involved, everything goes through a filter. The truth comes out, but in a sanitized and selective manner. Sometimes only part of the truth comes out. Sometimes a little more than the truth comes out.

But it's not a problem limited to lawyers. It's a problem of middlemen.

Where there's a middleman, there's deniability. There's confusion. There's misunderstandings. There's excuses. There's a way for one side to throw its hands up and say, hey, it wasn't me. There was a middleman. Something went wrong in the middle.

And that seems to be the case with two hot stories lately, the SEC's enforcement action against Goldman Sachs and the "lost" prototype iPhone that Gizmodo disassembled on their webpage.

Take your pick for sources on both stories. Felix Salmon has a lot to say on Goldman Sachs. Daring Fireball has a lot to say on the iPhone saga.

Don't let the volume of paper produced about these stories fool you: both stories are very simple.

Goldman Sachs was paid $15 million to push a crummy deal, which they did by concealing how the whole deal had been structured by someone betting against it, someone who walked away with $1 billion when all was said and done. Gawker Media, publisher of Gizmodo, paid $10,000 to the "finder" of a "lost" prototype iPhone.

Don't blame them, of course. Something went wrong in the middle.

Does the law provide for relief when that happens?

Sometimes so, sometimes not. There's no unambiguous rule that says Gawker is, or is not, liable for theft or that Goldman Sachs is, or is not, liable for fraud when they filter the deception through a middleman.

Answering that question is why we have lawyers and courts.

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At The National Law Journal, Nick Akerman, a partner at Dorsey & Whitney, has a thorough argument that the Computer Fraud and Abuse Act ("CFAA") should, and likely will, be applied against employees who leave with trade secrets or other proprietary / confidential information for use at their new jobs:

The Computer Fraud and Abuse Act, a federal criminal statute outlawing the theft of data, permits a company that "suffers damage or loss" by reason of a violation of the CFAA, to "maintain a civil action against the violator" for damages and injunctive relief. 18 U.S.C. 1030(g). Since [Pacific Aerospace & Electronics Inc. v. Taylor, 295 F. Supp. 2d 1188, 1196 (E.D. Wash. 2003)], there has developed a body of district court opinions that refuse to apply the CFAA against employees who steal their employer's data. This article will explain why these opinions are not likely to survive appellate review; it will also provide a strategy to avoid the application of these decisions.

Well worth reading if you come across trade secrets theft in your practice. Akerman may be the most experienced attorney in the country on this developing body of law, and it shows.

I agree with him, but for a more general reason. Since I practice in the Third Circuit (Pennsylvania, New Jersey and Delaware), I'll focus on the Third Circuit's most recent opinion on the CFAA:

The District Court focused on the criminal provisions and found it difficult to infer a civil application within the statutory framework and concluded that it could not do so, although the Court did acknowledge that several other courts had determined to the contrary. However, we conclude that not only the relevant case law, but also the plain language of the statute, militate in favor of the availability of a civil remedy, and specifically, the type of injunctive relief sought by the PC plaintiffs.

Numerous courts have recognized that a civil cause of action is apparent from the text of § 1030(g). Although we acknowledge the criminal thrust of the section in general, as it is found in Title 18, there is ample authority for permitting civil actions to proceed based on violations of the section pursuant to the language of § 1030(g). See, e.g., Theofel v. Farey-Jones, 359 F.3d 1066, 1078 (9th Cir. 2003) ('The civil remedy extends to 'any person who suffers damage or loss by reason of a violation of this section.'') (emphasis in original); I.M.S. Inquiry Mgmt. Sys., Ltd. v. Berkshire Info. Sys., Inc., 307 F. Supp. 2d 521, 526 (S.D.N.Y. 2004) (stating that § 1030(g) affords civil action for any violation of CFAA). Accordingly, we conclude that civil relief is available under § 1030(g).

P.C. Yonkers, Inc. v. Celebrations the Party & Seasonal Superstore, LLC, 428 F.3d 504, 511 (3d Cir. 2005).

In one sense, the above looks like a straightforward review of a criminal statute which permits a civil remedy. The statute says there's a remedy, so we'll enforce it.

In another sense, we're witnessing a big change in the way Circuit Courts and the Supreme Court interpret federal statutes which provide plaintiffs with civil relief for criminal conduct.

Like the CFAA, The Racketeer Influenced and Corrupt Organizations Act ("RICO") creates a civil remedy for those persons injured by racketeering activities, typically mail or wire fraud. Also like the CFAA, numerous District Courts have contorted the brief text of the RICO Act to enact confusing, complicated barriers to relief without much basis in the Act itself. For example, numerous District Courts required plaintiffs show "first-party reliance" on the alleged mail or wire fraud (rather than merely injury related to the racketeering as a whole) and required that the plaintiff prove the defendants used a formal racketeering structure.

In the past year, the Supreme Court has torn down both of these barriers. See Bridge v. Phoenix Bond & Indem. Co., 128 S. Ct. 2131, 2145 (2008)(eliminating the "reliance" requirement, noting "Whatever the merits of petitioners’ arguments as a policy matter, we are not at liberty to rewrite RICO to reflect their — or our — views of good policy. We have repeatedly refused to adopt narrowing constructions of RICO in order to make it conform to a preconceived notion of what Congress intended to proscribe."); Boyle v. United States, ___ U.S. ____, No. 07-1309, 2009 U.S. LEXIS 4159, at *22–23 (Jun. 8, 2009)(eliminating the "structure" requirement, noting "The fact that RICO has been applied in situations not expressly anticipated by Congress does not demonstrate ambiguity. It demonstrates breadth.”).

Like the RICO Act, the broad text of the CFAA "does not demostrate ambiguity[,] it demonstrates breadth." If the Circuit Courts and the Supreme Court interpret the CFAA the same way they've interpreted the RICO Act, we'll see a lot more of these claims in the future.

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An interesting opinion out of the Eastern District of Pennsylvania in Youtie v. Macy's Retail Holding, 2009 U.S. Dist. LEXIS 47383 (June 5, 2009) by Senior Judge Thomas N. O'Neill, Jr.:

On August 1, 2000, Macy's acquired all of the publicly-held shares of David's Bridal, Inc. David's Bridal is a corporation and a clothier specializing in bridal gowns and other formal wear and accessories. Plaintiff had purchased David's Bridal in 1972, expanded the operations, partnered with Steven Erlbaum beginning in 1989 or 1990 and with Erlbaum made a public offering of David's Bridal's stock in 1999. After Macy's acquired David's Bridal, plaintiff entered into a contract of employment with a division of Macy's, Macy's Retail, on or about October 1, 2001. In accordance with the terms of the agreement, Youtie served as the Executive Vice-President, Product Development and Sourcing of the David's Bridal division of Macy's Retail. On November 17, 2006, an affiliate of Leonard Green & Partners signed an agreement with Macy's to acquire David's Bridal and consummated the sale and transfer of stock of David's Bridal to the Leonard Green affiliate on January 31, 2007. As part of the transaction, Macy's subsidiary Macy's Retail assigned its employment agreement with plaintiff to David's Bridal.

In short, Plaintiff claimed that the sale of his division to another company was a termination entitling him to severance. He lost; applying Missouri law (per the contract), the Court held:

The employment contract at issue in this case is one for personal services, which, as a general rule, cannot be assigned without the consent of the employee. Alexander & Alexander, Inc. v. Koelz, 722 S.W.2d 311, 312-13 (Mo. Ct. App. 1986), citing Alldredge v. Twenty-Five Thirty-Two Broad. Corp., 509 S.W.2d 744, 749 (Mo. Ct. App. 1974). However, a mere change in the form in which a business is owned or conducted should not work to prohibit assignment. Id. at 313. Whether there is a change in partnership personnel or structure, the incorporation of a previously unincorporated business, the dissolution of a corporation or a change in corporate structure, "if there is no material change in the contract obligations and duties of the employee, there is no reason for the transfer of the rights from one entity or form to another to work an assignment putatively prohibited by the rule against assignment of personal service contracts." Id.

That's what happened here, in addition to the employment agreement itself recognizing the possibility of assignment. Hence, summary judgment for the Defendant on Plaintiff's claims.

Plaintiff probably should have left it alone:

Defendants filed an answer, affirmative defenses and counterclaims on December 17, 2007, alleging that plaintiff breached his employment agreement, misappropriated trade secrets and/or confidential and proprietary information, breached his fiduciary duty and duty of loyalty, engaged in tortious interference with business and employment relations, was unjustly enriched and engaged in unfair competition.

