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Connectiuct Business Litigation Blog
Commentary on lawsuits and legal issues impacting Connecticut businesses. Authored by experienced business litigation attorney, Kane Bennett of Aeton Law Partners, LLP.
Confidential Information and the Departing Employee
I recently ran a seminar for the Human Resources Association of Central CT on "Effectively Managing Your Departing Employees." The issues concerned how attorneys can help to eliminate, prevent, or mitigate the risks of intellectual property theft. In this post, I will define the basics of the problem. In the next post, I will cover how to address the problem. Employees will Leave (Millennials average job tenure is 2.5 years) Employees will be disgruntled (Wall Street Journal: 75% of departing employees are disgruntled) Employees will have access to electronically stored data (UC Berkeley study shows 90% of critical business data is digital) Digital is portable, easy to copy, saved in seconds, and transferred to multiple locations Employees do take confidential information, even if by mistake. (Ponemon Institute says 59% of departing employees take information, and 90% of IT professionals) Based on the these numbers, you could fairly argue that in a three year time frame an average business will likely have to deal with an unhappy, departing employee that will copy accessible confidential information. This paints a pretty grim picture. Nevertheless, it is a fair way to think about the problem to manage risks appropriately. One of the biggest risks is financial loss from theft of intellectual property and confidential information. This might cover any of the following: Trade secrets (confidential client lists, formulas, data) Patents (fully or partially disclosed inventions) Copyrights (original works such as software code) Trademarks (counterfeit goods, brand damage) Proprietary information (anything you do not
What To Do If You Suspect Your Business Partner Is Stealing – Some Basics
In any case involving theft by a business partner or business dispute, it is very important to have an understanding of the basic issues and legal framework. Although these cases often involve complex problems, you cannot determine a good course of action without starting with the basics. Here are 5 of the basic issues and what to do if you anticipate a business dispute with a partner or small business in Connecticut. 1. Figure out the type of entity you formed for your business Principals of small or closely held companies or partnerships typically start off their businesses by choosing an entity such as a Limited Liability Company (LLC), Limited Liability Partnership (LLP), or Corporation (C Corp. or S Corp.). This may seem like a "no brainer" but you might be surprised that many partial business owners (typically minority owners) do not know the exact type of business entity they own. To determine what type of entity you formed look for documents such as Articles of Organization, Articles of Amendment, Certificate of Incorporation, Organization and First Report, Certificate of Amendment, Certificate of Limited Liability Partnership, or Statement of Partnership Authority. These are the so called "incorporating" documents or "originating" documents filed with the Secretary of State. These documents clarify the type of entity chosen and the original incorporators or members of the entity. These documents are available to the public and are available for searching at the Secretary of State website www.concord-sots.ct.gov . If you cannot find your documents, try
New John Doe Copyright Infringement Suit Filed in Connecticut
A lawsuit relating to online copyright infringement of synthesizer software using “peer-to-peer” networks was filed recently in Connecticut District Court. The case is captioned reFX Audio Software, Inc. v. Does 1-89. The complaint alleges that certain individuals and Connecticut residents committed acts of copyright infringement through the use of a common “peer-to-peer” (“P2P”) file transfer protocol known as BitTorrent. A common tactic in mass copyright infringement lawsuits is the use by plaintiffs of “tracking software” which identifies the internet protocol addresses (“IP Addresses”) that were allegedly used to commit acts of software piracy. By way of background, Internet service providers, (i.e., Comcast, Cox, etc.) provide the account holders with specific IP addresses from which users can access the Internet. In these lawsuits, attorneys bringing the lawsuits allege that each IP address is unique and is therefore linked to a specific user account. In order to identify the allegedly infringing users, reFX hired a Connecticut attorney to file a motion with the court, asking to conduct discovery in order to learn the identities of the account holders. If granted by the court, the attorney for reFx will issue a subpoena to each of the Internet providers requesting that they turn over information (typically name, address, telephone number) for the account holder. On March 20th Judge Janet Hall granted Plaintiff’s motion for leave to take discovery in the reFX Audio case. As a result, certain Internet providers have now sent letters to cable customers and account holders notifying them of the
