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Home , Act of God, Force majeure

Inside 3Q2020 2.....How In-house Leaders Can Use Technology to Better Prepare for the Next Crisis 3.....ACC News 4.....: How COVID-19 is Impacting Considerations in Maryland 7.....COBRA Notice Litigation: Heightened Scrutiny Likely in Troubling Times 8.....Protecting Your Trade Secrets in the COVID-19 Era 9.....Board Leadership FOCUS

President’s Message Larry Venturelli

Greetings and We hope you were able to take advantage If you ever want to share any welcome to the of the three series webinar last month- ideas or comments with the Q3 2020 newslet- Leveraging LinkedIn to Advance Your board, here is the current list ter! It is hard to Career: A Three-Part Career Development of officers and directors: believe that by Series. The series featured Chris Batz, a the time all of Legal Recruiter of the Lion Group, who Larry Venturelli—President you are reading provided insightful principles on how Board Members: this newsletter to best showcase your experience on summer will be coming to a close and LinkedIn, how to make the LinkedIn Dan Smith. President elect and Treasurer the fall season will be upon us. If you are Algorithm work for you and four steps to like me, you continue to work from home LinkedIn Visibility. Many thanks to Chris Kimberly Neal—Secretary with little travel to the office, along with Batz for providing such great content and Cory Blumberg gearing up for a virtual start to my kids’ to past Board Member, Ed Paulis, for put- Taren Butcher school year. ting us in contact with Chris. Dee Drummond As you know, after much deliberation, As we continue to navigate during this Joseph Howard including a survey to our members, the pandemic, I hope that everyone has been ACC Baltimore Board made the difficult able to step away for a bit to relax and Raissa Kirk decision to postpone our annual Golf/Spa recharge, even with the limited options Danielle Noe event until next year. This is truly a special for travel and adventure. This year has Shane Riley event that is enjoyed by all who attend, thrown some new challenges at us and it and I look forward to planning the event is easy to find ourselves overwhelmed or Kristin Stortini for 2021. We will keep you posted on tim- becoming physically, mentally or emo- Michael Wentworth ing for next year’s event as we continue tionally drained. I urge you all, if you Matthew Wingerter to monitor the progress of COVID-19 have not already, to take some time off Prabir Chakrabarty . advances through the end of the year. and disconnect from the technology that Immediate Past President is at our fingertips every day. In addition, the Board has also decided Lynne Durbin. that luncheon programming and any Lastly, I hope everyone took advantage Chapter Administrator social events shall be held virtually of the new low rate for the Virtual ACC through at least the end of October. Annual Meeting. It certainly will be The Board continues to meet regularly different not being able to see all of you Upcoming Events to discuss the most recent COVID-19 there, but I know ACC will have some guidelines and whether we will continue great content like they always do. October 7, noon to 1:30 pm to operate remotely through the end of Womble Bond Dickinson presents Stay Safe! the year. We will continue to provide you “You’re Not Google, Facebook, legal presentations virtually as we work Yours truly, Amazon or Apple: Why You Should with our Sponsors. Larry Venturelli Care About Congressional Antitrust Investigations into the Tech Sector” How In-house Leaders Can Use Technology to Better Prepare for the Next Crisis By Olga V. Mack

