United States: Defend Trade Secrets Act: Recent Developments Raise Questions About Inadvertent Disclosure

The Defend Trade Secrets Act ("DTSA"), signed into law last year by President Obama, revolutionized intellectual property law by creating a new civil cause of action permitting trade secret owners to sue for misappropriation in federal court under federal law.  Prior to the DTSA, trade secret owners had to rely on state law to remedy misappropriation or to enjoin former employees without non-compete agreements from going to work for a competitor simply because of the confidential information they learned or had access to during the course of their employment. 

One of the primary goals of the DTSA was to establish a uniform law of trade secret misappropriation.  The DTSA expressly did not, however, preempt existing state law, which is anything but uniform on whether the inevitable disclosure doctrine can be used to obtain an injunction to prevent employees from changing jobs in the absence of concrete evidence of actual or threatened use of stolen trade secrets.  Early draft versions of the DTSA were criticized precisely because the language could have been read to endorse the inevitable disclosure doctrine, which some jurisdictions have rejected or where it has not been officially recognized including Maryland, Virginia, California, Georgia, and the District of Columbia. 

In LeJeune v. Coin Acceptors, Inc., 31 Md. 288 (2004), a case of first impression, the Court of Appeals of Maryland rejected the inevitable disclosure doctrine as a basis for granting a preliminary injunction under Maryland's Uniform Trade Secrets Act ("MUTSA"), and that remains the law in Maryland today.  To avoid conflict with state law that promotes at-will employment – especially in industries that thrive on innovation and a mobile workforce – the final version of the DTSA was changed.  It authorizes a court to grant an injunction to prevent actual or threatened misappropriation provided that it does not "prevent a person from entering into an employment relationship, and that conditions placed on such employment shall be based on evidence of threatened misappropriation and not merely on the information the person knows." 

It appeared that the problem was solved.  Or was it?  There is only one reported decision in the federal courts in Maryland in a misappropriation case brought under both the MUTSA and the DTSA, but the district court did not have occasion to address whether the inevitable disclosure doctrine would apply in deciding the plaintiff's motion for a temporary restraining order and preliminary injunction.  Recent decisions from other federal courts, however, are starting to raise questions about the proper interpretation of the plain language of the DTSA and its explicit rejection of the inevitable disclosure doctrine.

In Fres-co Systems USA, Inc. v. Hawkins, et al., 2017 WL 2376568 (3d Cir. June 1, 2017), the U.S. Court of Appeals for the Third Circuit applied what, for all intents and purposes, appears to be the inevitable disclosure doctrine in deciding an appeal of the district court's grant of a preliminary injunction in favor of a former employer against its former employee of sixteen years.  The injunction barred him from disclosing Fres-co's confidential information and from soliciting twelve clients whom he had serviced while at Fres-co.  Although the Third Circuit did not mention the doctrine by name, it concluded that the district court was within its discretion to find that the plaintiff satisfied the likelihood of irreparable harm element of a preliminary injunction because its former employee "would likely use his confidential knowledge [obtained during his former employment]" to his former employer's detriment in his new job with a direct competitor.  In reaching this conclusion, the Third Circuit emphasized the "substantial overlap" between what the former employee had done at Fres-co and what he planned to do for its director competitor – he would be working in "the same role, the same industry, the same geographic region."  In other words, the Third Circuit agreed with Fres-co's argument that its former employee would be unable to perform his new job duties without inevitably using or disclosing Fres-co's trade secrets without any specific proof that he would do so.  Because the Third Circuit did not distinguish between the plaintiff's claims under the DTSA and the Pennsylvania Uniform Trade Secrets Act, it would appear that the mere threat of misappropriation based on a former employee's knowledge acquired on the job is sufficient under both statutes to warrant granting a preliminary injunction against the former employee.

Federal district courts in Missouri and New York likewise have recognized the inevitable disclosure doctrine in cases brought under both the DTSA and the applicable state trade secret acts.  In Panera LLC v. Nettles, Case No. 4:16-cv-1181, 2016 WL 4124114 (E.D. Mo. Aug. 3, 2016), the district court applied the inevitable disclosure doctrine, which has not been formally adopted in Missouri, to grant the plaintiff's motion for a temporary restraining order against its former employee, who was "likely to draw upon, as a matter of course, his experience and knowledge with regard to Panera's confidential systems and business strategy" at his new job.  The district court in Free Country Ltd. v. Drennen, et al., Case No. 1:16-cv-8746, 2016 WL 7635516 (S.D.N.Y. Dec. 30, 2016), noted that the plaintiff "theoretically" could lodge an inevitable disclosure claim against its former employee "based on information still in [his] head." 

These decisions leave open the question of what would happen in those jurisdictions where, prior to the enactment of the DTSA, to get an injunction, it was not enough for a trade secret owner to simply show that a defendant's new employment would inevitably lead him or her to rely on those trade secrets in order to carry out his or new job duties.  At this early stage, it remains to be seen whether a split among the federal circuit courts of appeal worthy of Supreme Court consideration will develop as more cases progress through the appeals process.  In the meantime, trade secret owners and their challengers need to play close attention to developing case law and how it will affect the fate of the inevitable disclosure doctrine in jurisdictions throughout the Mid-Atlantic, the Southeast, and beyond.

This article originally appeared at Law360.com. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions