Plain old run-of-the-mill threatened misappropriation

In a previous article I addressed judicial decisions which resolved threatened trade secret misappropriation under the inevitable disclosure doctrine. In this article I address decisions about threatened misappropriation generally. This category of misdeeds, unlike those under inevitable disclosure, is explicitly recognized as an actionable claim by the federal Defend Trade Secrets Act [hereinafter ‘the Act’].

One such case under for threatened misappropriation occurred in the procedural posture of a motion to dismiss. The Oneida Group, Inc. v. Steelite International USA, Inc. et al., 2017 U. S. Dist. Lexis 206717 (S. D. N. Y. December 15, 2017).  In this decision the court (i) denied a motion to dismiss a claim under the Act when the plaintiff provided numerous specific allegations of the defendant employee’s improper activities aimed at disclosure and use. In particular, the plaintiff alleged that the defendant former employee would not return his computer, retained access to plaintiff’s files after his departure, and was one of few persons with access to plaintiff’s confidential information such as customer-specific strategies. Furthermore, defendant Steelite began selling dishes with the plaintiff’s designs, often to plaintiff’s former customers, after the defendant employee left plaintiff’s employ for Steelite.

Not surprising however, many courts address threatened trade secret misappropriation exclusively in the context of a plaintiff’s preliminary injunction motion. In Executive Consulting Group LLC v. Baggot, 2018 WL 1942762 (D. CO. April 25, 2018), the court granted a preliminary junction to prevent trade secret use and disclosure by the plaintiff’s former employee who departed for plaintiff’s competitor.  The court concluded that the plaintiff was likely to establish threatened misappropriation on the merits where evidence showed that (i) the former employee forwarded confidential information to her personal e-mail account (ii) in breach of her employment agreement with the plaintiff. This confidential information included client lists, ongoing projects, and specific strategies for select clients.  The court also found irreparable harm where the full extent of damage to the former employer was impossible to ascertain.

In a factually similar case, the court granted a preliminary injunction where the defendant former employee had signed confidentiality provisions, but nevertheless downloaded plaintiff’s confidential profit and loss statements to his personal e-mail account. This same defendant resigned from plaintiff’s employ and opened his own competing business several days thereafter. Radiant Global Logistics, Inc. v. Furstenau, Jr. et al., 2019 WL 697004 (E. D. Mich. February 20, 2019.) (claims for threatened and actual misappropriation).

A significant win for former employers occurred at the appellate level In Fres-Co Systems USA, Inc. v. Hawkins et. al., 690 Fed. Appx. 72 (3d Cir. 2017). In this case, a former employee defendant appealed from an order granting a preliminary injunction to prevent disclosure and use of his former employer’s client list. The court held that there was irreparable harm from threatened misappropriation, because the employee’s previous and subsequent employment substantially overlapped in the same industry and same geographic area. However, because the record did not comprise information on the remaining preliminary injunction requirements, the appellate court remanded the case for resolving (i) likelihood of succeeding on the merits, (ii) balancing of equities and (iii) public interest.

© 2020 Adrienne B. Naumann. All rights reserved. Ms. Naumann does not sponsor or endorse the advertisements at adriennebnaumann.wordpress.com

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: