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United States: New U.S. District Court Decision From Massachusetts Makes "Inevitable Disclosure" Arguments Effective Only When Noncompetes Are Involved
Massachusetts Lawyers Weekly
reports on a new decision from the U.S. District Court for the
District of Massachusetts by Judge Casper that makes
"inevitable disclosure" arguments effective only in cases
involving noncompetition agreements. I'm quoted in the
text of the article. (For those of you without a subscription
to Massachusetts Lawyers Weekly, I'll post a copy of
the article once I receive reprint permission.) The article
does a good job of describing the facts and holding, but for those
of you who want to read the decision, it can be found
here.
Here's why I think the case is significant. The
"inevitable disclosure" doctrine states that employees
who have knowledge of their former employers' trade secrets can
be held liable for the misuse of trade secrets merely by being
employed by the former employer's competitor. The idea is
that the employees would "inevitably disclose" the trade
secrets they know from their former employment to the competitor
while working for the competitor. The plaintiff in this case,
U.S. Electrical, tried to get the court to preliminarily enjoin its
former employees, Schmidt and Colon, from working for a competitor,
Munro Distributing, by using this doctrine. U.S. Electrical
argued that it was likely to succeed on its trade secret claims
against Schmidt and Colon because Schmidt and Colon would
disclose U.S. Electrical's trade secrets to Munro Distributing,
not that Schmidt and Colon already had disclosed those
secrets. In refusing to issue an injunction, Judge Casper
ruled that District of Massachusetts cases that used the term
"inevitable disclosure" did so only after an employer
established that the employee breached (or likely had breached) a
noncompetition agreement with the employer. Only then did
those cases consider "inevitable disclosure" arguments to
establish that a plaintiff would be "irreparably harmed"
if the employee continued to work for the competitor.
Most courts that have considered the "inevitable
disclosure" doctrine have similarly ruled that a claim for
misappropriation of trade secrets cannot be based on
"inevitable disclosure"—there must be evidence
that the employee actually disclosed trade secrets. In the
District of Massachusetts, though, an employer can get a
preliminary injunction by showing: (1) that an employee breached a
noncompetition agreement by working for a competitor; and (2) that
the employer would be "irreparably harmed" if the
employee continued to work for a competitor because the employee
would "inevitably disclose" the employer's trade
secrets or confidential information to the competitor. This
case was different.
The key takeaway is that current case law in the District of
Massachusetts does not support claims for misappropriation of trade
secrets based on the "inevitable disclosure"
doctrine. A plaintiff employer needs to show that an employee
breached a noncompetition agreement first and then that the
employer would be harmed if the employee continues to work for the
competitor because the employee knows trade secrets that he would
"inevitably disclose" to the competitor.
To view Foley Hoag's Massachusetts Noncompete Law
Blog please click
here
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guide to the subject matter. Specialist advice should be sought
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