California Federal Court Grants TRO Under New Federal Trade Secrets Law
In the first decision under the federal Defend Trade Secrets Act of 2016 (DTSA), which was signed into law on May 11, 2016, a California federal court has granted a temporary restraining order (TRO) against a sales consultant who changed employers and allegedly stole confidential data in violation of federal and state trade secret laws and employment agreements. In Henry Schein, Inc. v. Cook, No. 16-cv-03166-JST, 2016 U.S. Dist. LEXIS 76038 (N.D. Cal. June 10, 2016), the district court entered a TRO enjoining the defendant from using or disclosing the plaintiff’s confidential information and trade secrets and from soliciting customers that were assigned to her during her employment.
The defendant Jennifer Cook was employed by the plaintiff Henry Schein, Inc. (“HSI”), a distributor of medical, dental and veterinary supplies and equipment, from April 2005 to May 13, 2016 when she resigned and began working for one of HSI’s competitors, Patterson Dental. Cook was a Field Sales Consultant for HSI who entered into confidentiality and non-solicitation agreements in 2005 and 2011 that prohibited her from copying or taking any of HSI’s confidential information. HSI alleged that Cook: (1) forwarded from her work email account, to her personal email account, HSI customer practice reports and additional customer-related reports, including an equipment inventory report, price quotations for prospective customers, and equipment proposals; (2) logged into HSI’s system and effectively updated onto her laptop HSI customer related sales and ordering data and then failed to return her laptop for two weeks; (3) accessed HSI’s computer system on the day she resigned, enabling her to obtain on her iPad, large amounts of ordering and purchase data for each of the HSI customers that had been assigned to her; (4) attempted to erase the e-mails she sent from her HSI computer; and (5) attempted to divert HSI customers to Patterson Dental, including by visiting the offices of certain HSI customers and deleting the HSI product ordering icon from their computer systems and destroying HSI catalogues and business cards.
On June 9, 2016, HSI sued Cook in federal district court and asserted a federal claim for misappropriation of trade secrets under the DTSA as well as seven other state law claims, including, among others, claims under the California Uniform Trade Secrets Act and California Unfair Competition Law and for breach of contract. HSI filed an application for a TRO on the same day that it filed its lawsuit.
One day later, on June 10, 2016, the federal district court found that HSI was likely to succeed on the merits of its claims because it demonstrated that Cook e-mailed and downloaded, to her personal devices, confidential information from HSI before leaving her employment to work at a competitor and Cook had signed agreements containing confidentiality and non-solicitation provisions. The court also found that Cook would suffer no undue hardship from the entry of a TRO because HSI only requested that Cook be enjoined from soliciting HSI customers to which she was assigned – conduct that was already prohibited under her confidentiality and non-solicitation agreement. Finally, the court found that the public interest is served when a defendant is asked to do no more than abide by trade laws and the obligations of contractual agreements signed with her employer. Accordingly, the court granted a TRO prohibiting Defendant from accessing or using HSI information and from contacting or soliciting HSI customers. Notably, the court did not require a bond because the TRO would not cause any damage to Cook’s legitimate business and in her contracts with HSI she agreed that HSI could seek injunctive relief without a bond.
The swift grant of a TRO by the federal district court demonstrates the utility of the new federal trade secrets law in protecting trade secrets and holding employees accountable for violating contractual and common law obligations to employers who provide them with access to confidential information and trade secrets to further business interests.
To review our prior post regarding the Defend Trade Secrets Act of 2016, please click here.