Reproduced by permission. 192004
33
The Colorado Lawyr
Colorado Bar Association,
17 (October 2004). All rights reserved.
PRIVACY AND INFORMATION SECURITY
The Inevitable Disclosure Doctrine:
Safeguarding the Privacy of Trade Secrets
by Jessica Lee
cour to issue an injuncton prohibitig
formtion that is sect
Most employers have trade secrts: inand valuable and
gives the employer an advantage over
an employee from
for a competitor of hi or her former employer. 1 It is a
competitors who do not have that inor-
tol that alows
mation. Cert employees , includi executives, salespeople, and techca sta
ployee from working for a competitor
even in the absence of a noncompete
however, have described the inevitable
necessary have access to trade secrets
agreement or any evidence of actual
tye of misappropriation-in
worki
cour to restrai an em-
which is not a problem if they rema loyal to their curent employer. However, an
wrngdoing. For the docte to be used
the court must find that the employee
employee may leave to work for a competitor, perhaps for a substatial increase
could not help but diclose hi or her
in pay because of the inormation
and ex-
perte leared whie workig for the previous employer. There may not be a noncompete agment in place to prevent an
employee frm workig for a competitor
in a substatialy simar position.
Even if an employee wante to preerve
the former employer s trade secrets , it
may not be realistic to think he or she
for-
mer employer's trade secets in perform-
ing the new job-in other word, the diclosure would be "inevitable." To wi the
injunction , the former employer must
show, at a mium, that the former employee had accs
to the employer's trade
secrets and that his or her new job with
the competitor renders disclosure or use
of those trade secrts inevitable.
Because the inevitable disclosure doc-
could comparentae and avoid being
inuenced by the former employer's valu-
tre prevents theatened miappropria-
able trade secret inormation when per-
it arguably fids
such citaces, the former employer
may have a remedy ifit ca establish the
rado has adopted. The UTSA allows
tion of the former employer's trade sects
support in the
formg simar duties for a competitor. In Trde Sects Ac
elements of the inevitable diclosure doctre (alo
docte
referrd to in th arcle as the
Ths arcle defies the inevitable dis-
closure docte and dicusses the seminal cae applyi the doce. It outles
Uniorm
("UTSA"),3 which Colo-
Most cour view
the inevitable disclo-
sure doce as merely a mean of demonstratig theatened misappropriation
which the UTA
addres. Oter cour
disclosure doctrine as creating a third
addition to
actual and threatened misappropriation-and thus not expressly justied by
the UTA 6
Because there are so may competing
interests at stake , cour that have ad-
doce
dressed the inevitable diclosure
are al over the map in term of whether
to apply the
doce at al and, if so, un-
der what ciumtace. Colorado cour
have not yet arculate a tet for applying the inevitable diclosure
Seminal Case:
doce.
PepsiCo, Inc.
v. Redmond
The Seventh Circut Cour was one of
the first circuit courts to uphold an injunction based on the inevitable disclo-
and threatened
courts to enjoin actual
miappropriation of trde sets. Nevertheless , Colorado courts have not yet
adopted or reject the inevitable diclo-
sur doce in any publied opinon.
The docte effectvely imposes a non-
compete restriction on the employee
public policies that both favor the doc-
where the employer did not negotiate for
rejec the docte
Unite State. Th is beus such age-
trne s application and support its rejec- one. Noncompete ageements have been
tion. The arcle al provides exaples of disfavored historically throughout the
caes applyig and
in other jursdictons. Fialy, the arcle
recommends measures employers might
take to safeguard the privacy oftheir
trade secets. Many of these steps should
help prevent the need to rely on , and liti-
gate, the inevitable diclosur doce.
ments restrict employees' mobilty and
prevent them frm marketi their most
valuable knowledge and
ski to employ-
obta
ers, who have an interest in
taente labor. Neverteles, mos state laws
includig Colorado , permt noncompete
ageements for the protecton of trde
Overview of Inevitable
Disclosure Doctrine
The inevitable disclosure docte is
judicially created doctrne that permts
se-
crets , reasoning that employers should
not be dicouraged frm puruig
logica, medca, and other advance
teoin-
much as socety as a whole would conti-
Jessica Lee, Denver, is an employment
and litigation partner in the firm of
Gibson, Dunn
Crutcher LLP-(303)
298-5700 jleefbsondunn. com.
ue to benefit frm such advance.