For example, Contract Management Software (CMS) automates the creation of based on the information it receives from requesters. But you create the language options the software pulls from during automation. You develop the decision-trees the software uses to suggest alternative language. The result is the uniform inclusion of pre-approved language and clauses in contracts. [Related: 5 Surprising Ways CMS Can Advance Your Legal Career] In-house leaders also expand their influence by developing training programs and instruction manuals that Members of my team recently asked me distracted, and unable to focus even if the help others apply technology in dealing a question that many in-house lawyers switch to remote work is not new. with everyday business problems. These have likely been hearing in one form or efforts help ensure seamless and long- [Related: In-house at Home: Finding another: “TheCOVID-19 crisis is hurting lasting consistency — especially during Normalcy in Uncertain Times] the small business community. What are the flux of a crisis. we, as a company, going to do about it?” At a time when employees crave order and consistency, technology Eliminate chaos with a uniform During a crisis, corporate counsel deal provides dependable direction. Project source of truth with many unknowns that make answering management tools support remote Recently, GCs have needed to collaborate a question like this a tricky business. We coordination of tasks and responsibilities. with outside counsel and internal often need to make decisions long before Remote workers stay more engaged executives to handle employment issues all the facts are revealed. There are no with a system that tracks and records and determine what new legislation, such rulebooks; no straight lines that lead to all milestone events. Automatic notifications as the US Coronavirus Aid, Relief, and the right answers. inspire fast action and move projects Economic Security (CARES) Act, means We can, however, take advantage of along reliably. Everyone stays in the loop for their business systems. technology to ensure we are better through informative dashboards. It is much easier to assess the effects informed during a crisis and better able In many ways, the push to rely more on of recent events and legislation when to assist employees and clients. The use technology now is helping teams build documents are centralized and searchable of technology tools can help you take trust in digital frameworks that provide a within a single cloud-based platform. decisive action now while also building strong sense of structure, inclusion, and Everyone accesses the same information, continuity and stability into your business consistency — the very bedrock of the which is stored in one location within systems. This way, you are prepared to longed-for stability employees need in the tools such as client, employee, or contract deftly manage any future crisis too. virtual workplace. management platforms. Data is more Use technology to provide the readily accessible, accurate, and up-to- Spread your influence with stability employees crave date than that obtained from manually automation maintained spreadsheets and long and Saying the coronavirus pandemic In-house leaders can use technology twisted email chains. accelerated remote work arrangements is platforms as a vehicle to spread their an understatement. Rather, it forced the [Related: Remote Collaboration: 3 Ways GCs influence throughout an organization. change like a mother bird pushing a baby Can Improve Their Communication Skills] Through enterprise-wide automation, you out of the nest. During the pandemic, dictate which actions are the inevitable The resulting uniformity reduces chaos many employees feel overwhelmed, result of a confluence of factors. in a crisis. Technology platforms offer

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2 Baltimore Chapter FOCUS 3Q20 continued from page 2 a single source of truth that helps and work directly with others online. Author: companies clarify priorities in navigating Simultaneously collaborating on the same Olga V. Mack is the the ever-changing business and legal document and communicating in real- CEO and general landscapes. time enhances mutual understanding and counsel of Parley Pro, promotes the free flow of information a next-generation Understand business and ideas. contract management relationships company that has Technology as a guiding tool pioneered online If you want to craft offers of assistance that negotiation technology. are truly useful and meaningful to your Technology’s usefulness has never Mack shares her views business, you must understand the full been more apparent. The COVID-19 in her columns on nature of your contracts. Contract analytics pandemic pushed companies to rely on ACC Docket, Newsweek, VentureBeat, Above help legal leaders navigate business technology as a source of stability in the the Law, Bloomberg Law, and High Performance relationships while centralizing the data virtual workplace. Lawyers are finding Counsel. Mack is also an award-winning and details lawyers need to empower they can trust automation to facilitate (such as the prestigious ACC 2018 Top 10 business leaders to help themselves. predictability, ensure reliability, and 30-Somethings) general counsel, operations enforce uniformity in decision-making. professional, startup advisor, public speaker, [Related: How Technology Shrinks Our adjunct professor, and entrepreneur. She Fictional Divide and Fosters Positive Change] Ultimately, using technology now results co-founded SunLaw, an organization dedicated in faster, easier access to more data- to preparing women in-house attorneys to Your team can quickly answer questions driven insights later, which helps us deal become general counsels and legal leaders, like, “Can we create an offer that aids with uncertainty and chaos during a and WISE to help female law firm partners clients whose contracts renew in the crisis and guides us in making decisions become rainmakers. Mack authored numerous next 30-90 days?” Or “Are there enough books, including Get on Board: Earning that are beneficial for our companies, renewals to make it a worthwhile effort?” Your Ticket to a Corporate Board Seat and our employees, and our clients for years In other words, you can empower your Fundamentals of Smart Contract Security. to come. team to have a much more functional and transparent relationship with contracts. For more advice and resources on coping during the pandemic, go to the CMS and document management platforms also improve how you interact ACC Coronavirus Resource page.

