May 21, 2015 Practice Points

Can the "Inevitable Disclosure" Doctrine Support a Breach of Contract Action?

The trade secrets doctrine of inevitable disclosure is often used as a preemptory tool to enjoin competitive employment where it would be inevitable that a former employee would disclose trade secret information in its new position at a competitor, whether purposefully or inadvertently.

By Christine Wilson Feller

The trade secrets doctrine of inevitable disclosure is often used as a preemptory tool to enjoin competitive employment where it would be inevitable that a former employee would disclose trade secret information in its new position at a competitor, whether purposefully or inadvertently. See Linda K. Stevens, "Unraveling the Doctrine of Inevitable Disclosure" Intellectual Property Litigation, American Bar Association (Mar. 28, 2014). Recently, in an attempt to fight a motion to dismiss, the plaintiff in Gilead Sciences, Inc. v. Abbott Labs, Inc., attempted to invoke the doctrine of inevitable disclosure as a basis for alleging that the defendants had breached a confidentiality agreement. 2015 WL 1191129 (D. Del. Mar. 13, 2015).

In Gilead, Pharmasset (later acquired by Plaintiff Gilead) and Abbott entered into a confidentiality agreement in order to exchange confidential information regarding therapies for the treatment of hepatitis C in preparation for a potential acquisition by Abbott. Id. at *1–2. After Gilead acquired Phamasset, Abbott began filing provisional patent applications relying on a "predictive 'mechanistic model,'" and Gilead filed suit alleging that Abbott had used Gilead's confidential information in support of this mechanistic model. Id. When Abbot moved to dismiss for failure to state a claim, Gilead attempted to support its allegations of breach of the confidentiality agreement by invoking the doctrine of inevitable disclosure. Gilead argued that since a number of named inventors on the patent applications had access to the confidential information, it was inevitable that the information was not just used to determine whether Abbott would acquire Pharmasset. Id. at *8. The court was not persuaded to invoke this doctrine and noted that Gilead could not cite to any precedent finding that someone who was bound by a nondisclosure agreement inevitably disclosed confidential information. Id. However, the court did not dismiss Gilead's breach of contract claim, finding instead that the facts alleged supported a plausible inference of breach under Twombly and Iqbal. Id. at *8–9.

The Gilead court was not convinced that the inevitable disclosure doctrine was an appropriate tool to support a cause of action for breach where the alleged breach had already occurred. As breach is an essential element of the breach of contract action, the court may have been wary of allowing a party to sidestep the pleading requirements. Although the inevitable disclosure doctrine was not successfully applied in Gilead, it may be more successful if used to support a cause of action for anticipatory breach or to support a request for equitable relief, such as a preliminary or permanent injunction. Beyond the motion to dismiss stage, it is also possible that the inevitable disclosure doctrine could be invoked as one factor, in combination with other facts uncovered in discovery, to convince the fact finder that there was a breach.

Keywords: intellectual property, litigation, breach of contract, disclosure, inevitable disclosure

Christine Wilson Feller is with Schiff Hardin LLP in New York, New York.


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Christine Wilson Feller – May 21, 2015