United States: Intent To Use Is Sticking "Pointe" In Denial Of Preliminary Injunction

Last Updated: November 14 2018
Article by Daniel J. Corbett and Johanna Jacob

On October 25, the U.S. District Court for the District of Massachusetts denied motions for injunctive relief in a case involving trade secrets allegedly stolen by a departing consultant using his personal computer to sync with the company's Dropbox. This case established (1) Massachusetts' newly enacted Uniform Trade Secrets Act ("UTSA") does not apply retroactively even if the violation is continuing; and (2) intent to use a trade secret is a hurdle which Plaintiffs can struggle to show where there is not evidence of actual use and the defendant takes steps at remediation.

Maine Pointe, a supply chain firm, filed a complaint against Collins, a former consultant, alleging trade secrets misappropriation and breach of contract, and requesting both a temporary restraining order and a preliminary injunction.

Maine Pointe hired Collins as a consultant, pursuant to a written employment agreement, in April 2018. Maine Pointe did not issue a company computer to Collins and allowed Collins to use his personal computer for the work he performed for Maine Pointe. Collins was given access to Maine Pointe's file server, a password-protected Dropbox account.

On September 30, 2018, Collins logged onto Maine Pointe's Dropbox site and downloaded a variety of folders which included client data and other Maine Pointe documents, templates and presentations, including the Analysis Playbook. Later that evening, Collins "unlinked" his personal computer from Dropbox. Typically, when Maine Pointe revokes a user's access to Dropbox, any data synched to that user's computer will be deleted. But if a user "unlinks" a Dropbox account and personal computer, Maine Pointe cannot delete information from that computer or verify what data resides on that computer.

On October 1, Collins announced his resignation by email. The next day, Collins assured Maine Pointe that his new employer does not work with any Maine Pointe customers and that he would not work with such customers for the next six months, pursuant to his noncompete agreement.

With respect to the breach of contract claim, the court held that, because "Maine Pointe did not outline any procedures for Collins to 'promptly return' the documents, or define the term 'promptly return,' the Court cannot conclude on the present record that Collins violated his contractual obligations."

With respect to the trade secrets claim, the court concluded that, as an initial matter, the newly-enacted Massachusetts UTSA does not apply to any violations that occurred before October 1, 2018 or began prior to October 1, 2018 and continued past that date. Noting that Collins' alleged violation occurred on September 30, 2018, and continued into October 2018, the court concluded that the Massachusetts UTSA did not apply.

Looking to Massachusetts law as it existed prior to October 1, 2018, the court concluded it was likely that Maine Pointe will be able to establish that its Analysis Playbook constitutes a trade secret, noting that it contains a step-by-step guide to Maine Pointe's approach to working with clients and lays out a timeline for key activities that should occur, deliverables for those activities, and the roles of Maine Pointe in those activities. The court also concluded that Maine Pointe took reasonable steps to protect its confidential information by restricting access on a "need to know" basis, by monitoring and logging individual access, and by storing the information on a secure, password-protected system.

The court was not persuaded by Maine Pointe's argument that Collins "intentionally sabotaged [Maine Pointe's] ability to effectively remove his access to the Company information systems" to gain an advantage at his new job, noting that Maine Pointe did not provide any direct evidence that Collins intended to use the information in his new job.

The court seemed to give more credence to Collins' arguments (at least at the initial injunctive relief phase). Collins attested that he had proposed a plan to turn over his computer to Maine Pointe, that he had downloaded the information to avoid deleting files (which had happened to him twice during his brief tenure with the company), and that he has told his new employer he cannot work for any clients that overlap with Maine Pointe's for six months.

Although it seems that Maine Pointe did everything right in terms of establishing the existence of trade secrets and taking reasonable methods to protect them (and that may help them later on in litigation), this decision highlights the challenges plaintiffs face in terms of proving intent to use trade secrets, especially when faced with a defendant prepared to argue his innocence and take necessary steps to remediate the issue..

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.

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