ACC News

2020 ACC Annual Meeting: Now identified as critical to an in-house operations of your company. Attend Low Rate for the New Dynamic legal career. The program includes live business education courses offered Experience instruction, hands-on experience, and a by ACC and the Boston University ACC will host the 2020 Annual Meeting final assessment. Those who successfully Questrom School of Business to learn entirely virtually and we want to see you complete the program will earn the elite critical business disciplines and earn there. You won’t want to miss this year’s ICC credential. Your law department valuable CLE credits: and your employer will benefit from program — including live interactive • Virtual course starts September 12 workshops, networking without limits, having a lawyer that returns with global daily marquee speakers, access to the entire best practices in providing effective and Learn more and register at acc.com/BU. meeting’s substantive content, and more! efficient legal counsel. Attend one of these Reserve your spot today at upcoming programs: Are you prepared to comply with new state privacy laws? acc.com/annualmeeting. • Alexandria, VA, November 16-19 Rapidly growing data privacy regulations In-house Counsel Certified Drive Success with Business from California to New York make you (ICC) Designation Education for In-house Counsel accountable for all third-party service providers that access, process, or store The ACC In-house Counsel Certification To become a trusted advisor for business your company's personal data. Visit Program, helps in-house counsel executives, it’s imperative for in-house www.acc.com/VRS for more information. become proficient in the essential skills counsel to understand the business

3 Force Majeure: How COVID-19 is Impacting Contract Consider- ations in Maryland By Indira K. Sharma, Esq. and Douglas A. Sampson, Esq., Saul Ewing Arnstein & Lehr LLP*

Six months ago, that boiler plate force force majeure clause in the contract and/ ing incident for the clause to apply. An majeure clause at the end of a contract or the application of other is a natural event that is not was barely noticed as contracting parties contract defenses amid a sea of devel- man-made and that is beyond human focused on negotiating and litigating oping and shifting law, particularly in control. This means that an Act of God seemingly more important terms and Maryland where there is little precedent cannot be caused by human intervention conditions. In the COVID-19 world, on force majeure issues. Taking calculated or even human . Natural events that “boiler plate” provision has become steps now to protect your interests may typically include natural disasters such as immensely important and could deter- prevent more significant legal issues down hurricanes, tornadoes, earthquakes and mine whether the contract remains the road. floods. Courts in other jurisdictions have enforceable. Parties are now scrutiniz- held that illness is an Act of God. In order ing their existing contracts to determine What is a Force Majeure Clause? for an event to be deemed an Act of God what excuses to performance may be Force majeure is French for “superior so as to excuse contractual performance, found in force majeure clauses or, on force” and a force majeure clause is the Act of God must be the sole event the other side, what grounds exist for defined by Black’s Law Dictionary as “a causing the . Jurisdic- insisting on continued performance. contractual provision allocating the risk tions are split on whether Act of God Where no force majeure clause is present, of loss if performance becomes impos- clauses are enforceable. The few Maryland parties are considering other common sible or impracticable, especially as a cases that have addressed the issue have law contract defenses including impos- result of an event or effect that the parties generally stated that a party may not sibility, and frustration could not have anticipated or controlled.” recover damages for injury inflicted by an of purpose to assess performance of The purpose of aforce majeure clause is to Act of God. contractual obligations. allocate risk between parties by relieving them of their obligation to contractu- Force Majeure Clauses in The COVID-19 pandemic has created Maryland numerous impediments to contrac- ally perform when an unforeseen event tual performance arising from supply occurs. Maryland courts have been virtually silent on the application of force majeure causes. chain issues, stay-at-home orders, travel A force majeure provision must be There is little binding precedent on the restrictions, and the shutdown of non- expressly included in a contract in order issue within Maryland jurisprudence. essential businesses. COVID-19 litigation to be invoked. It is not a statutory or is already underway across the country common law right. Whether the provi- The critical issue with COVID-19force in California, Florida, Massachusetts, sion actually excuses performance will be majeure litigation is whether Maryland New York and Virginia with a substantial determined on a case-by-case basis and courts will recognize the pandemic as a increase expected in the years to come. will depend on the specific language of force majeure event. Most force majeure While there is much uncertainty about the provision, the law of the jurisdiction, provisions do not currently list pandemic, when COVID-19 will end, one thing is and the specific facts of the case. illness, disease or health emergency as a triggering event making it generally certain – parties can take control right A force majeure clause may be in the difficult to invoke a clause on the basis of now to reduce their exposure to poten- form of an exclusive provision if it lists COVID-19. It is more likely that a force tial COVID-19 contract litigation in the specific triggering events such as war, majeure clause will list “Act of God” as a future by adding pandemic-specific provi- civil unrest, labor strikes, fire or extreme triggering event and then the issue will sions, including force majeure clauses, to weather. A force majeure clause can also become whether COVID-19 qualifies as any new contracts and amending existing be inclusive (i.e., non-exclusive) where it an Act of God. contracts where possible. Parties that includes “catch all” language that expands bear little risk arising out of COVID-19 the scope of the type of events covered Under the cases in other jurisdictions may want to ensure the other party to the simply by using the words to the effect establishing that an illness is an Act contract performs their obligations by of “including” or “without limitation” to of God, one could certainly argue that restricting or eliminating force majeure indicate that the events listed are possible COVID-19 qualifies because it is a natural provisions. triggering events but do not constitute an virus. The counter arguments to antici- Whether COVID-19 is deemed an excuse exhaustive list. pate are (1) that COVID-19 could have been manmade in a laboratory, as some for contract performance will ultimately An Act of God is a particular type of force have hypothesized and/or (2) COVID-19 depend upon the specific language of any majeure event often listed as a trigger- itself is not the sole cause of any breach

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4 Baltimore Chapter FOCUS 3Q20 continued from page 4 because it is the human response to the ered on a case-by-case basis. The lack of a doctrines of and imprac- virus that is causing the breach. Spe- bright-line rule and substantive case law ticability identically, because Maryland cifically, many of the breaches at issue in will lead to inconsistent and unpredict- (unlike other jurisdictions) does not force majeure litigation are not caused able outcomes as COVID-19 litigations require a showing of actual impossibility solely by the existence of the virus itself inundate courts over the next several of performance. A showing of impractica- but are instead caused by government years. bility because of extreme or unreasonable orders relating to the shutdown of opera- hardship, expense, injury or loss is suf- tions, social distancing, prohibitions on Contract Construction and ficient to excuse contractual performance. gatherings and travel restrictions. Any Common Law Defenses During the To establish any of these common law type of human interference or other Pandemic defenses, a party to a contract must estab- intervening factors contributing to the As in many jurisdictions, Maryland attor- lish: (1) that the event was not reasonably breach will prevent a party from rais- neys are left with the pillars of contract foreseeable; (2) the party did not assume ing Act of God as an excuse for contract interpretation and any guidance from the risk of the event or did not fail to performance. state courts about the application of com- protect itself with an appropriate contract provision; (3) performance of the contract Even where a force majeure clause does mon law contract defenses such as impos- is impossible or completely frustrated; not include pandemic, illness, or Act of sibility, impracticability and frustration and (4) the party seeking to be excused God, it may disclaim performance due of purpose. Using these tools, attorneys bears no culpability for the occurrence of to governmental orders or regulations. can try to anticipate how Maryland courts the event. Due to the thousands of executive orders will address contract issues during the and regulations promulgated across the COVID-19 pandemic. Foreseeability will likely be a hot point of United States, failure to perform due to Maryland courts follow the objective law contention for disputes involving these governmental orders may be the heavi- of contracts and will generally interpret a common law doctrines. For contracts est litigated COVID-19 issue. Whether contract clause by looking to the contract executed before the pandemic, there is a the governmental regulation triggers the language and applying the customary, strong argument that the wide sweeping force majeure provision will depend on ordinary and accepted meaning of the effects of COVID-19 were not reason- whether the regulations were mandatory language. Maryland courts generally will ably foreseeable. The analysis is much or suggested guidance. not excuse performance of a contract more complicated for contracts executed if the interruption in performance was once COVID-19 became widespread. For The Unpredictability of Force foreseeable. Foreseeability is often the contracts executed during the pandemic, Majeure Clauses deciding in commercial impracti- a party may argue that common law The enforceability offorce majeure provi- cability cases. defenses are inapplicable because the sions can vary widely from jurisdiction effects of COVID-19 were well-known In some jurisdictions, in order to be to jurisdiction. In some jurisdictions, and foreseeable when the contract was excused from a contractual duty, a party courts will only excuse performance if executed. However, pinpointing the must first attempt to perform its obli- the events are specifically enumerated exact time when COVID-19 effects went gations and be thwarted by the event. in an exclusive contractual provision. In from unforeseeable to foreseeable is Maryland courts have offered little or no other jurisdictions, courts will excuse complex. As COVID-19 spread, some guidance in this area. In the COVID-19 performance if they believe that the states immediately executed emergency world, attempting to perform a contrac- more expansive “catch-all” phrase in an orders and shut down non-essential tual obligation often translates to violat- inclusive (i.e., non-exclusive) provision businesses, while others remained open ing the laws and regulations promulgated includes the event at issue. For example, entirely. The public often received con- by a state in response to the pandemic. Delaware courts have held that includ- flicting information from health offi- Under Maryland law, a contractual ing “any reason whatsoever” as part of cials, and the federal and state govern- provision cannot be enforced if it would the force majeure clause may expand its ments. Whether the effects of COVID-19 break the law or violate public policy. protections. were foreseeable may depend on both This allows for the argument that con- when and where the contract was exe- The dichotomy in the approaches by vari- tract performance must excused where cuted as foreseeability of the impact of ous states is further complicated by the performance can be deemed to violate COVID-19 could vary across states. As lack of relevant case law. There is a dearth an emergency governmental order in a result, disputes involving common law of opinions interpreting and enforcing response to the pandemic. defenses may be fact intensive, unpre- force majeure provisions, particularly as Maryland courts recognize the com- dictable, and ultimately determined on a they relate to a pandemic and government mon law contract defenses of impos- case-by-case basis. regulations during a state of emergency. sibility, impracticability, and frustration The case law that is available provides that of purpose. Maryland courts treat the force majeure clauses should be consid- continued on page 6