The Colorado lawyer / October 2004 / Vol. 33, No. 1 0 / 17
Inevitable Disclosure Doctrine
sure doce.
PepsiCo, Inc v. Redrrnd
which was decided in 1995 and is the
leading case applying this doctrine , in-
volved a rivalry between PepsiCo and
Quer Oats for the sport dr
market.
Defendant Redmond began workig for
PepsiCo in 1984. When he joined the company, he signed a confdentiality agree-
ment but he did not sign a noncompete
ageement.
Afer ten years at PepsiCo , Redmond
general manager of the business
bee
unt covering Calforna that accQunted
for 20 percent of PepsiCo s profit for the
Unite State.1 Redmond' s high position
in the company gave hi accs to inide
information , including: (1) PepsiCo s national and regional marketig and fiancial strategies for the upcoming year; (2)
the company's plan for spec makets;
and (3) PepsiCo s plan of attack for in-
dr
hi
ment wi inevitably lead
to rely on
the plaitis trade secets.
The cour found that Reond would inevitably diclose or miappropriate trde
secets, ageeing with Pepsico that "Redmond
help but rely" on PepsiCo
trade sects whie worki for Quaker.
Thus, "PepsiCo fids itselfin the position
of a coach, one of whose players has left
playbook in hand , to join the opposing
caot
team before the big game."20
The cour alo found evidence
tht Re-
mond and Quaker intended to use Pepsis trade secrets, includig Redmond'
lack offortghtness and Quaker Oats'
unnatural interest" in hiring PepsiCo
employee. 21 Therefore, an injuncton was
appropriate to prote PepsiCo s trade se-
crts.
The
PepsiCo
decision was signficant
because the pares had not executed a
cring its sha in the sport
market.
In 1994 , without informing PepsiCo
Redmond began negotiating for employment with the sports drink division of
they rarly did so
Quaker Oats. Redmond ultimately ac-
press noncompete ageement.
noncompete agreement. Although cour
PepsiCo
had applied the inevitable disclosure docte to enjoin an
prior to
employee frm workig for a competitor,
in the absence of an ex-
cepte ajob offer frm Quaker Oats to be
come Vice President-Field Operations of
the company's sport
dr diviion. How-
ever, Reond inormed hi PepsiCo supervors that he had accpte an offer to
become Quaker s Chief Operating Offcer. Shorty therer, PepsiCo fied a di-
agt
October
stdig public policy agt
a long-
non-
compete agreements exists in the law
which favors rejecon of the doce be
cause it crate an afr-the-fact covenant
not to compete to which the pares never
ageed.
Colorado courts will have to grapple
with these public policy factrs
in decid-
ing whether to apply or reject the doctre. Therefore, Colorado employers who
want to invoke the proteons of the doctre to prote their trade secets should
addrss each of those factrs in an appro
priate maner.
Division Among the Courts
In light of the competing interests at
ste, it is not surri tht thos cour
that confonted the issue are divided
whether to apply the inevitable diclosur
doctre at al and , if so, under what ciEmployers who wih to avai
themselves of the doce wi want to re
cutace.
ly heaviy on caes that have endorsed the
doce where pares seekig to avoid
its application wi rely on caes that have
rejecd or lited the doce. A dicussion of both categories of caes follows.
