Defend Trade Secrets Act (DTSA)

Last Updated on Wednesday, 11 October 2017 11:59 Written by Chris Griswold Wednesday, 11 October 2017 11:59

Today, there’s so much technology and capability to steal the intellectual property and trade secrets given the ever-evolving technology advancements of today’s business world….  They’re a huge cybersecurity risk.  Oklahoma adopted a form of the Uniform Trade Secrets Act (UTSA) in 1986 (Texas did not until 2013).  However, in May of 2016, President Obama made law the federal Defend Trade Secrets Act, which provides a first-time ever, federal, private cause of action for those who claim that their trade secrets have been “misappropriated.”  Helpful information for everyone (and don’t forget to click on my Facebook or YouTube links below to also see my short video on this material).

Defend Trade Secrets Act (DTSA)

Question #1:  Why was the federal DTSA made law?  Although 48 States had previously passed their own form of the UTSA (all with their own variances, gaps, inconsistencies, etc…), until now, there was no federal cause of action for stealing others trade secrets and other forms of intellectual property – an the UTSA’s of the States were, again, inconsistent and lacked homogeneity.  Furthermore, to bring a claim under a State’s particular UTSA, the action could only be brought in such State’s State court system, not the federal courts.

 Question #2:  What sort of facts must exist that permit the federal DTSA to apply?  A federal DTSA claim can only be brought if “…it is related to a product or service used in, or intended for use in, interstate or foreign commerce.”  This is the federal “diversity requirement” that mandates that the wrongful misappropriation occurred across State lines or in another country.  So, if some sort of alleged misappropriation of your intellectual property or some other sort of trade secret gets tossed around between OKC and Dallas, you can have redress under the federal DTSA.  But, if it all happens, from beginning to end, here in Oklahoma – no luck.

Question #3:  What does the DTSA define as a “trade secret”?    The federal DTSA defines “trade secret” as “…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…”; including “tangible or intangible” information, regardless of how such information is “…stored, compiled or memorialized.”  So what?

Question #4:  What does the Oklahoma UTSA define as a “trade secret”?    In comparison, the Oklahoma UTSA defines “trade secret” as “…information, including a formula, pattern, compilation, program, device, method, technique or process….”  So, the federal DTSA appears to be broader in its definition of what constitutes a “trade secret,” not surprising since the federal DTSA is 30 years newer than the 1986 Oklahoma UTSA.  So what?

Think about employees and certain vendors here, and trade secret stuff found nowhere else but in the employee’s or vendor’s minds – and same being subject to a plaintiff’s federal DTSA claim (but not the Oklahoma UTSA).

What My Clients Are Saying

“Chris Griswold has a way of simplifying complex legal issues.  He is quick to respond, efficient and professional in his delivery of services and fair and up front with his cost.  Professional Insurors considers Chris an asset to both our business and our clients.  Our trust in Chris grows each and every time we call upon his expertise.”
Kelly Miller / President / Professional Insurors Agency, LLC / Oklahoma City, Oklahoma

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Covenant of Quiet Enjoyment

Last Updated on Tuesday, 11 July 2017 04:46 Written by Chris Griswold Tuesday, 11 July 2017 04:44

Listen up landlords, tenants, subtenants, brokers and lenders.  Sometimes, for whatever reason, we do something so many times that we actually forget the significance of doing it.  As regarding the typical commercial lease, there are certain provisions that, for some long-forgotten reason, appear again and again.  But why?  One of these provisions, the covenant of quiet enjoyment (which the Landlord owes to the Tenant), is really worth brushing up on.  This should be helpful for everyone… (and don’t forget to click on my Facebook or YouTube links below to also see my short video on this material).

Covenant of Quiet Enjoyment

Some anonymous person once humorously noted “…I have my mind made up so don’t try to confuse me with the facts.”  We’ve all seen the covenant of quiet enjoyment expressed in the leases we negotiate.  It ordinarily reads something to the effect of “… Tenant may peaceably and quietly have, hold and enjoy the premises for the term aforesaid….”  However, what is this covenant, why is it there & what implications follow from the parties expressly addressing it in their lease?