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Careful Contract Construction Best Practices: • Be mindful of the fact that you might Can Avoid COVID-19 Issues • Review your existing contracts to find yourself on both sides of the issue As with many contractual disputes, it is determine if you bear any risk arising (i.e., wanting to invoke force majeure vital to have a carefully drafted provi- out of COVID-19 in fulfilling your per- in one case and then wanting to reject sion that anticipates potential issues formance obligations and determine if force majeure assertions in another and adequately protects your rights and you can re-negotiate and amend to add case) and that the legal positions taken interests. Regardless of the jurisdiction or a force majeure clause that would should be consistent. the applicable law, courts will give effect a pandemic such as COVID-19. The information in this article is current as of to the plain meaning of a contract and July 28, 2020. • If you have a force majeure clause enforce the intent of the parties. Accord- and would like to invoke it because of Authors: ingly, contract language that specifies COVID-19, be sure to comply with COVID-19, pandemic, epidemic, virus, *Indira K. Sharma any notice requirements and deadlines. and Douglas A. illness, health emergencies, government Even if there is no notice requirement, Sampson are order and/or shut downs as force majeure you should send a notice anyway. members of Saul events should be included in a force Ewing Arnstein & majeure clause if your goal is to preserve • Be mindful of your duty to mitigate Lehr’s Force Majeure your right to avoid contract performance damages. litigation team that may be hindered by these events. On resident in the firm’s Indira K. Sharma • Add a force majeure clause to new the other hand, if your goal is to ensure Baltimore office. that the other party to your contract will contracts to protect your right to avoid The team advises perform regardless of COVID-19 circum- contractual performance if an event clients across the stances, then you would want to ensure such as COVID-19 occurs. country with issues related to contract that there is no force majeure clause in the • Be aware of other parties to your con- performance and contract or that any force majeure clause tract requesting force majeure clauses disputes in light is limited sufficiently to ensure contract to relieve their obligations to you and of force majeure performance. negotiate appropriate limitations. events including the Douglas A. Sampson COVID-19 pandemic. There are a variety of provisions you may • Specify the alternative options available want to consider, including unilateral The team reviews to the parties if a covered force majeure existing contracts for options to delay or force majeure clauses that protect one event occurs. avoid performance, drafts and responds to party, or mutually beneficialforce majeure force majeure notices, prosecutes and defends clauses that protect both parties equally. • Identify specific effects COVID-19 could have on your business model breach of contract litigation involving force These clauses can be adapted for many majeure and contract-related doctrines. For (reduction in work force due to ill- business models and to ensure protection more information, contact Indira K. Sharma at against liabilities related to COVID-19. ness, mandatory closure, supply-chain (410) 332-8621 or [email protected] or Until the pandemic ends, you must antici- issues, etc.) and plan for these circum- Douglas A. Sampson at (410) 332-8661 pate the pervasive effects of COVID-19 stances in your contracts. or [email protected]. Visit and carefully scrutinize pandemic-related • Review your policies to www.saul.com to learn more about the firm and its capabilities. provisions to protect your interests. determine if your business interruption or other losses are covered.