Competing Policy Interests
The inevitable disclosure doctne apPepsiCo
implicates stakly com-
plied in
petig public
policy interests. There are
several factrs
supportg application of
Courts Applying the Doctrne
Followig the lead of the Seventh CirPepsiCo 26 several state, includig
Iowa, Pennylvana, and Nort Carlia
cut in
Qu-
the docte. Fist , employers have an
interet in incentivizi and
in-
apparently have embrace the inevitable
disclosure docte. Following are exa-
novations developed
ples of some of the caes that endorsed the
In the Ilois ditrct cour, PepsiCo ar-
investments of tie and capita. Second
whie
socety has an interest in protectg trde
sects so that businesses wi purue fu-
employed at PepsiCo , inasmuch as his
new position gave him substatial input
ther inovations and the public wil continue to benefit from advances in medi-
versity suit
Redmond and
er Oats, seekig to enjoin his employment
at Quaker Oats.
gued that Reond would inevitably dissects he acquied
close the trade
on the marketig of Quaker Oats'
s sport
The defendants argued
that Redmond would be responsible for
drnk prouct.
implementig Quaker Oats'
prexitig
business plans; therefore , any special
prote
cie teology
that Reond
and other fields.24
Th
promotig
mata stdar
ethcs and fair dealng. Fially, both the
society also has an interest in
and
of commercal
UTA and
re
Restatement of Unfair Compe-
doce.
Iowa:
In
Barilla America, Inc. v.
Wriht 29 the defendant was a plant manager at Barilla s production facilty in
Ames , Iowa. Wright did not sign a conf-
dentiality agreement or a noncompete
agreement when he joined the company,
even though it was company policy to re-
quire such documents prior to employment.so Whe' employed atBara, he was
titin
thatened exposed to an extensive amount of the
permt cour to
note miappropriation of trade sect inorma- company's proprietary information , in-
knowledge of PepsiCo s strategies would
be irelevant.
thugh substatial
The defendants alo
had signed a confdential-
tion.
cludig detailed techncal and fiancial
sure of any trade secrets or confdential
that
favor rejecton of the inevitable disclosur
information. Nonetheless, the court
docne. Fit, employees have an inter-
agreed with PepsiCo and enjoined Redmond from working at Quaker Oats.
The defendants appealed.
est in marketing their most valuable
inormation. 31 Five month afr he
ed workig for Barla , Wright tendered
his resignation and accpte ajob as pro
ducton maner for AI, one of Bara
main competitors. 32 He retaed a number of confidential documents , photo-
ty agreement that prohibited the disclo-
The Seventh Circuit Cour reviewed
the Ilois
Trde Sects Act and relevant
cae law. The cour concluded that
a plaintiff may prove a claim of trade
secret misappropriation by demonstratig that defendant's
new employ-
There alo ar policy justications
skis, knowledge , and experience. 26 Sec
ond, employers have an interet in obta-
in taente labor and us spec exp
rience and talents avaiable in the workforce. Third , society has an interest
fosteri competition to encour
inovation and reduce the costs of goo
sta
grphs, and notes when he left Bara.
Bara sued Wright and AIC and re-
quested a
preliar injuncton to pre-
fuer
vent Wright from workig for AIC. Bar-
and servces in the maketplace. Fialy,
juncton becuse Wright would inevitably
18/ The Colorado Lawyer / October 2004 / Vol. 33, No.
10
ila argued that it was entitled to an in-
Inevitable Disclosure Doctrine
October
disclose its trade secrets to his new employer. 54 The distrct cour ackowledged
zos alo had
acqui "spec knowled
. . . with respe to the lease negotiations
pI oyer s
that the inevitable disclosure doctrine
which he had undertaken on (the plaitis) behal" tht was "properly
mer employee s lack of forthrightness
"has been used as a vehicle for showing
that an injuncton is necsar to prevent
the miappropriation of trade secets."35
Because Iowa s trade secrets act authorized cour to enjoin actal or theatened
miappropriation, the Barilla
cour concluded tht
the
doce was ' us one way
"36
disclosure.
threatened
of showing a
(Emphais add.
