Welcome to the Weintraub Resources section. Here, you can find our Blogs, Videos, and Podcasts, in which Weintraub attorneys regularly provide insights and updates on legal developments. You can also find upcoming Weintraub Events, as well as firm and client News.


Protect Your Business: What You Need to Know About the New Defend Trade Secrets Act

Businesses at every level – from Fortune 500 companies to solo-inventor enterprises – rely on trade secret protections to safeguard their intellectual property trade secrets. American companies and innovators now have additional protections for their valuable intellectual property assets in the newly enacted federal Defend Trade Secrets Act (DTSA). This legislation represents the most significant trade secret reform legislation in years.

Essentially, the DTSA extends the current Economic Espionage Act of 1996, which criminalizes certain trade secret misappropriations, and allows trade secret owners the opportunity to pursue claims in federal court under federal law, in addition to traditional state court claims. The new federal trade secrets law also presents some very important practical considerations for businesses.

First, the DTSA has a broad reach, and it will likely affect every aspect of a company’s operations. Trade secret issues arise every time a company hires or fires an employee; every time a company enters into a contract containing a non-disclosure or confidentiality clause; and every time an employee discusses the company’s business with a business partner, the public, or friends. All of these activities are now governed by the DTSA.

Second, the DTSA will potentially increase the legal costs associated with protecting a company’s trade secrets. Because of the overlap between the DTSA and state law, companies will need to incur additional costs in order to understand and conform their practices to accommodate both sets of laws. When dealing with trade secret litigation, companies will now have to prosecute or defend against both state and federal claims, adding to the already expensive cost of litigation.

Finally, for better or for worse, the DTSA may create greater opportunities for trade secret owners to win more cases, and to file more lawsuits. By providing plaintiffs with another set of laws and another venue in which to litigate, the DTSA creates more strategic avenues to success. The increased odds of success could spur more litigation, some of which may be for illegitimate or anti-competitive reasons. This, again, could increase litigation costs.

For these reasons, companies would be wise to educate themselves on the DTSA in order to take advantage of, and protect themselves from, the important legal and business consequences of this new federal trade secret law.

IF YOU SUE FACEBOOK, WHAT’S THE LIKELIHOOD YOU’LL BE ALLOWED TO DEPOSE MARK ZUCKERBERG?

Companies are no strangers to litigation. In California, it is a cost of doing business. Unfortunately, it is not uncommon for litigants to try to gain leverage in a dispute with a corporate party by attempting to depose its high-level executives to harass and embarrass them, and force the company into a quick and aberrant settlement. The strategy employed by a litigant may go like this: (1) put pressure on a company by noticing the deposition of an officer or director, (2) make clear the intent to delve not only into the high-level executive’s alleged wrongdoing, but also other points of potential embarrassment, and (3) the company will capitulate and pay a significant settlement to avoid the pain of the deposition. Some refer to this (and similar tactics) as judicial extortion. What, then, can a company and its counsel do to prevent an abusive deposition of a high-level executive?

California federal and state courts apply the “apex” doctrine to protect high-level executives, also referred to as apex executives, from harassing depositions.  In considering whether to allow the deposition of a high-level executive, courts focus on two primary factors: (1) whether the high level executive has unique first-hand, non-repetitive knowledge of facts at issue in the case, and (2) whether the party seeking the deposition has exhausted other less intrusive discovery methods. Apple Inc. v. Samsung Electronics Co., Ltd., 282 F.R.D. 259, 263 (N.D.Cal. 2012); Mutual Ins. Co. v. Superior Court, 10 Cal.App.4th 1282, 1289 (1992).

Courts understand that where an opportunity exists to game the system and harass a party it will likely be exploited, and, thus, are carful to protect against it. This was observed in one of the first cases to apply the “apex” doctrine. In 1985, a class of plaintiffs sued for personal injuries from an alleged defective design in the fuel system of the 1975 Dodge van. Plaintiffs’ counsel noticed the deposition of Lee Iacocca, then Chairman of the Board of Chrysler Corporation, claiming that statements Iacoccoa made in his recently published biography demonstrated that he had knowledge relevant to Chrysler’s alleged liability and the plaintiffs should be allowed to depose him to explore such knowledge. The court granted Iacoccoa’s motion for protective order preventing his deposition, noting: “the fact remains [Iacoccoa] is a singularly unique and important individual who can be easily subjected to unwarranted harassment and abuse. He has a right to be protected, and the courts have a duty to recognize his vulnerability.” Mulvey v. Chrsyler Corp., 106 F.R.D. 364, 366 (D.R.I. 1985).

Some chairman and officers are obvious “apex” executives – such as Iacoccoa or, say, the late Steve Jobs. See Affinity Labs of Texas v. Apple, Inc., 2011 U.S. Dist. LEXIS 53649 (N.D. Cal. 2011) (court denied plaintiff’s attempt to depose Steve Jobs). However, most high level executives are not celebrities. They are not regularly quoted and their companies are not featured in the media. Yet, these less recognizable high-level executives responsible for running smaller to mid-size business are just as important to their companies as their high-profile counterparts, and equally vulnerable to harassment. Unfortunately, there is no clear definition of who qualifies for protection as an “apex” executive. Some factors that have been considered are job duties and the potential for business disruption, where the executive falls within the company’s executive hierarchy (e.g., how many people report to the executive), and the likelihood of harassment.

The most important factor considered by courts in applying the “apex” doctrine is whether the high-level executive has personal knowledge of relevant facts. Equally important is whether the information can be obtained through other less burdensome means, such as from a lower level executive or employee. When a CEO or other high-level executive lacks such personal knowledge, courts are inclined to deny their depositions.

However, the “apex” doctrine exists in tension with the otherwise broad allowance for discovery in litigation. Apple Inc., supra., 282 F.R.D. at 263. Although a deposition notice directed at a high-level executive with no personal knowledge of the facts involved should result in the issuance of a protective order denying that executive’s deposition – courts are likely to allow some manner of discovery. Now, in the case involving Apple, the court simply denied the deposition of Steve Jobs outright. But, in the matter involving Chrysler, although the court denied the deposition of Iacoccoa it allowed plaintiffs to propound written interrogatories to him. This is a less intrusive means of discovery of a high-level executive courts have allowed. See, e.g., Retail Brand Alliance, Inc. v. Factory Mut. Ins. Co., 2008 WL 622810, at *6 (SD NY 2008). Likewise, rather than  completely deny the deposition of a high-level executive, a court may limit the length or scope of the deposition to avoid harassment or undue burden. Apple Inc. v. Samsung Electronics Co., Ltd., 282 F.R.D. 259, 265-67 (ND CA 2012) (allowing depositions of high-level officers, but limiting them to 2-3 hours each); Scott v. Chipotle Mexican Grill, Inc., 306 F.R.D. 120, 124 (SD NY 2015) (limiting apex depositions to 4 hours).

From the outset of litigation or potential litigation, a company’s counsel must be mindful that higher-level executives are vulnerable to a deposition – particularly as a form of harassment and to gain leverage. Counsel should investigate alternative means for providing an opposing party with potentially relevant information that a high-level executive may possess, and develop a record early on establishing the limits of the high-level executive’s involvement, if any, and that such executive has no unique, personal knowledge of the relevant facts. It is important to be prepared to utilize the “apex” doctrine in order to protect against potential abuse or harassment of high-level executives.

Self-Help Discovery May Be Protected Activity

As a matter of first impression, the Massachusetts Supreme Judicial Court recently held that self-help discovery may constitute “protected activity” under Massachusetts’ anti-retaliation statute. The decision is contrary to other jurisdictions which do not expressly authorize such self-help discovery.

To read the full blog, please visit: http://blog.hrusa.com/blog/self-help-discovery-may-be-protected-activity/

California’s New Equal Pay Laws Promise to Bring More Litigation

Equal pay claims just got a lot tougher to defend in California.  Last month, Governor Jerry Brown signed SB 358, a new law which aims to curb a statewide pay disparity between men and women.  The law, dubbed the California Fair Pay Act, goes into effect on January 1, 2016 and requires immediate, affirmative assessment by most California employers. 

Overview of the California Fair Pay Act. 

Current law already requires California employers to pay men and women the same wage for performing equal work in the same establishment.  The new law broadens that requirement.  It removes the term “equal work” and replaces it with “substantially similar work.”  This means work that is substantially similar when viewed as “a composite of skill, effort, and responsibility, and performed under similar working conditions.”  The new law also removes the “same establishment” requirement, meaning that employees can now bring equal pay claims by showing the employer paid an opposite sex employee at a different location higher wages for substantially similar work.