What is it?  The covenant of quiet enjoyment is the legal mechanism which prevents a landlord (or anyone for whose conduct the landlord is responsible) from “interfering” with a tenant’s use and enjoyment of the leased premises during the lease term.  Interestingly enough, if this covenant is not expressly spelled out in the lease (or if the lease was made orally), the law actually implies (i.e., inserts) this covenant into the lease.  When the law implies this covenant into the lease, the upshot is that upon such “interference” by landlord, the tenant doesn’t have to pay rent and can even elect to terminate the lease.

If the law implies it into every lease, why do I always find it written into every lease?  Even though the law implies this covenant into every lease, the parties to a lease can still modify and condition the enforcement of this covenant by tenant.  Accordingly, when the language relating to the covenant of quiet enjoyment appears in the lease, it’s actually restricting and conditioning tenant’s rights – not enlarging them….  That’s why your lease reads that “…upon tenant’s payment of rent and observance of all the terms and provisions of this lease as contained herein, tenant may peaceably and quietly have, hold and enjoy the premises for the lease term contained herein….”  Remember, in the beginning, landlords’ counsel drafted the leases to serve the best interests of landlords, not tenants.  Since that time, due to all the leases that have been executed over the years, it has become a custom that Tenant will have to pay rent and perform all of their lease obligations prior to enforcing the covenant of quiet enjoyment against Landlord (which is reverse of how the law would otherwise imply).

What implications follow from the parties expressly addressing it in their lease?  Basically, once the covenant of quiet enjoyment is expressed (i.e., conditioned) in the lease, it’s incumbent upon the tenant (and even the landlord) to carefully draft the lease provisions so that their interests are protected.  Why?  Upon seeing that the parties have chosen to negotiate their own particular terms as relating to the covenant of quiet enjoyment, the courts will not, absent certain circumstances, modify such negotiated terms.  So, negotiate carefully and write well….

What My Clients Are Saying

“I take special care when selecting business partners to represent my company and look for those who exhibit the same levels of professionalism and integrity that I try to achieve.  Chris Griswold definitely meets these requirements and is considered a very valuable member of the JOBO Properties team.  I have no hesitation in recommending Mr. Griswold to handle your business and commercial real estate transactions.” Darren Ford / Owner & Developer of JOBO Properties, L.L.C. / Oklahoma City, Oklahoma

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Loan Commitments

Last Updated on Tuesday, 23 May 2017 10:19 Written by Chris Griswold Tuesday, 23 May 2017 10:19

This month we talk about an often overlooked issue in lending and a lender’s potential liability to a borrower, under certain circumstances.  This should be helpful to everyone… (and don’t forget to click on my Facebook or YouTube links below to also see my short video on this material).

Loan Commitments

Hypothetical situation:  A borrower is buying a portfolio of chain restaurants with a portfolio price of $50M, and an unconditional liquidated damages penalty of 10% of the purchase price (i.e., $5M) payable by buyer to seller is not allowed to be conditioned upon my buyer’s inability to actually, ultimately obtain financing (actually not an uncommon purchase/sale document concept when a buyer is buying a chain of stores from a large, national franchisor – since all franchisors feel that they’re pretty big and bad enough to get whatever they want….  go figure!).

True, most contracts have an escape clause about buyer’s failure to obtain financing (just not under this sort of a deal, which commonly has liquidated damages penalties due to seller/franchisor lest buyer/potential francisee fails to actually close – all predicated upon seller’s fervent belief that everybody and their brother wants to buy their licensing rights and become proud franchisees).  So, there the buyer is….  Potentially owing lots and lots of money (that can’t be secured under any financing vehicle, but must basically be cold cash) if buyer can’t get financing….

Lenders, be sure and have “hold lender harmless” statement in favor of the lender in your loan commitment letter.  Otherwise, your bank’s insurance company might be paying your insurance claim.  This can also happen if the loan turns out to be larger than the bank’s legal lending limit and the banker can’t find a fellow loan participant.  Either way, it’s a potentially big, big problem, with an easy fix.

What My Clients Are Saying

“It has been a pleasure working with Mr. Griswold. He knows the commercial real estate business well and has been an integral element in our deal making process on some very key transactions.”
Kris Davis /  Industrial and Investment Advisor / NewMark Grubb / Oklahoma City, Oklahoma

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