Deciding to Enforce A Non-Compete Agreement in Connecticut – 5 Tips
Many Connecticut business owners have agreements (so called "non-compete agreements") in place with their employees concerning competition or solicitation. When an employee leaves a company, business owners have to decide if they should try to enforce the non-compete agreement by filing a lawsuit or engaging an attorney. Here are 5 factors to consider: 1. Is the contract reasonable? I have reviewed hundreds of these agreements, and they are all different (even the agreements I draft). There are various legal and factual requirements that you will need to satisfy for enforcement of non-compete or non-solicitation contracts. However, in general, the first question you have to ask is whether the contract is reasonable in light of the business you are in and purpose behind the specific contractual terms. For this reason, it is always a good idea to have an attorney draft your agreement specifically tailored for your legitimate business concerns. Getting a form template online and applying it to your business may seem like a cost effective approach, but what happens when you really need to enforce your agreement? 2. What are you trying to protect? Generally speaking, it is easier to convince a court to stop a departing employee from taking your customers or manufacturing process than it is to stop the employee from working for a competitor. For example, the chances of successful enforcement increases if your contract was drafted to protect customers the employee was working with as opposed to trying to stop the employee from working
Damages for Breach of Non-Compete Agreement In Connecticut
When deciding whether to hire an attorney to seek enforcement of a non-compete agreement in Connecticut, a business should consider the available remedies or damages. The following are the basic remedies or damages for breach of a typical non-compete agreement in Connecticut. 1. Injunctive relief. Injunctive relief basically means a court ordered act or prohibition against an act. For example, when seeking to enforce a non-compete or non-solicitation agreement, your attorney will request that the court issue an order preventing the employee from working for a competitor. If there is a non-solicitation clause in the contract, the attorney will ask the court to issue an order to prevent the departing employee from soliciting or "stealing" clients. The court will only issue such an order if the agreement meets a series of factual requirements. Essentially, the restrictions in the agreement must be reasonable in relation to protecting legitimate business interests. 2. Actual losses. In some situations, a business will have no measurable losses and will need to resort to injunctive relief only. However, in other instances, a business will have provable loss of business from breach of an agreement. The traditional rule for breach of contract is to measure the damages or losses to the business and not the gains of the departing employee or competing business. A typical example would be the loss of incremental profits from losing a customer arising from the improper conduct of the departing employee. In Connecticut, a business must prove these damages with
Time Does Not Run Against The King Or The State of Connecticut
Imagine you are a subcontractor hired to work on a project for the State of Connecticut in 1994. You did not deal with the State at all in your contractual dealings. You were hired by a general contractor to do a small part of a large building project. Next, you priced your work, completed it, and got paid. Now, fast forward 12 years. Without any notice to you (some defendants claimed they had no notice of issues) of any problems for 12 years, the State of Connecticut knocks on your door with a lawsuit seeking over 15 million dollars from more than 20 defendants, including your company. When you receive this lawsuit, you might immediately conclude that the lawsuit is time barred by the statute of limitations for breach of contract and negligence. You might even ask your attorney, and your attorney probably would agree that the statute of limitations for your work has long expired. Nothing to worry about, right? WRONG. Here is the case: Lombardo Case Nullum Tempus Lives!State of Connecticut v. Lombardo Brothers Mason Contractors, et al. In this case, the Supreme Court of Connecticut upheld the ancient doctrine of nullum tempus occurrit regi, or "no time runs against the king." The king is the State of Connecticut. The court noted that nullum tempus is "a common-law rule that exempts the state from the operation" of time based statutes, such as statutes of limitation and repose. In short, the 12 year passage of time does not matter
About CTBL
Connecticut Business Litigation is the most well-read litigation blog in the state of Connecticut. Founded by Attorney Kane Bennett in 2009, a pioneer in Attorney Marketing in the state of connecticut