Posted by Sequel on May 6, 2014
Topic: blogs, Trade Secrets
Tags: inevitable disclosure rule
Courts Seem Reluctant to Enforce Non-Compete Agreements Without ‘Troubling Facts’

The scenario is all too common.

A top-level executive at a company is enticed by a competitor to take a similar role with it. An agreement is struck and the executive announces his intent to switch companies. Immediately his former company files a suit against him and the competitor charging any or all of breach of contract, breach of fiduciary duty and misappropriation of trade secrets.

Such complaints are generally filed before there is any proof that the departing executive has done anything wrong. Often, the company losing the executive alleges that it will be impossible for the executive to do his or her job at the new company without violating trade secrets. This is the so-called “inevitable disclosure” principle.

Recent court rulings indicate a trend on the part of U.S. courts to deny injunctive or other pre-emptive relief in the absence of some facts that strongly indicate an intent to steal proprietary data or knowledge. Such facts might include wiping computers of data, actual removal of data from the company’s control, or documents between the departing executive and his or her new employer

As is always the case, if you are going to rely on trade secrets as your primary or sole IP protection strategy, be sure that you’ve anticipated such situations and covered them with appropriate non-compete and non-disclosure agreements. In addition, clearly spelled out and widely disseminated policies, constant vigilence in identifying and protecting such information and uniform application of procedures will all help you deal with potential issues when a senior executive announces his or her intention to leave the company.

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