6 Baltimore Chapter FOCUS 3Q20 COBRA Notice Litigation: Heightened Scrutiny Likely in Troubling Times Devin Karis, Gordon Feinblatt LLC

The COVID-19 virus brought with it • Identification of the qualifying event; • Notices omitted the required continua- not only a national health crisis but tion coverage termination date; • Explanation of the plan’s procedures also a national unemployment crisis. for electing continuation coverage, • Notices omitted the specific con- With workforce reductions, furloughs, including an explanation of the time tact information of the health plans’ layoffs and other cutbacks becoming period during which the election must COBRA administrators; and more common from the virus’ fallout, be made and the date by which the employers and administrators of • By failing to explain COBRA elec- election must be made; health plans governed by the Employee tion procedures clearly, (i.e., omitting Retirement Income Security Act of • Explanation of the consequences for important information on missed 1974, as amended (ERISA), would be failing to elect continuation coverage; COBRA premium payments, by pro- wise to review the requirements of the viding the required information piece- • Explanation of the maximum period notices that must be sent to “qualified meal over multiple mailings, and not for which continuation coverage will beneficiaries” under the Consolidated providing COBRA notices in Spanish, be available under the plan, if elected; Omnibus Budget Reconciliation Act among other issues.) the notices were an explanation of the continuation cov- (COBRA). not written in a manner easily under- erage termination date; and an expla- stood by the average plan participant. Beginning in 2019, a number of class nation of any events that might cause action lawsuits were brought in federal continuation coverage to be terminated Citing the above regulatory violations, court against high-profile health plan earlier than the end of the maximum plaintiffs’ counsel sought injunctive relief, sponsors (e.g., Pepisco, Petsmart, The period; requiring new notices at the employers’ Hershey Company and others) alleging expense, “appropriate equitable relief” • Description of the amount, if any, certain technical violations of COBRA’s under ERISA, statutory penalties to of that each qualified beneficiary will be notice requirements. Not only have these $110 per day for each class action plaintiff, required to pay for coverage; and types of lawsuits continued apace, but attorneys’ fees and costs, and other relief in light of 2020’s economic downturn, • Description of the due dates for pay- deemed appropriate by the court. Publicly scrutiny of COBRA notices by diligent ments, payment grace periods, the available information reveals settlements plaintiffs’ counsel is likely to intensify. address to which payments should as high as $1.25 million. be sent and the consequences of late As a reminder, COBRA amended ERISA In light of the nation’s economic hardship payment. to allow for the continuation of health and increased employee turnover, health coverage for an insured employee, spouse (The foregoing list is a non-exhaustive plan sponsors and administrators should or dependent who would otherwise lose list of COBRA’s regulatory notice content review their COBRA notices for regulatory coverage as a result of their termination requirements; employers, plan sponsors compliance, ensure that the method(s) of employment, death or other “qualifying and administrators should consult the of distribution meet legal standards, and event.” In general, COBRA requires that regulations at 29 CFR 2590.606-4 for make revisions as needed. Doing so will upon a qualifying event, the health plan’s more detail.) To assist employers with provide peace of mind for employers sponsor or administrator must provide COBRA’s notice content compliance, weary of the COVID-19 crisis and wary of each qualified beneficiary (i.e., former the U.S. Department of Labor (DOL) what else may lie ahead in 2020. employee, spouse, former spouse or published a model COBRA notice. Author: dependent child of a former employee) the ability to elect, within a specified The recent spate of COBRA notice Devin Karis is election period, the option to continue litigation cases all seem to allege Counsel in the Benefits/ERISA law coverage. Notice of the ability to elect similar facts of which plan sponsors and administrators should be aware. practice in which continued coverage must meet 14 strict he focuses on content standards. Most notably, the Specifically, these cases alleged the following: employee benefits notice must include the following: and executive compensation. • The name of the plan andthe name, • Defendants opted out of using the address and telephone number of the DOL model notice, choosing instead to Devin Karis party responsible for the administra- draft a tailor-made, arguably deceptive tion of the continuation coverage notice; benefits;