Once the employee makes the required showing, the new law now shifts the burden to the employer to demonstrate that the wage differential is based on valid reasons.  This means an employer can justify pay disparities only if they arise from:

  • a seniority system;
  • a merit system;
  • a system that measures earnings by quantity or quality of production; or
  • a bona fide factor other than sex, such as education, training, or experience.

While prior law already allowed employers to assert a bona fide factor defense to equal pay claims, the new law substantially limits that defense.  Now, employers can only rely on bona fide factors that are not based on sex, are job related, and are consistent with a business necessity.  In addition, the bona fide factor defense does not apply if the employee can show that an alternative business practice would serve the same purpose without resulting in a pay disparity.

Supreme Court Rules DOMA Section 3 Unconstitutional

Today the United States Supreme Court ruled that Section 3 of the federal Defense of Marriage Act (DOMA) is unconstitutional. The case, United States v. Windsor, 570 U.S. ____ (2013), involved the portion of DOMA that stated that the federal government will only recognize marriages between opposite-sex spouses for purposes of federal law. There are over 1,000 federal laws that address marital status, and DOMA’s Section 3 denied validly married same-sex couples myriad protections and responsibilities under federal law. Because of the Windsor decision, same-sex spouses who are validly married under state law will now also be treated as married under federal law.

Edith Windsor married Thea Spyer, her partner of 46 years, in Ontario, Canada, in 2007. At the time, their state of residency, New York, did not allow same-sex marriage, but it did recognize the validity of their Canadian marriage. When Ms. Spyer died in 2009, she left her entire estate to Ms. Windsor. Ms. Windsor filed Ms. Spyer’s federal estate tax return and claimed that she was owed a refund of $363,053 as the surviving spouse. Under federal tax law, property passing from a deceased spouse to a surviving spouse is not subject to estate tax. However, DOMA prevented the IRS from recognizing Ms. Windsor and Ms. Spyer’s marriage, and the refund claim was denied. The federal District Court and the Second Circuit Court of Appeals ruled in favor of Ms. Windsor, holding that the applicable provisions of DOMA were unconstitutional and ordering that the Treasury refund the estate tax paid to Ms. Windsor with interest. The government appealed that decision to the U.S. Supreme Court.

In today’s U.S. Supreme Court decision, Justice Kennedy, writing for the majority, stated Section 3 of DOMA violates the due process and equal protection principles of the Fifth Amendment to the U.S. Constitution because it was principally designed to impose an unequal status on otherwise validly married same-sex couples. Specifically, Section 3 tells these couples that “their otherwise valid marriages are unworthy of federal recognition . . . plac[ing] same-sex couples in an unstable position of being in a second-tier marriage.” Slip op. at 23. To the extent that a state has chosen to allow same-sex marriage, the U.S. Constitution prohibits the federal government from imposing “a disability on the class [of same-sex spouses] by refusing to acknowledge a status the State finds to be dignified and proper.” Slip op. at 25.

Although the decision takes effect immediately, I would caution same-sex spouses to expect some glitches along the way. Because of the number of federal laws that are tied to marital status, it will likely take weeks and months for various state and federal agencies to fully adjust to this change, educate their employees, and issue the appropriate regulations.

For same-sex couples doing their estate planning, this decision may have a major effect on the structure of their estate plan. For example, same-sex spouses are now eligible for the federal estate tax marital deduction (and so may use “QTIP” trusts and make portability elections); they may now make unlimited lifetime gifts to their spouses; and they are now eligible for spousal status on retirement accounts. For same-sex spouses with estate plans currently in place, I would strongly recommend contacting your lawyer to discuss whether the Windsor decision will affect you.

It is important to note that this ruling only applies to lawful same-sex marriages. Currently, 13 states, the District of Columbia, and a number of Native American tribes currently allow same-sex marriage or have laws legalizing same-sex marriage set to go into effect this year. Because of the Supreme Court’s decision in Hollingsworth v. Perry this morning (see Marriage Equality Returns to California), California is included among those states. Additionally, Windsor does not affect Section 2 of DOMA, which permits states to refuse to recognize same-sex marriages performed in other states.

