Protecting Your Trade Secrets When a Key Employee Moves to a Competitor
We see it in movies all the time—a key employee is enticed away from his or her current position by a competitor who promises a bigger salary, better benefits package, and a cushier office. In return, however, the competitor wants insider information about the employee’s former company.
Potential New CustomersThey want to know about potential new customers, what the newest ad campaign looks like, confidential client information, and the scoop on new products scheduled to be launched; in essence, they want the "trade secrets."
Unfortunately, situations such as these arise in real life all the time (in fact, Zillow just settled with Move for $130 million to end a dispute that arose when Zillow hired two of Move's top executives), and if not caught in time, can result in the downfall of an entire company. Because of the serious consequences that can arise from the unauthorized sharing of a company's trade secrets, our business lawyers recommend taking protective measures as soon as you learn of a former key employee's employment with a competing company. If it is too late for protective measures, and if the former employee has already spilled the beans about any of your trade secrets, you may have grounds for a legal suit against both the former employee and your competitor.
Available Legal Avenues when Trade Secrets Have Been SpilledIn the movies, the bad guy (the ex-employee and the competitor) always get their just desserts, but in real life, it can be much more difficult (and costly) to prove wrongdoing--especially if you did not have your former employee sign a non-compete. If you did not have an existing legal covenant with your former employee barring them from future competition, your options are limited, but not non-existent. According to the American Bar's Enforcement of Trade Secret Rights and Non Competition Agreements, there are a few causes of action available to you in the event that a non-compete does not exist:
1. Injunction, which is a request that the court issue an order prohibiting the former employee from continuing to act in violation of an existing covenant or any applicable laws;
2. Tortious Interference with Contractual Relations, which can be filed if either a competitor entices an employee to break his or her existing contract with you, or a former employee entices an existing client to break his or her contract with you;
3. Intentional Interference with Business Relations, which does not require that any sort of contract be broken, and can be filed on the grounds that the wrongdoer's actions directly resulted in the termination of a business relationship between you and a continuous, loyal client;
4. Misappropriation of Trade Secrets and Proprietary Information, which will allow you to recover any damages and unjust enrichment earned by the competitor that resulted from the willful or accidental sharing of your company's trade secrets; or
5. Civil Conspiracy, which exists where there is an agreement between two or more individuals to accomplish an unlawful purpose, or to accomplish a lawful purpose by unlawful means, which results in damages.