Uh oh. Among other allegations:

Plaintiff does not dispute that the "first cost" data at issue is the cost the manufacturer charged David's Bridal to manufacture the designs David's Bridal provided the manufacturer for its Spring 2007 catalogue. Additionally, plaintiff admitted in his affidavit that he "asked for the cost data because [] Erlbaum . . . was interested in what David's Bridal paid various manufacturers for the dresses they manufactured." Plaintiff further admits that he gave a copy of the cost sheet to Erlbaum but believes that plaintiff provided it to Erlbaum after plaintiff recovered from the surgical procedure he underwent after his January trip to Hong Kong.

Plaintiff also admits that he and his former partner Erlbaum had general discussions about Erlbaum returning to the bridal business. 

It's never a good idea to share proprietary information about your current employer with your former business partner.

Plaintiff raise a good issue; most of Defendants' claims were actually a single "trade secrets" claim:

laintiff argues that defendants' counterclaims for misappropriation of trade secrets and/or confidential and proprietary information, unjust enrichment and unfair competition are preempted by the PUTSA. The relevant section of the PUTSA provides as follows:

(a) General rule.--Except as provided in subsection (b), this chapter displaces conflicting tort, restitutionary and other law of this Commonwealth providing civil remedies for misappropriation of a trade secret.

(b) Exceptions.--This chapter does not affect:

(2) other civil remedies that are not based upon misappropriation of a trade secret; or

12 Pa. C.S.A. § 5308. The dominant view of courts in states that have also adopted the Uniform Trade Secrets Act of 1985 is that preemption exists to the extent that defendants' counterclaims are based on the same conduct that is said to constitute a misappropriation of trade secrets. See e.g., Motorola, Inc. v. Lemko Corp., 2009 WL 383444, at *10 (N.D. Ill. Feb. 11, 2009); Hecny Trans., Inc. v. Chu, 430 F.3d 402, 404-05 (7th Cir. 2005); Penalty Kick Mgmt. Ltd. v. Coca Cola Co., 318 F.3d 1284, 1296-98 (11th Cir. 2003); Savor, Inc. v. FMR Corp., 812 A.2d 894 (Del. 2002).

Defendants' counterclaims for misappropriation of trade secrets and/or confidential and proprietary information, breach of fiduciary duty and duty of loyalty, unjust enrichment and unfair competition involve plaintiff's conduct of requesting and disclosing "first cost" data to Erlbaum. These claims each refer to the same "first cost" data and are wholly based on the same conduct as the conduct that comprises a misappropriation of trade secrets claim. The "first cost" data is the sole information at issue in this case and it is either a trade secret or something less. Thus, these counterclaims are preempted only if the "first cost" data at issue constitutes a misappropriation of a trade secret.

And that's what would have kicked out most of these claims, except that the parties forgot to brief if the information was actually a trade secret:

A trade secret under the PUTSA is defined as:

Information, including a formula, drawing, pattern, compilation including a costumer list, program, device, method, technique or process that:

(1) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use.

(2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

PUTSA, 12 P.S. § 5302.

However, neither party has properly briefed whether this information qualifies as a trade secret. Plaintiff argues that the PUTSA preempts defendants' counterclaims but states, without sufficient legal analysis, that the information does not qualify as a trade secret to satisfy the PUTSA because it was readily available to anyone who asked for it. These arguments are contradictory; plaintiff cannot have it both ways. See Callaway Golf Co. v. Dunlop Slazenger Group Am., Inc., 295 F. Supp.2d 430, 437 (D. Del. 2003), stating that arguing that information does not constitute a trade secret and also that other claims are preempted by the Trade Secret Act is contradictory. Defendants did not respond with legal analysis on whether the "first cost" data constitutes a trade secret; instead they merely requested leave to file an amended counterclaim complaint if I find such information to be a trade secret. As this information may qualify as a trade secret, I will not find that the data satisfies lesser standards than those required for a trade secret merely because the issue has not been properly briefed. For this reason, I cannot find that defendants' counterclaims of misappropriation of trade secrets and/or confidential and proprietary information, breach of fiduciary duty and duty of loyalty, unjust enrichment and unfair competition are preempted at this time because defendants may still be able to recover under such theories in the event that the "first cost" data does not constitute a misappropriation of a trade secret under the PUTSA. Cenveo Corp. v. Slater, 2007 WL 527720, at *3 (E.D. Pa. Feb. 12, 2007), stating "that the cases holding that the Trade Secrets Act does not preempt common law tort claims when it has yet to be determined whether the information at issue constitutes a trade secret take the better approach." 

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