Trade Secrets & Employee Mobility

Now on Spilling Secrets, our podcast series on the future of non-compete and trade secrets law:

The inevitable disclosure doctrine, expected to be a widely used tool to protect trade secrets after the famous PepsiCo, Inc. v. Redmond case in 1995, has not been as commonly employed as anticipated. But is the legal landscape about to change?

Our colleagues Peter Steinmeyer and Brian Spang have co-authored an article in Law360, titled “Trade Secrets Law 25 Years After PepsiCo Disclosure Case.” (Read the full version – subscription required.)

Following is an excerpt:

Twenty-five years ago, the U.S. Court of Appeals for the Seventh Circuit issued what many at the time perceived as a landmark decision, PepsiCo Inc. v. Redmond, in which the court applied the concept of inevitable disclosure of trade secrets to affirm an injunction prohibiting a senior executive from taking a similar position at a direct ...

In a recent decision from the Southern District of New York, Judge William H. Pauley III rejected the use of the "inevitable disclosure" doctrine as a basis for an independent claim and outright granted a Rule 12(6)(6) motion to dismiss the complaint brought by a California employer against its former New York based employee.

A federal judge in Chicago recently refused to issue an injunction based upon either the "inevitable disclosure" of trade secrets doctrine or a geographically broad, 24-month non-compete that did not have a narrowly drawn activity restriction.

Florida law, specifically section 542.335, Florida statutes, which generally authorizes courts to enforce non-compete and other post-employment restrictive covenants if reasonable, leaves a number of issues unaddressed. Several of those issues are addressed in an opinion issued recently by the Eleventh Circuit Court of Appeals in Proudfoot Consulting Co. v. Gordon (11th Cir., July 30, 2009). The Eleventh Circuit affirmed the district court's injunction, but reversed the $1.66 million damages award to the former employer.

Penthouse Club, the adult nightclub chain, filed a suit seeking a temporary restraining order and other injunctive relief against a former director for violating a noncompete and nondisclosure agreement.

In a decision, dated January 26, 2009, in the matter Epiq Systems, Inc. v. Hartie, Index No. 111950/08, the Supreme Court of the State of New York, New York County, by Judicial Hearing Officer (and retired Justice) Ira Gammerman, denied a preliminary injunction in aid of arbitration sought by plaintiffs Epiq Systems, Inc. and related companies (collectively, "Epiq"). Epiq claimed that it faced inevitable disclosure of its trade secrets by three individual defendants formerly employed at Epiq and their new employer Kurtzman Carson Consultants LLC ("KCC") with respect to three computer programs, including one web-based system, developed and used by Epiq to solicit ballots and tabulate ballot results in Chapter 11 bankruptcy proceedings, and in analogous foreign proceedings, involving widely-held public securities.

A recent decision of the United States District Court, Southern District of New York, entitled International Business Machines Corporation v. Papermaster, No. 08-CV-9078 (KMK), 2008 WL 4974508, 2008 U.S. Dist. LEXIS 95516 (S.D.N.Y. Nov. 21, 2008), appears to have breathed new life into the "inevitable disclosure" doctrine, apparently easing the burden of proof that an employer must satisfy in order to show the irreparable harm necessary for a court to grant an injunction preventing the former employee from working for a competitor.