Page 42 - AVN October 2017

BUSINESS NEWS
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reason that an employee is hired is to find out his/her former employer’s top-
secret items.
Here is an example: During the early 1990s, competition in the market for
sports drinks and the exploding market for so-called “new age” drinks (such as
Snapple, not so “new” any longer) was fierce. Quaker Oats had the behemoth
Gatorade; PepsiCo had followed with copycat All Sport, shooting for the same
market. Quaker had purchased Snapple, a skyrocketing product; PepsiCo was
angling to get into the same market.
One William Redmond Jr. worked for PepsiCo as an executive, knee deep in
sports/new-age beverage marketing. Not surprisingly, PepsiCo required Redmond
to sign a confidentiality agreement, which he did.
You probably already have guessed what happened: Redmond quit PepsiCo to
take a comparable position with Quaker. That, as you probably can imagine, did
not sit very well with PepsiCo, which immediately filed suit, as also you certainly
have already figured.
Now, generally the idea of such a suit would be to obtain an injunction
prohibiting the disclosure of any trade secrets. However, PepsiCo took it one step
further, seeking an injunction to prevent Redmond from working for Quaker at all
because they claimed that in his position there he inevitably would disclose and
use PepsiCo’s trade secrets. The court agreed in PepsiCo, Inc. v. Redmond, 54 F.3d
1262 (7th Cir. 1995).
The majority of courts that have considered such cases have declined to adopt
the “inevitable disclosure” doctrine from the PepsiCo case. But some courts have.
In many states, the most significant exception being California, you can avoid
the above problem by including a non-competition agreement in your employment
contract with each employee. However, even where permitted, non-competition
agreements are carefully scrutinized by courts, which tend to “blue pencil” them if
they are too broad in terms of territory, duration and/or scope.
Another point here is everyone’s favorite: independent contractors. Many
independent contractors correctly should be treated as employees (an important
topic beyond the scope of this article). Independent contractors need written
contracts; those written contracts need to include confidentiality provisions for
trade secrets. Because without one, an independent sales broker may be free
to walk off with your customer list to do whatever. And, as noted, it isn’t just
customer lists; it’s pricing, terms of sales and more.
So, as noted above, there are vehicles for protecting trade secrets. Most
fundamentally, an action could be brought for misappropriation of trade secrets.
To bolster the ability to make such a claim, a bunch of legal eggheads (the
National Conference of Commissioners on Uniform State Laws) got together
and wrote the Uniform Trade Secrets Act in the late ’70s. What that does is to
allow a lawsuit for a myriad of remedies for disclosure or use of trade secrets. The
Uniform Trade Secrets Act has been adopted by all but two states, and it is under
consideration in those. Additionally, states have enacted criminal penalties for
theft of trade secrets.
However, Congress believed that not to be enough. Extending the Economic
Espionage Act of 1996, which criminalizes certain trade secret misappropriation
and was described by Forbes magazine as the “Biggest Development in [Intellectual
Property] in Years,” Congress enacted the Defend Trade Secrets Act of 2016
(“DTSA”), 18 U.S.C. § 1836, et seq., something much needed in the era of
computer hacking, the 21st-century version of the long-standing, dishonest
and illegal practice of industrial espionage. The DTSA includes extraordinary
ammunition. However, it does not pre-empt state laws on the subject (as, for
example, does the Copyright Act, which voids every state law protecting rights
equivalent to those secured by that Act).
To put the above in perspective, DTSA defines a trade secret as follows (and this
definition was a product of a whole bunch of smart people thinking about it):
“[T]he term ‘trade secret’ means all forms and types of financial, business,
scientific, technical, economic, or engineering information, including patterns,
plans, compilations, program devices, formulas, designs, prototypes, methods,
techniques, processes, procedures, programs, or codes, whether tangible or
intangible, and whether or how stored, compiled, or memorialized physically,
electronically, graphically, photographically, or in writing.”
Read that a couple of more times and think about your business while you are
doing so. All kinds of things are trade secrets!
DTSA is a Howitzer in terms of remedies. Double damages (and “damages”
include losses of the trade secret owner and ill-gotten gains of whomever
purloined the trade secret), attorney’s fees, injunctions, and seizures. Additionally,
it includes whistle-blower protection—and that is interesting. Employers are
required to notify employees of that right; a person who blows the whistle on a
trade-secret thief can benefit from that and cannot be throttled by the thief.
Another aspect of DTSA is that it is a ticket to federal court, coupled with a
right to sue anyone anywhere (though presumably with due process limitations).
All told, DTSA adds to a considerable body of law that allows owners of trade
secrets—if proper procedures are in place to make sure that the secrets are
secret—to drop the hammer on trade secret thieves.
Three things are to be learned from the above. Thing One is that if you have
a company, make sure you have adequate trade-secret safeguards in place. Thing
Two, also if you are a company, be sure that your employees—and particularly
your independent contractors—have executed adequate trade-secret protection
documents. Thing Three is that if you are an employee, or even an independent
contractor, don’t think for a minute that you can run off and work for a competitor
or start your own thing by capitalizing on what you’ve learned from your
employer, especially the customers and really especially if you are in sales and
think you will steal the customers for your new employer or for your new venture.
Did you ever think about any of this? You should!
Clyde DeWitt is a Las Vegas and Los Angeles attorney, whose practice has been focused on adult
entertainment since 1980. He can be reached at ClydeDeWitt@earthlink.net. More information can
be found at ClydeDeWitt.com. This column is not a substitute for personal legal advice. Rather, it is to
alert readers to legal issues warranting advice from your personal attorney.
LEGALESE | By Clyde DeWitt
FSC UPDATES WEBSITE WITH ENHANCED RESOURCES
Adult industry trade association the Free Speech
Coalition (FSC) has relaunched its website
FreeSpeechCoalition.com with new information and
resource sections, as well as members-only content
and directories of FSC-approved vendors and services.
The new site will also feature exclusive webinars
for FSC members on growing and protecting adult
businesses.
“We are doing everything possible to help our
members to thrive and grow,” FSC director Eric
Paul Leue said. “We still have many legislative and
regulatory battles ahead of us, but we can not be
content to play defense. We believe that a more
aware, better educated, and healthier industry is not
only good business, it makes us stronger and more
united as a community.”
For the first time, FreeSpeechCoalition.com will
allow visitors to access information about FSC’s
varied initiatives, providing detailed resources and
further reading to help educate members and the
general public. The new site allows visitors to see
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products and piracy, featuring experts and industry
leaders, will start in the fall.
FSC is also building a portal for new performers.
Dubbed INSPIRE, the section will help those new to
the industry understand the business, find resources
and know their rights.
New public-facing press sections will give those
reporting on the industry access to important data
and facts, including scientific research and expert
contacts, as well as recommended documentaries,
books and articles. By providing resources, FSC hopes
to better combat misinformation and stigma put forth
by anti-industry voices.
“The new FSC site will be the first stop for
accurate, unbiased information on the adult industry,
whether you’re a journalist, a legislator or small
business owner,” Leue said. “We’ve worked hard
over the past year to build a resource-rich portal,
and in the coming months, we’ll be announcing new
programs and classes to help our industry and its
workers succeed.”
at a glance the latest news from the FSC, as well as
upcoming calendar items and ways to connect.
The new members’ directory will connect FSC
members to special pricing from FSC-approved
vendors providing services including legal,
accounting, banking, technology, public relations and
more.
Members-only webinars on topics from site
security and media training to fighting counterfeit