Trade Secrets protect information: 1) that a business has taken reasonable measures to keep secret; and 2) that derives real or potential independent economic value from not being generally known or ascertainable. Under the Defend Trade Secrets Act, 18 U.S.C. § 1836(b), misappropriation of a trade secret occurs when a person acquires the trade secret improperly or discloses the trade secret without consent.
When most employers think of what improper acquisition may mean, thoughts of espionage, theft, and other clandestine activities occur. However, more common trade secret misappropriation occurs when a former employee takes with them trade secret information that former employee had rightful access to during the original employment. Many employers think they must wait for that former employee to use the trade secret to attempt to gain customers or win business before there has been trade secret misappropriation. This waiting on proof of using the trade secret can be an uncomfortable and uncertain time for employers.
There is a way to help short circuit that waiting game, and that is through the use of good employee agreements. Soliciting customers or business is only one manner of trade secret misappropriation. Another form of trade secret misappropriation is through the breach of a duty of secrecy. If an employment agreement clearly states that the former employee maintains a duty of secrecy as to trade secrets and that employee agreement bars the employee from using the trade secrets after termination, the former employee may be liable for trade secret misappropriation.
The need for such an employment agreement is illustrated by a recent ruling in the Northern District of Illinois regarding trade secret misappropriation. An employee agreement spelling out that employees are barred from using protected information after termination recently helped Medcor, Inc. gain a temporary restraining order and preliminary injunction in regard to a former employee in Illinois. The former employee had claimed no trade secret misappropriation occurred because Medcor’s trade secrets hadn’t been used to solicit new business by the former employee. The court disagreed and granted a temporary restraining order and preliminary injunction against the former employee in part because the former employee violated the duty of secrecy created by the employment agreement.
Now is a good time to pull out those employee agreements and make sure there is language related to the employee’s duty of secrecy following termination.
The case is Medcor, Inc. vs. Garcia et al. Read it here.
If Marbury can help you review your employment agreements or you have any trade secret questions, please contact Tim at tjohnson@marburylaw.com or 571-267-7028.