7 Protecting Your Trade Secrets in the COVID-19 Era By Liane Kozik

The greater number of employees now employer’s requiring a confidentiality start of their employment, put in their working from home has made the task agreement is considered by the court. personnel file, and forgotten, these of protecting valuable trade secrets more agreements can be reaffirmed throughout When drafting the confidentiality challenging than before the COVID-19 employment. For instance, consider agreement, clearly define what is pandemic. However, employers’ legal asking employees to reaffirm and considered “confidential” and a “trade requirement to take reasonable steps acknowledge their existing confidentiality secret” so an ordinary employee would to protect their valuable information agreements when they get a promotion, understand it. Not all information an remains unchanged. a raise, or—because of COVID- employee has access to is a “trade secret.” 19—begin working from home. This If an employer ends up in litigation over Generally, trade secrets are financial, acknowledgment should reference the misappropriated trade secrets by a former business, scientific, technical, economic or original confidentiality agreement they employee, under both the federal Defend engineering information, including plans, signed and be clear that it is not replacing Trade Secrets Act, 18 U.S.C. §1836 et seq., patterns, program devices, formulas, the old agreement, but simply reminding (DTSA) and the Maryland Uniform Trade designs, prototypes, methods, techniques, the employee of their current obligations. Secrets Act, Md. Code Ann., Com. L. Art. processes, procedures, programs, § 11-1201 et seq., (MUTSA), courts will customer lists, or codes with independent Even an employer that does not have look at whether: economic value that are not generally confidentiality agreements with all of known to competitors. 18 U.S.C. §1839(3). its employees may consider a policy on 1. The former employee with access to the Conducting a short training for employees confidential information in its employee company’s information converted it for explaining the company’s confidentiality handbook. Courts in Maryland have their own use; policy and what exactly it considers a viewed such a handbook policy as a 2. The information the employee took has trade secret will help prevent employees positive indication the employer is independent economic value because it from acting negligently with information taking reasonable steps to maintain the is not generally known; the employer wants to keep confidential confidentiality of its trade secrets. It is and show a court how seriously the easier to demonstrate the employer took 3. The information the employee took employer takes protecting its trade secrets. reasonable steps to protect its information is not readily ascertainable by proper if it has both a general handbook The employer also can include provisions means by others to whom it would be confidentiality policy and individual in a confidentiality agreement that would valuable (i.e., competitors); and confidentiality agreements, in addition to help it in litigation. For example, the the safeguards discussed below. 4. The employer took reasonable employer can include a clause where the steps to maintain the secrecy of the employee affirms having access to the information. Restrict, Monitor Employee employer’s trade secret information. Such Access to Trade Secrets, This article focuses on the “reasonable a clause helps guard against the employee Computer Systems steps” employers can take to maintain claiming otherwise early on in litigation. Courts also look to what additional the secrecy of their trade secrets under The employer also can include a provision safeguards the company has in place, such the last factor. It also includes tips on where the employee agrees to returning or as restricting or monitoring employee preserving crucial for a potential destroying all confidential or trade secrets access to its trade secrets to determine trade secret misappropriation claim. in their possession upon termination of employment. This gives clear notice whether the employer took reasonable Use Confidentiality Agreements of expectations and help demonstrate steps to protect its information. Confidentiality agreements can help the employer is taking reasonable steps Information the employer truly believes a company protect its trade secrets. to prevent disclosure of its confidential is a trade secret can be limited to Compared to a non-compete agreement, information and trade secrets. employees on a need-to-know basis, such confidentiality agreements are more Additionally, the type of relief (such as as restricting access to certain employees broadly accepted and have been upheld injunctive relief and attorneys’ fees) the on the company’s computer systems. by the Maryland courts. (Courts in employer would be entitled to if it must Another practice to help safeguard Maryland may not enforce non-competes, enforce the agreement and prevails can trade secrets is to limit employees’ however, when an employee loses be included and can provide leverage in ability to download or print trade secret their job through no fault of their own obtaining a preliminary injunction and information. Additionally, if employees during a global pandemic with high forcing early resolution. are working remotely, the employer unemployment.) When determining While confidentiality agreements are can require employees to use company- whether a company has taken reasonable routinely signed by employees at the issued computers. This also allows the steps to protect its trade secrets, the continued on page 9

8 Baltimore Chapter FOCUS 3Q20 continued from page 8 employer to take additional security the IT Department can disable access Conclusion measures, such as disabling the use of to company systems, electronic devices Given the current status of the pandemic, USBs on the laptop, access to personal (including removing past emails and working from home will continue for the emails, or uploading to share file websites. data from remote devices), and accounts; foreseeable future. Certain steps can be These and other measures can make it exit interviews can be conducted by effective in protecting an employer’s trade less likely an employee will be able to video or phone; and employees can secrets when employees have more access misappropriate trade secrets in the first e-sign documents establishing their to that information outside the normal place or store them on a personal laptop continuing confidentiality obligations. controlled office environment. Further, or other devices while working from Investment in these technologies can these and other steps can be an effective home. In Glynn v. Impact Sci. & Tech., help protect the employer’s trade secrets. way to preserve the employer’s legally Inc., 807 F. Supp. 2d 391, 435 (D. Md. The employer also can ask the employee protectable interest in its trade secrets in Aug. 25, 2011), the court said a company’s to certify they have not retained any the event of litigation. efforts only need to be “reasonable” and physical or electronic copies of company not “foolproof.” data, information, or other property and Author: that everything has been returned or Liane Dublinski Kozik An employer can also monitor who is destroyed. is an attorney in the accessing, downloading, printing, or Baltimore office of otherwise modifying its trade secrets. In additional, consider not recycling Jackson Lewis P.C. Cloud-based databases or other software or upgrading the operating system of where she advises and typically have logs of all activity related to computers of newly off-boarded employee represents employers certain files that is often stored for a few right away, especially if the former in a broad range of months, but the storage duration can be employee resigned suddenly, was in a employment law increased. These logs can help prove an position of power with access to some matters, including Liane Kozik employee misappropriated trade secrets. particularly valuable trade secrets, or those involving discrimination and harassment, wage and hour, may be going to a competitor. A forensic wrongful termination, restrictive covenants, Employee Off-Boarding evaluation of the computer can prove Procedure and retaliation claims. Jackson Lewis has over crucial in trade secret misappropriation 900 workplace law attorneys in 62 offices. For Off-boarding employees can be litigation. If the computer is needed for more information on the issues raised in this particularly challenging during this another employee, IT can make a full article or any workplace law matters, you can pandemic. Luckily, many off-boarding copy of the hard drive before it is reused. reach Ms. Kozik at [email protected]. functions can be performed remotely—

Board Leadership

President Program Chair Past Presidents Advisory Board Larry Venturelli Joseph Howard Karen Gouline Zurich North America Howard Bank Melisse Ader-Duncan 410.559.8344 443.573.2664 Frank J. Aquino [email protected] [email protected] Ward Classen Immediate Past President Board Members Maureen Dry-Wasson Prabir Chakrabarty Cory Blumberg Lynne M. Durbin Mariner Finance Taren Butcher Lynne Kane-Van Reenan 443.573.4909 Dee Drummond Andrew Lapayowker [email protected] Joseph Howard William E. Maseth, Jr. President Elect/Treasurer Raissa Kirk Christine Poulon Dan Smith Danielle Noe Dawn M. B. Resh Under Armour. Shane Riley Mike Sawicki [email protected] Kristin Stortini Chapter Administrator Secretary Michael Wentworth Lynne Durbin Kimberly Neal Matthew Wingerter [email protected] General Counsel The Children’s , Inc.. [email protected]

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