For those who wish to read the case in full, Windsor has somewhat of an unusual procedural history, as the Executive Branch (which enforces DOMA) asserted that it believed that DOMA was unconstitutional and declined to defend it in court, but it continued to enforce DOMA and denied Ms. Windsor’s estate tax refund. The U.S. House of Representatives, through the Bipartisan Legal Advisory Group (BLAG), defended the law instead. After a significant amount of debate as to whether the U.S. Supreme Court had jurisdiction to hear the case and BLAG had standing to defend DOMA, the Supreme Court determined that it had jurisdiction and reached the merits of the case. A substantial portion of the majority opinion and the dissenting opinions focuses on this issue.

Marriage Equality Returns to California

The United States Supreme Court issued its opinion in Hollingsworth v. Perry, 570 U.S. ___ (2013), this morning, regarding the validity of Proposition 8. The outcome is that same-sex marriage is once again legal in California. The Supreme Court did not rule on a specific right to same-sex marriage, but rather it stated that neither it nor the federal Court of Appeals for the Ninth Circuit (which includes California) had the power to hear the case. Hollingsworth is largely a procedural case, and it requires some background to fully understand.

In 2008, the California Supreme Court held that the California Constitution’s equal protection clause prohibited limiting marriage to opposite-sex couples. Shortly thereafter, California voters passed Proposition 8, which amended the state constitution to restrict marriage to opposite-sex couples. The Respondents in Hollingsworth, two same-sex couples, filed suit against various California state and local officials in federal District Court asserting that Proposition 8 was invalid under the Fourteenth Amendment of the U.S. Constitution. California state officials declined to defend Proposition 8, and the District Court allowed the Proponents (the parties who put Proposition 8 on the ballot) to defend it. The District Court then declared Proposition 8 unconstitutional, and state officials declined to appeal. The Proponents then appealed to the Ninth Circuit Court of Appeals. The Ninth Circuit ultimately held that Proposition 8 was unconstitutional, and the Proponents appealed to the U.S. Supreme Court. Even though the Ninth Circuit found Proposition 8 to be unconstitutional, it put a “stay” in place, meaning that same-sex marriages were put on hold while the appeal to the Supreme Court was pending.

In order for a case to be heard in federal court, the U.S. Constitution requires that there must be an “actual controversy” and parties must have standing; that is, there must be a concrete and personal injury to the parties that can be remedied. Generalized injuries are typically not sufficient to confer standing, nor is being a “citizen” or a “taxpayer.” In Hollingsworth, the Respondents had standing to sue in the District Court because they had an actual injury – California’s refusal to permit them to marry. Once they won and the state declined to appeal, their injury had been fully redressed. The Proponents of Proposition 8 contended that they had standing to appeal the decision to the Ninth Circuit (and subsequently the Supreme Court) because of their special role in the ballot initiative process. The Ninth Circuit eventually concluded that the Proponents had standing, but Proposition 8 was unconstitutional.

However, the U.S. Supreme Court today has reversed the Ninth Circuit and stated that the Proponents lacked standing because they failed to show a particularized harm. Even though they were the driving force behind putting Proposition 8 on the ballot, once it passed, the Proponents’ interest in defending the law became indistinguishable from the general interest of every other Californian. Further, the Proponents did not qualify as “agents” of the state or the people of California, and thus had no special status that might confer standing.

Because standing is a threshold question in federal court, the U.S. Supreme Court did not reach the merits of the Hollingsworth case. This means they did not rule on whether Proposition 8 is unconstitutional. The Supreme Court vacated the Ninth Circuit’s judgment that Proposition 8 is unconstitutional and sent the case back to the Ninth Circuit with instructions to dismiss it because the Proponents lack standing to bring their case in federal court.

The next step will be for the Ninth Circuit Court of Appeals to officially dismiss the case and lift the stay. Once the stay is lifted, the District Court’s decision that Proposition 8 is unconstitutional under the U.S. Constitution will go into effect. Governor Jerry Brown has already ordered the California County Clerks’ offices to begin issuing marriage licenses to same-sex couples at that time. The Proponents have stated that they will continue to pursue legal action to enforce Proposition 8, but for the time being, same-sex marriage will once again be legal in California as soon as the Ninth Circuit acts.

More Guidance On Pre-Discovery Trade Secret Disclosures

A central issue in all trade secret litigation is the adequacy of plaintiff’s pre-discovery disclosure of the alleged trade secrets. The Fourth District Court of Appeal has contributed to the growing body of case law interpreting the adequacy of the initial trade secret disclosure required by California Code of Civil Procedure section 2019.210. (Perlan Therapeutics v. Superior Court of San Diego County (November 4, 2009), 178 Cal.App.4th 1333.) Section 2019.210 provides that a plaintiff suing for misappropriation of trade secrets must identify the alleged trade secrets with “reasonable particularity” before commencing discovery. The Perlan decision joins two other recent decisions evaluating the particularity required in the plaintiff’s trade secret disclosure. (See Brescia v. Angelin (2009) 172 Cal.App.4th 133 and Advanced Modular Sputtering, Inc. v. Superior Court (2005) 132 Cal.App.4th 826.) The Perlan court analyzes the Brescia and Advanced Modular decisions in addressing critical procedural and substantive questions.

Perlan sued its former employees, alleging they misappropriated trade secrets related to protein-based therapeutics for viral infections. The trade secret statement at issue was actually plaintiff’s second attempt to comply with section 2019.210. The plaintiff’s section 2019.210 statement began with boilerplate objections similar in nature to written objections, which in no way attempted to comply with the requirements of section 2019.210. The remainder of the statement repeated the narrative information alleged in the complaint with some limited additional technical information. However, the court found that additional technical information was very general in nature and was also publicly available. Although plaintiff’s statement contained highly-technical language, the court noted that the technical language “does not provide specific identifications of the peptides or reagents used in the process.” (Id. at 1338.) In addition to the general descriptions, plaintiff apparently referenced 50 additional documents related to the alleged inventions and included a catchall clause that the trade secrets included “all related research, development, advances, improvements, and processes related thereto.”

The defendants attacked the amended trade secret statement, stating that it “remains a non-committal collection of loosely worded conclusory allegations.” Defendants demanded a clear explanation of the particular substances and processes at issue, arguing that plaintiff’s descriptions were not reasonably particular and were not sufficient as to distinguish that information the description from matters generally known in the scientific field.

The purpose of section 2019.210 has been outlined by the court in Advanced Modular. Those four purposes include: (1) promoting well-investigated claims and discouraging the filing of meritless trade secret complaints; (2) preventing plaintiffs from abusing the discovery process to learn about defendants’ trade secrets; (3) framing the issues in order to place reasonable limitations on discovery from defendants; (4) allowing defendants to formulate well-reasoned defenses and not have to wait until the eve of trial. (Id. at 1343, citing Advanced Modular, supra, 132 Cal.App.4th at 833-34.)

The Perlan court analyzed what has been described as the “’ubiquitous’ problems of litigating the appropriate scope and timing of trade secret identification.” (Id. at 1344.) Plaintiffs rarely provide detailed descriptions of the alleged trade secrets without court order. They do so for numerous reasons, some more legitimate than others. Plaintiffs do not want to be tied down early on in the litigation in the hope of amending or refining their contentions as the litigation and discovery progress. Plaintiffs also have the legitimate concern that, in the event defendants did not completely misappropriate their trade secrets, a detailed description in the section 2019.210 statement will give defendants the valuable element they did not steal. Plaintiffs are also justifiably concerned that the detailed disclosure might somehow be leaked to the public, thereby depriving plaintiffs of the economic value of the trade secret.

The trial court in Perlan held that plaintiff’s amended statement failed to describe the alleged trade secret with reasonable particularity and failed to demonstrate that the information disclosed was not generally known to the public. The appellate court affirmed the ruling and relied on the prior decisions in Advanced Modular and Brescia in doing so. The Perlan decision is useful in that it summarizes both the procedural issues related to the appellate review as well as the substantive issues relating to the adequacy of the disclosure.

