Archive for the ‘Business & Commercial Law’ Category

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Malicious prosecution is a common law intentional tort, while like the tort of abuse of process, its elements include (1) intentionally (and maliciously) instituting and pursuing (or causing to be instituted or pursued) a legal action (civil or criminal) that is (2) brought without probable cause and (3) dismissed in favor of the victim of the malicious prosecution. In some jurisdictions, the term “malicious prosecution” denotes the wrongful initiation of criminal proceedings, while the term “malicious use of process” denotes the wrongful initiation of civil proceedings.

Criminal prosecuting attorneys and judges are protected, by doctrines of prosecutorial immunity and judicial immunity, from tort liability for malicious prosecution. Moreover, the mere filing of a complaint cannot constitute an abuse of process. The parties who have abused or misused the process, have gone beyond merely filing a lawsuit. The taking of an appeal, even a frivolous one, is not enough to constitute an abuse of process. The mere filing or maintenance of a lawsuit, even for an improper purpose, is not a proper basis for an abuse of process action.

Declining to expand the tort of malicious prosecution, a unanimous California Supreme Court in the case of Sheldon Appel Co. v. Albert & Oliker, 47 Cal. 3d 863, 873 (1989) observed: “While the filing of frivolous lawsuits is certainly improper and cannot in any way be condoned, in our view the better means of addressing the problem of unjustified litigation is through the adoption of measures facilitating the speedy resolution of the initial lawsuit and authorizing the imposition of sanctions for frivolous or delaying conduct within that first action itself, rather than through an expansion of the opportunities for initiating one or more additional rounds of malicious prosecution litigation after the first action has been concluded.”

CLICK HERE TO WATCH THE VIDEO ON NON-COMPETITION & NON-DISCLOSURE CLAUSES

2008 Update Video on Non-Compete & Non-Disclosure Clause

Many technology companies are necessarily concerned about losing trade secrets and other confidential information when their employees leave the company. In addition, there is a risk that technology professionals may inevitably use proprietary information in their new employment without actually taking physical documents or data when they leave. Can technology companies protect themselves against these scenarios through the use of non-compete provisions? The answer to this question is . . . sometimes.

Technology executives sometimes fail to recognize the nature of the information that constitutes protected trade secrets. As a result, such companies are either over inclusive or under inclusive in their efforts to protect business information. In California, a trade secret generally consists of information that derives independent economic value by virtue of not being generally known to the public and is the subject of reasonable efforts to maintain its secrecy. A trade secret could consist of a business process or method or a customer list that is the result of research and development. Trade secret protection is independent of the protections afforded by the patent and copyright laws, which generally require disclosure of the information before it can be protected. Conversely, a trade secret is entitled to protection only when efforts are made to keep the information confidential.

Typically, a non-compete provision will prohibit an employee from working for a competitor for a period of time following termination of his or her employment. These provisions are commonplace in many states outside of California. The justification for the use of such provisions is that employees will inevitably use the trade secrets obtained during their employment irrespective of whether they actually took anything with them.

However, such provisions based upon “inevitable disclosure” are not allowed in California. Instead, California courts generally will not enforce a non-compete provision unless it is entered into in connection with the sale of an employee’s business. Similarly, California courts will not enforce out-of-state non-compete provisions unless they are consistent with this policy. California’s policy is based on Business & Professions Code § 16600, which invalidates a contract by which anyone is restrained from engaging in a lawful business or profession.

Despite this prohibition against the use of covenants not to compete, employees in California do not have an unfettered right to use confidential information taken from a prior employer and use it in their subsequent employment. California law prohibits the use of trade secrets to compete against one’s prior employer. This legal prohibition may be reinforced in employee contracts, such as non-disclosure agreements. Such agreements should occupy a standard role in the new hire process.

California law does allow the use of non-compete provisions in connection with employment contracts entered into with sellers of an interest in a business. In such instances, the sellers of the business may be prohibited from engaging in a competing business within a certain geographic area for a specified period of time. This type of provision may be used when the former business owners are hired by the acquiring company. However, the restrictions in such agreements must be reasonable. For example, an over-inclusive geographic restriction or excessive time duration will not be enforced by a court.

What can be done to protect yourself from competition by prior employees who do not fall within the business owners’ exception? As stated above, all employees should be required to sign a non-disclosure agreement designed to protect trade secrets. The law prohibits the use of trade secrets after an employee leaves the company. However, in order to establish that the information is entitled to trade secret protection, one must show that efforts were made to protect such information. Non-disclosure agreements are useful for this purpose.

Special care should be devoted to access to trade secrets. Many executives within technology companies are often allowed access to customer lists. However, such widespread access is often unnecessary. Restricted access is one of the underpinnings of trade secret protection.

Further, employees should be asked to return all information, including company computers, when they leave the company. Following departure of an employee, the company should conduct a forensic analysis of his/her computers and devices to be sure that nothing was taken. Steps may be taken to immediately retrieve and to enjoin the use of any information that was removed.

These steps will not guaranty that misappropriation does not occur. However, with constant vigilance, the chance that a company will suffer harm through the loss of valuable information will be lessened.

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