September 18, 2018

September 18, 2018

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September 17, 2018

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DTSA and Inevitable Disclosure (Defend Trade Secrets Act)

A recent decision in the Northern District of Illinois gave life to the inevitable disclosure doctrine under the Defend Trade Secrets Act. Inevitable disclosure is a common law doctrine by which a court can prevent a former employee from working for a competitor of his or her former employer where doing so would require the employee to depend upon his or her former employer’s trade secret information. See, e.g., PepsiCo, Inc. v. Redmond, 54 F.3d 1262 (7th Cir. 1995). To date, some commentators have suggested that the inevitable disclosure doctrine is not available under the DTSA because of language in the statute indicating that any injunction granted under the statute to prevent trade secret misappropriation may not “prevent a person from entering into an employment relationship,” and that any conditions placed on employment must be based on “evidence of threatened misappropriation and not merely on the information the person knows.” The Northern District of Illinois’s decision in Molon Motor and Coil Corp. v. Nidec Motor Corp., No. 16 C 03545 (N.D. Ill. May 11, 2017), however, suggests that the inevitable disclosure doctrine may continue to be useful for trade secret plaintiffs asserting claims under the DTSA.

In Molon Motor, Molon Motor and Coil Corp. (“Molon”) sued Nidec Motor Corp. (“Nidec”) alleging misappropriation of trade secret information under the DTSA after Molon’s head of quality control, Manish Desai, left Molon to work for Nidec. Molon alleged that before leaving, Mr. Desai copied dozens of Molon’s engineering, design, and quality control files onto a thumb drive and took the files to Nidec where his position involves similar responsibilities.

Nidec moved to dismiss the complaint arguing, inter alia, that there is no ground for inferring that it accessed or used any of the information Mr. Desai downloaded. In response, Molon argued that it does not need to give specifics regarding Nidec’s access or use of misappropriated information because the disclosure and use can be inferred under the inevitable disclosure doctrine. In evaluating whether the facts justified this circumstantial-evidence based inference, the court considered the following factors: (1) the level of competition between the former employer and the new employer; (2) whether the employee’s position with the new employer is comparable to the position he held with the former employer; and (3) the actions the new employer has taken to prevent the former employee from using or disclosing trade secrets of the former employer.

The court found that Molon satisfied each of these factors. Molon plead convincingly that Nidec is a serious competitor, and that Mr. Desai’s position with Nidec is similar to his former position at Molon. On the third factor, the record was silent, however the court found that at this early stage in the litigation, this silence was not surprising because a complaint does not typically contain allegations about what a competitor did to safeguard trade secrets. In conclusion, the court found that:

All told, Molon’s allegations on the direct competition between the parties, as well as the allegations on the employment breadth and similarity of Desai’s quality control work at the two companies, are enough to trigger the circumstantial inference that the trade secrets inevitably would be disclosed by Desai to Nidec.

It is important to note that this treatment of the inevitable disclosure doctrine came on a motion to dismiss and not a motion for an injunction, and thus it is still unclear how courts will address the inevitable disclosure doctrine in the context of a motion for a preliminary injunction. Molon Motor, however, remains a significant development in DTSA jurisprudence suggesting that the inevitable disclosure doctrine is available to trade secret plaintiffs at least in the context of a motion to dismiss, but possibly also in the context of an injunction where trade secret information taken by a former employee will be inevitably used in the employee’s work for a competitor.

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About this Author

Bret Cohen, Mintz Levin, FLSA Lawyer, Workplace Discrimination Attorney,
Member

Bret is Co-chair of the firm’s Employee Mobility, Noncompetes & Trade Secrets Practice. His practice includes representing employers in labor and employment litigation, including claims arising under FLSA, Title VII, ADA, ADEA, Mass. Gen. Laws ch. 151B, Massachusetts Wage Act, as well as state common law, breach of contract, wrongful termination, and defamation claims. Bret has extensive experience litigating noncompetition and nonsolicitation agreements and executive compensation agreements.

He frequently lectures on practice before the...

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Michael T. Renaud, IP Litigation Attorney, Mintz Levin Law Firm
Member

Michael’s practice is focused on patent litigation and also includes licensing, patents, copyrights, trademarks or trade secrets, and other intellectual property matters. His work in patent litigation primarily involves technologies such as electromechanical systems, digital cameras, embedded microprocessors, telecommunications and network software, cellular phones, and e-commerce, among others. Michael has also advised clients in regards to patent portfolios and IP diligence, and has counseled venture capital funds on their IP assets and patent value.

Michael rejoins Mintz Levin from Pepper Hamilton LLP.

617-348-1870
Nicholas W. Armington, mintz levin law firm, patent, IP, litigation attorney
Associate

Nick’s intellectual property practice focuses on patent litigation, and he has experience representing clients in both the International Trade Commission and United States District Courts.

Prior to joining Mintz Levin, Nick completed judicial internships for Hon. Ralph D. Gants, Chief Justice of the Massachusetts Supreme Judicial Court, and Hon. Patti B. Saris, Chief Judge of the U.S. District Court, District of Massachusetts. In these roles, he conducted legal research, prepared bench memoranda, and assisted in courtroom proceedings.

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