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January 28, 2015 Practice Points

Nike Lawsuit Will Test Company Security Initiative

The lawsuit may provide a road map and guidance for employers who are continually striving in an increasingly digital world to safeguard their trade secrets.

By Shawn N. Butte and John A. Snyder

On December 8, 2014, athletic shoe manufacturer Nike filed suit in Multnomah County Circuit Court in Portland, Oregon, against three of its former designers alleging a misappropriation of Nike’s trade secrets and conspiracy to start a new, competing business venture.

The lawsuit claims that three former designers, Denis Dekovic, Marc Dolce, and Mark Miner “conspired to and developed for themselves, and then for Adidas, a strategic blueprint for a creative design studio to compete against Nike, began consulting with Adidas and misappropriated Nike trade secrets for use in their new business venture” and seeks $10 million in alleged damages.

In the complaint, Nike alleges that the defendants knowingly violated several agreements signed with Nike at the outset of their employment. All three defendants signed non-competition agreements pursuant to which they agreed to: (1) not to compete with Nike during and for a period of one year following their employment; (2) not to use or disclose any of Nike’s confidential information and to return all copies of such information upon leaving Nike’s employment; and (3) not to solicit other Nike employees away from Nike to a competitor.

The defendants also signed employee invention and secrecy agreements, by which each of them “assign[ed] to Nike all . . . inventions . . . conceived” during his employment term with Nike relating “in any way” to Nike’s “business . . . or products.” The defendants further agreed to disclose promptly in writing to Nike all such inventions conceived during their employment with Nike whether or not such inventions were assignable under either of the agreements.

Nike’s complaint describes the extensive, company-wide efforts taken to protect its confidential information. Since 2012, Nike has invested more than $1.5 million in a company-wide security initiative known as “Keep it Tight” or “KIT.” As described in the complaint, KIT is a program designed to educate employees regarding the protection of Nike’s proprietary and confidential information, including its product-design information. The KIT initiative provides employees with online training on the topics of social media, information security, device (laptop/mobile) security, and workplace and situational-awareness security. Nike asserts that there has been, and continues to be, significant publicity of the KIT principles on postings throughout the Nike campus and on Nike’s internal employee website and social-media platforms. Nike has apparently gone to great lengths to prevent leaks of proprietary, confidential, and trade-secret information and reinforces the company-wide culture of locking down such information.

Nike claims the three designers stole a “treasure trove of Nike products designs, research information and business plans” in an effort to market themselves to Adidas. Dekovic in particular, had the contents of his laptop copied, which gave him access to “thousands of proprietary documents relating to Nike’s global football (soccer) product lines.” The lawsuit identifies that the information taken by the defendants is among the most important and highly confidential information in Nike’s athletic-footwear business. Disclosure of any of this information, it claims, “would irreparably harm Nike, by, among other things, enabling a competitor to effectively undermine and counter Nike’s performance in the athletic markets for the next three to four years.”

On December 9, 2014, Nike filed a motion for temporary restraining order and preliminary injunction. The Multnomah County Circuit Court granted Nike’s motion in part and issued a temporary restraining order against all three defendants on December 11, 2014.

However, on December 24, 2014 both parties agreed to vacate the court’s temporary restraining order and instead, stipulated to a preliminary injunction enjoining the defendants from the following until July 6, 2015:

  • consulting with any other company in any industry in which Nike participates
  • disclosing any Nike trade secrets or other proprietary information
  • directly or indirectly soliciting, diverting, or hiring away Nike employees or Nike-sponsored athletes

The preliminary injunction also includes provisions from the court’s December 11, 2014, temporary restraining order, requiring the defendants to return copies of Nike’s trade secrets and other confidential and proprietary information, and to disclose the identity of any persons or entities to whom or which defendants disclosed Nike’s trade secrets and other confidential and proprietary information.

Both parties agreed to appear before the court June 22–25, 2015, for a trial on Nike’s claims for injunctive and equitable relief. A pivotal issue expected to be extensively litigated at trial is the effectiveness of Nike’s “Keep It Tight” program and the steps Nike undertook to protect its trade secrets and other proprietary information. The lawsuit, involving one of Oregon’s most famous companies, is particularly significant because it may provide a useful road map and guidance for other employers who, in an increasingly digital and global economy, are continually striving to safeguard their trade secrets and proprietary and confidential information to maintain their competitive advantage and market share, and avoid unfair competition.

Shawn N. Butte and John A. Snyder, Jackson Lewis P.C.

Copyright © 2015, American Bar Association. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. The views expressed in this article are those of the author(s) and do not necessarily reflect the positions or policies of the American Bar Association, the Section of Litigation, this committee, or the employer(s) of the author(s).