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Hey, everyone on Facebook.  Good afternoon, good Saturday.  This week I received a number of phone calls asking whether or not a noncompeting clause is enforceable in California, and I just thought I would to take this opportunity to share some general information with you on the topic.  Again, I’m providing general information so if you have a specific question about your unique circumstance, consult with your local attorney.

Now, this particular situation starts with a salesperson that is currently employed by Company A that now wants to work for Company B.  There is a noncompeting agreement between the sales person and Company A, but Company B is telling this salesperson to go ahead and work with us because a noncompeting agreement is not enforceable in California.  Well, I wouldn’t say that noncompeting agreements are not enforceable as a blanket statement, because there are situations where the court does uphold the noncompeting clause agreement.  So, before we start, I’m going to tell you that there is a public policy in California court that states everybody in California has a right to make a living.  This public policy is pretty much just a guiding principle for the judges that they go by when they are deciding on this type of issue.

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The major drivers of corporate purchases are trying to grow a business at a lower cost. Often that lower cost comes when the new, larger company is able to do more with less people. That appears to be the case at Aliso Viejo-based QLogic, a computer networking and storage provider.

The company plans on laying off 69 people effective October 17, according to documents filed with the state, reports the Orange County Register. QLogic announced in June it had been purchased by San Jose-based chipmaker Cavium Inc. for $1.36 billion. The deal was finalized on August 16.

QLogic is now a wholly owned subsidiary of Cavium which makes switches, adapter cards and other networking equipment. QLogic provides a number of high tech products, including the Fibre Channel Adapters, which allow the storage and movement of large amounts of data.

photo-Supreme-Court-insider-trading-case-300x285Can someone be guilty of insider trading if that person gives no money to the source of information? If the person is just tipping off friends or family members with no money paid back in return? The answer from the Supreme Court is yes.

Illegal insider trading is generally buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security, according to the federal Securities and Exchange Commission (SEC). Violations can also include “tipping” such information, securities trading by those receiving the information and trading by those who misappropriate this information.

The Supreme Court issued a decision in an insider trading case for the first time in two decades earlier this month. Despite its reputation for a hard philosophical divide often resulting in split decisions, this ruling was unanimous: a Chicago man, Bassam Salman, was guilty of insider trading, reports Reuters. The precedent should make it easier to prosecute those accused of profiting from confidential investment information.

All businesses have some kind of intellectual property (IP) that helps them stand out from the crowd and be successful. Anything of value is worth protecting, including IP. There are many ways a restaurant’s IP rights can be protected.

Trade secrets are those things a restaurant owner can’t, or doesn’t want to, file for trademark or patent protection. This can include customer lists, marketing and sales plans, processes, recipes and many other items. These things must actually be kept secret. Having employees and vendors sign non-disclosure agreements should help.

Recipes are intellectual property. They can be a trade secret like the formula for Coke. Can they be patented? Patents can be granted for any “new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof” according to federal patent law. A list of ingredients can be a composition of matter and/or manufacture and how the product is produced can be a process.

photo - PIMCOBill Gross, the billionaire “Bond King” and the person who co-founded the Pacific Investment Management Co. (PIMCO) in 1971 no longer is part of the company and is suing it. The Newport Beach company was sued in state court in Orange County in October. The lawsuit alleges Gross was forced out by a “cabal” of other executives seeking his bonus, resulting in a loss of $250 million, according to Reuters. Forbes estimates Gross’ net worth is nearly $2 billion.

This is a case of a messy split up of a co-founder of a business and its current management. While Gross portrays his forced resignation the product of greed and conspiracies by others, PIMCO defends itself by stating,

  • It’s simply a parting of the ways. Gross and PIMCO’s management couldn’t agree on how the company should move forward into the future.
  • The returns on the investments Gross has been making have been declining and clients have moved their money out of the company.
  • The assets Gross managed peaked at $293 billion in April 2013 but have since dropped by about two-thirds to less than $100 billion.

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photo - unsocial media by Automotive SocialNonprofits in some ways are much like businesses. They need to raise revenues, control costs, have client bases they need to satisfy and they must create and defend their brands. Just like for profit businesses a nonprofit organization can use legal action against another entity if their trademarks have been violated. But just like businesses with litigation comes possible public relations issues.

Two nonprofits are in the news for their aggressive trademark and copyright protection approaches, Susan G. Komen for the Cure and the Wounded Warrior Project.

Komen’s major fundraising events nationwide are their “races” for a cure for breast cancer, which are long distance walks where participants obtain donations and businesses sponsor the events. Komen’s logo is a pink ribbon which has also become popular. It has over 200 registered trademarks. Given their success others have gotten on the “for the cure” bandwagon and Komen is fighting back, according to the Stanford Social Innovation Review.

Komen is trying to find possible trademark violators and has threatened hundreds of non-profits with legal action if the alleged violations don’t stop. The Huffington Post reports that organizations involved with Kites for a Cure, Par for The Cure, Surfing for a Cure and Cupcakes for a Cure have been targeted. Kites for a Cure was warned not only not to use “for a cure” but also the color pink. Those organizing the “Mush for a Cure” sought to trademark their name only to have it opposed by Komen.

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photo - DTSAA bill allowing a private cause of action for trade secret theft was approved by the Senate Judiciary Committee in January. The Defend Trade Secrets Act (DTSA) would create a private cause of action based on federal law. Its remedies would be consistent with those provided by federal law to owners of other forms of intellectual property such as patents, trademarks and copyrights.

The goal of the bill is to discourage the theft of corporate trade secrets. If it can be shown such a theft occurred it would allow companies to go after the (alleged) thieves of confidential business information in federal court. The DTSA would amend the Economic Espionage Act of 1996 (EEA) to create a federal private right of action for trade secret theft. As it stands now the EEA only allows criminal law violations for trade secret theft and a civil lawsuit on the matter would have to be based on state law.

The bill as approved by the committee,

  • Provides for injunctions, civil seizure orders and damages, and
  • Changes the EEA’s definition of “trade secret” to align it with the definition contained in the Uniform Trade Secret Act which has been enacted by 47 states (including California).

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photo - get in writingIt’s something lawyers often say to people claiming to have a “contract” or “agreement” that’s supposedly broken. Often what supposedly was agreed to was never formalized in writing. Oral contracts are binding and enforceable. All the plaintiff has to do is prove it existed and both parties agreed to it. The fact the “contract” or “agreement” were only spoken words, often in the presence of no witnesses, can make that difficult if not impossible.

It’s not just Mom & Pop businesses who have this problem, as a lawsuit described in CNN/Money shows. At issue is the now halted $475 million dollar sale of Forbes magazine to a group of Chinese investors, doing business as in Hong Kong as Integrated Whale Media Investments.

The Forbes family has filed suit against Integrated Whale for failing to pay up. Its complaint, filed in Delaware in October, alleges Integrated Whale,

  • Purchased the publishing business last year. It borrowed money from the Forbes family to finance the purchase and is accused of failing to honor its contract and defaulting on the loan.
  • Failed to make its first interest payment due on October 1, 2014. The terms of the agreement require Integrated Whale to repay the entire amount of the loan, which it failed to do.
  • Has “actively resisted … efforts to collect on the unpaid debt by any means necessary, no matter how improper…They have also wasted corporate assets and abused their position as controlling shareholder of Forbes Media.”
  • Investors perjured themselves in court testimony in the British Virgin Islands in the course of another legal action Forbes filed to force the company to repay the loan and it “potentially faces being placed into liquidation due to its failure to pay its debt.”

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photo - trade secrets verdictsThe sale of counterfeit goods results in the theft of business from companies who legally sell their goods. Counterfeiters copy a wide range of products and either use their own labels or copy the brand of the rightful owner and profit from the work of others. One way these sales are made is through websites which are coming under more scrutiny by law enforcement.

Last Cyber Monday (the Monday after Thanksgiving) police authorities across the globe, spearheaded by the U.S. Customs and Border Protection Service (USCBPS), closed down 37,479 websites believed to be selling bootleg products. In addition to U.S. authorities, Europol and 27 Interpol countries cooperated in the effort (including Thailand, China and Argentina who are new to the effort) according to the International Business Times.

About 7-8% of world trade each year involves counterfeit goods, according to federal government website STOPfakes.gov. That may come to as much as $512 billion in global lost sales. U.S. companies are out between $200 billion and $250 billion due to the sale of counterfeits.

USCBPS states in fiscal 2010 nearly 20,000 seizures of counterfeit and pirated goods occurred, with a value of $188.1 million and a manufacturer’s suggested retail price of $1.4 billion. Areas of the economy that are the most impacted are manufacturing, consumer goods, technology, software and biotechnology including pharmaceuticals.

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