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Trade Secrets: Lessons for Employers

September 07, 2017
Post by Patricia A. Sweeney - Of Counsel

Two court cases have provided a potent lesson in the need to interview incoming employees from competitors, and when the so-called “nuclear option” is available, when it is your trade secret that walks out the door.

The “nuclear option” is a portion of the Defend Trade Secrets Act that was passed in 2016. Among the remedies for an employer is, in addition to seeking damages and injunctive relief, the ability for a court to order the property of the individual or company accused of misappropriating trade secrets to be seized by a US Marshal. If granted by a federal court, the Marshal can, without any advance notice, enter the property of the person or entity accused of misappropriation of the trade secret and seize documents, computer files, or other property that would allow the misuse of the trade secret. A question that immediately arose upon passing of the law was what were these “extraordinary circumstances” that allowed such a seizure. The language of the law provided it was permitted when there would be immediate and irreparable injury if the seizure did not occur. In Misson Capital Advisors LLC v. Romaka, a district court in New York ordered such a seizure. There, the real estate finance company accused a former employee of downloading the entire 65,000 client list to his computer and then seeking employment with competitors. According to the court, he had deleted the data but had not. The court ordered seizure of the employee’s property including going to his home, copying the files from his personal computer and deleting the files from his computer.

As the case reflects, the assertion of immediate harm would need to supported by the evidence and be directed to such “extraordinary” situations, but is an option the Court was willing to apply. Do note, as reflected in earlier Filewrapper posts, that in order to recover punitive damages and attorney fees under this new law, agreements with employees should include a notice of a “whistleblower” provision that reflects secrets may need to be disclosed if invoking a whistleblower federal or state law.

In the second case, Uber hired a former employee of Waymo, a part of Google, involved in developing a driverless car. Before leaving, the engineer had downloaded 14,000 copies of Waymo documents. Once it was discovered, Waymo sued in federal court in California. Waymo LLC v. Uber Technologies. The judge granted a partial injunction and referred the case to the US Attorney.  The judge commented that Uber did not require the employee to sign any agreement confirming he was not bringing confidential materials from his former company. This was despite the fact that Uber later did require other employees to sign such agreements. 

In short, lessons learned include to conduct exit interviews when an employee leaves, where possible, to remind them to protect trade secrets; and that entrance interviews and agreements also will help to let the employee know to leave their prior employer’s secrets behind. That, and check who is downloading what to where.

Patricia Sweeney is an Intellectual Property Attorney in the Biotechnology/Chemical Patent Practice Group at McKee, Voorhees & Sease, PLC. For additional information please visit www.ipmvs.com or contact Pat directly via email at patricia.sweeney@ipmvs.com.

 




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