Data Revealed on Open Zoom Meeting Loses Trade Secret Status

• Pages: 27-28
• Date: 01 April 2023
• Author: Leslie R. Snider
• Subject Matter: Civil Law

are obligated to enforce arbitration

agreements according to their terms,

unless the FAA has been “overridden

by a contrary congressional command”

that “preclude[s] a waiver of a judicial

forum” for the claims at issue.

The Fifth Circuit held that section

4712 creates whistleblower rights that

protect employees from retaliation by

an employer regarding an employee

“blowing the whistle on certain govern-

ment-contracting abuses.” The privilege

to request a jury trial included in sec-

tion 4712, however, is not a “right” or

“remedy” created by the statute, but

instead, only a means to vindicate a

whistleblower’s statutory rights.

Litigation Section leaders agree

that the Fifth Circuit followed the law,

but some believe there is room to dis-

tinguish this case from Compu Credit.

“The Supreme Court’s recent case

law on arbitration has been extremely

protective of arbitrationagreements,

and without a stronger statutory pro-

tection of jury trial rights, I think that

the court had to uphold the arbitra-

tion agreement,” concludes Cassandra

B. Robertson, Cleveland, OH, chair

of the Appellate Subcommittee of

the Section’s Civil Rights Litigation

Committee.

“One distinguishing factor that the

Fifth Circuit could have latched on to

was the language of section 4712’s

anti-waiver clause. The language of the

Compu Credit case anti-waiver clause

was not as robust as this one, and it

did not specif‌ically reference prospec-

tive waivers,” says Dustin Crawford,

Atlanta, GA, chair of the Employment

Subcommittee of the Section’s Civil

Rights Litigation Committee.

While acknowledging that the court

reached the correct legal decision,

Section leaders note that the opinion

highlights serious public policy con-

cerns. “This case is a great example of

why there would be a strong public

interest in disclosure—the underlying

allegations that gave rise to the whis-

tleblower allegation are about improper

inf‌luence in government contracting.

If those allegations are true, that’s a

waste of taxpayer dollars and the pub-

lic would have a strong interest in both

the disclosure of that misconduct and

in remedying it,” explains Robertson.

Data Revealed on

Open Zoom Meeting

Loses Trade Secret

Status

By Leslie R. S nider, Litigation News

Contributing Editor

A business that does not take reason-

able steps to protect its conf‌idential

information while using Zoom can-

not receive trade secret protections,

according to the Court of Chancery of

the State of Delaware. The court noted

that a failure to use Zoom’s safety fea-

tures led to conf‌idential information not

being protected. ABA Litigation Section

leaders agree that the case is a stark

reminder that businesses using video-

conferencing platforms must implement

adequate privacy and safety protocols.

The conf‌lict in Smash Franchise

Partners, LLC v. Kanda Holdings, Inc.

began when Todd Perri expressed inter-

est in a mobile trash compaction busi-

ness franchise operated by the plainti

companies. After learning about the

franchisee opportunity, Perri had sev-

eral calls on Zoom with the plaintis’

contractors and franchisees to learn

about the company. After executing

a nondisclosure agreement (NDA),

Perri and his colleague formed their

own mobile trash compaction business

called Dumpster Devil LLC, while Perri

continued to attend the plaintis’ meet-

ings to gather information.

The plainti companies f‌iled suit and

sought a preliminary injunction to stop

Dumpster Devil from doing business

or, alternatively, to enjoin Dumpster

Devil from making false comparisons

between the two companies’ products

and using the plaintis’ trademark in

marketing campaigns.

The court denied “business-stop-

ping” injunctive relief to the plaintiffs.

The court stated that while the defen-

dants “engaged in disingenuous and

underhanded conduct,” the informa-

tion that the plaintiffs sought to enjoin

defendants from using was (i) made

publicly available by the plaintiffs, (ii)

not confidential information within

the meaning of the NDA, or (iii) not a

trade secret.

The crux of the court’s ruling was

rooted in the plaintis’ lack of proper

protection of trade secrets. The court

explained that for information to qualify

as a trade secret, it “must both derive

independent economic value from not

being generally known or readily ascer-

tainable and be subject to reasonable

eorts to maintain its secrecy.” The

court concluded that even if some of

the information, such as business routes

and pricing models, gave the plaintis

an independent economic advantage

over their competitors, the plaintis did

not take reasonable steps to protect

the information’s secrecy.

The court pointed out that the plain-

tis freely provided Zoom meeting

information to anyone who expressed

interest did not use the password-pro-

tection feature for the meetings or the

waiting room feature to screen attend-

ees. Additionally, the court found that

the plaintis did not follow their own

procedures and take roll at the begin-

ning of each call or remove anyone who

did not belong. There was also no indi-

cation that all participants in the plain-

tis’ meetings signed NDAs.

The court ruled that a broad “busi-

ness-stopping” injunction was unwar-

ranted and disproportionate. However, it

also determined the plaintis had made

the requisite showing for a “targeted”

injunction to prevent the defendants

from making false or misleading state-

ments regarding the plaintis’ products.

Litigation Section leaders agree that

the Smash case highlights the need

for practitioners to apply foundational

concepts to technology. “Translate

brick-and-mortar trade secret prac-

tices into the virtual settings,” advises

Nicole D. Galli, Philadelphia, PA, cochair

of the Section’s Business Torts & Unfair

Competition Committee. “The nature of

the electronic medium makes it easier

for people to overlook simple protec-

tions many would not overlook in a

physical setting. In person, there are

checks and balances in procedures for

protection. So, now, we need heightened

protection while online,” states Galli.

Businesses and practitioners should

develop safety protocols for virtual

meetings, especially when discuss-

ing conf‌idential information. “The best

practice would be to take attendance,

and gather the information of indi-

viduals, before inviting attendees into

a room to hear your product,” says

Gregory S. Bombard, Boston, MA,

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