March 28, 2014

Unraveling the Doctrine of Inevitable Disclosure

Linda K. Stevens – March 28, 2014

As employee mobility continues to increase, the same situation occurs throughout today's business world:  A key employee has defected for the competition, and management is upset . . .  and worried. The employee knows competitively sensitive information, such as the coming year's marketing strategies and details about the company's important new product-development efforts. The employee has no noncompete agreement, although the company did obtain her signature on its standard confidentiality agreement when she started her job several years ago. The employee swears that she will live up to her confidentiality obligations, and her new employer disclaims any interest in any "trade secrets" she might know. Still, management does not trust the employee's ability to respect confidentiality, especially because her new job looks to be substantially the same as her old job. Whether inadvertent or on purpose, misappropriation seems inevitable. Management asks, "What can be done?  Can't we stop her from taking this job?"

In the past, many lawyers would have advised this employer that, absent a valid noncompete agreement, the employee is free to switch jobs, even to join the competition. The former employer most likely would have been advised to wait and watch the employee's conduct, and the marketplace, for evidence of trade-secret misappropriation. It might not be necessary to wait for the proverbial horse to leave the barn, however. Some jurisdictions provide a way to prevent the loss of trade secrets before it happens—by invoking the doctrine of  "inevitable disclosure" of trade secrets to prevent the employee from performing competitively sensitive duties for the competitor, even in the absence of any noncompete and without any evidence of actual trade-secret misappropriation.

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