The Perlan court held that the adequacy of a section 2019.210 statement is a discovery issue and discovery rulings are reviewed for an abuse of discretion, citing Scripps Health v. Superior Court (2003) 109 Cal.App.4th 529, 533. However, the court in Advanced Modular and in Brescia reviewed the legal questions de novo, and the plaintiff in Perlan argued that the Court should do the same. The Perlan court noted that Advanced Modular and Brescia correctly applied the de novo standard of review, but only because the trial courts in those cases applied an improper legal meaning of “reasonably particular.” In Advanced Modular, the trial court erroneously weighed the conflicting testimony from a competing expert and, in Brescia, the trial court conducted a mini-trial seeking an explanation how the trade secrets which Brescia had described with precision differed from publicly-available information. Those trial courts applied an incorrect interpretation of “reasonable particularity,” which those appellate courts correctly reviewed de novo. However, the Perlan court found that the trial court had applied the correct legal standards and, therefore, it was obligated to review the decision under the abuse of discretion standard.

The Perlan court noted that neither Brescia nor Advanced Modular provides an easy answer to the substantive question of whether the plaintiff’s statement was sufficiently detailed. Advanced Modular held that the section 2019.210 disclosure does not require “every minute detail” of the trade secret or the “greatest degree of particularity possible.” (Advanced Modular, supra, 132 Cal.App.4th at 835-36.) Section 2019.210 also does not require a mini-trial on the merits of the misappropriation claim before discovery can begin. However, the Advanced Modular court also held that, where “the alleged trade secrets consist of incremental variations on, or advances in the state of the art in a highly specialized technical field, the more exacting level of particularity may be required to distinguish the alleged trade secrets from matters generally known to people skilled in the field.” (Id. at 836.) The Advanced Modular court went on to hold that the trial court applied the wrong legal standard in weighing the conflicting testimony of experts as to whether the section 2019.210 disclosure, although reasonably particular, actually disclosed information not generally known to the public. In that context, the court held that the trial court committed reversible error in improperly weighing the conflicting testimony of the parties’ respective experts.

In Brescia, the plaintiff claimed a trade secret in its pudding formula and manufacturing process and disclosed the precise recipe and process in its section 2019.210 disclosure. Despite this exacting disclosure, the trial court found that Brescia’s disclosure was silent on the question of whether the recipe was known to persons knowledgeable in the field. The appellate court disagreed, holding that section 2019.210 does not create a mechanism by which a defendant can litigate the ultimate merits of the case – for example, whether the precise formula at issue was actually a trade secret. The precise recipe identified by Brescia was certainly sufficient to allow a defendant to formulate a defense and to investigate whether the recipe was within the public domain and was, therefore, not a trade secret.

After reviewing this precedence, the Perlan court found that plaintiff’s trade secret designation did not comply with the standards of section 2019.210 in that the statement was not “succinct” because it contained numerous pages of surplusage, including objections, qualifications, allegations, and references to hundreds of pages of documents. The Perlan court held that the exactitude used by plaintiff in Brescia in reciting its exact pudding recipe was not legally required by section 2019.210, but certainly more specificity was required of the plaintiff. The court found that a highly-specialized technical field like this one does require a more exacting level of particularity to describe the trade secret and to identify what is known to persons knowledgeable in the field, citing Advanced Modular.

The lessons to glean from Perlan is that the section 2019.210 statement must describe the alleged trade secret concisely and with clarity, but need not include “every minute detail.” If more than one trade secret is alleged, the individual trade secrets must be segregated and not blended together. The section 2019.210 statement should further describe how the trade secrets differ from publicly-available knowledge. Lastly, the disclosure must not contain unnecessary surplusage and should avoid documents that require the court and the defendant to guess which specific reference might constitute the alleged trade secrets. As the court stated, “Perlan [is not] entitled to hide its trade secrets in ‘plain sight’ by including surplusage and voluminous attachments in its trade secret statement.” (Perlan, supra, at 21.)

The Perlan decision includes a final discussion that should impact a litigant’s decision on whether to seek writ relief related to the adequacy of the section 2019.210 disclosure. The plaintiff in Perlan argued that it would suffer undue prejudice if forced to disclose the additional information about a trade secret before commencing discovery. The appellate court was not sympathetic, finding that once discovery commences, plaintiff will be required to provide responses to interrogatory and document demands that will require disclosure of the alleged trade secrets in exacting detail. The tactical advantages concerning when the detailed information was provided is generally not sufficient to warrant extraordinary appellate relief. That reasoning would apply equally to a defendant contemplating extraordinary relief. A defendant can always obtain detailed information later by way of interrogatories, requests for admission, and document demands, and the tactical advantage of having the plaintiff disclose the alleged trade secret with more detail at the outset generally should not warrant extraordinary relief.