Acc
cour, to invoke
the inevtable disclosur doce
to the Barila
an employer must prove not only that
the employee had access to or knowledge of trade secrets and that
the du-
ties of his or her next job overlap with
the duties of his or her previous job, but
that he or she would be able to remember the trde sect inormtion in a us-
able form.
clasied
as confdential and proprieta inorma-
misappropriate his former employer
trade sects and, thus, an injuncton was
ti' s diadvanta.
46 The cour
even in the absence of a restrictive
covenat, a former employer ca enjoin
the competitive use of confdential information obtained as a result of the
trust and confdence of a former employment.
Accrdly, the cour issued a perment
injuncton preventi Brozost frm repre
senting the defendants in competing
tranactons with the plaitiff and from
his new job because of the risk of disclo-
that of disclosure
ex-
isted. The cour found that the missing
physical evidence "weigh(ed) against
Wright' s
ply to
credibilty and in favor of a ne-
may indications tht
Wright
use this inormation to fuher his position at AIC."39 Therefore, the cour enjoined Wright from workig for AIC or
any other competitor of Barilla for approxiately one year.
In a 2000 cae Hyman
Pennslvania
Cos. v. Erwin
4O
Pearl, Inc
ditrct cour considered
41 a
Pennylvana
whether to enter
an injunction prohibiting an attorney,
the plaitis
competitor in lease negotiations. Afer
Brozost, from representi
workig as the plaitis general counel
for several years 42 Brozost had become
employed by the defendant companies.
There, he performed the same job duties
and responsibilties for them that he had
performed for the plaiti as its general
counsel. 43
Accordig to the plaintiff the
lease negotiations would requie
evitably to use or disclose the
trade
set inormtion.
hi in-
plaitiffs
The cour found that Brozost had " ac-
quied signcat
and detailed informa-
tion regarg (the plaitis) operations
in the. . . years he was employed."44 Although most of th inormation was "gen-
era knowled," the cour found that Bro
concluded tht
the
Merck
defendat was liely to
appropriate. 56
note that
may
that a legitiate
cour
a fiduciar duty to the plaiti and had a
duty not to use or disclose its confdential
and proprieta inormation to the plai-
farous intent"38 and tht there were "sim-
was
expsed whie workig for Bara. Nevertheless , the missing physical evidence of
trade seet inormation tht Wright tok
when he left Bara convinced the cour
Afr
reviewig these factrs, the
formation.
In a 2004 cae Doebler's Pennslvania
Hybri Inc v. Doebler Seeds, LLC 49 the
Cour predict that Pennsylvana would apply the inevitable disclosur docte based on a state superior
cour cae Air Pruc
Chemical Inc
v. Johnson. 5o In Air Products
Chemical Inc the Pennlvana Supeor Cour
restrained an employee from disclosing
confdential inormtion to a new employer and parcipatig in cert aspec
trade secet inormation to which he
both in hi or her actvities before accpting the job and in his testimony. 55
tion.
The cour alo found that Brozost owed
disclosing the plaintiffs trade secret in-
The testiony before the cour faied to
show that Wright retained any of the
effort to safeguard the former
employer's trade secrets; and (5) the for-
Th Cirt
Courts Rfdecting or
Limiting the Doctrne
Lower courts in California , Florida
Michga, New York, and
VIra have ei-
lite
ther rejecd or severely
the application of the inevitable disclosure doctrine. However, the supreme courts in
each of these state have yet to decde the
issue.
The leading California
California:
doce
cae on the inevitable diclosur
may be a 1999 cae Bayer Corp. v. Rohe
Molecular Systems. 57 In that cae, Betze-
los quit his job as a marketig manager
for Bayer and accpte a simar position
with a competitor, Roche. Thereupon
Bayer intitute legal acton and requested a preliminary injunction against
Roe.
In rug on the injuncton , the distrct
cour state that it was ' 'lely that Bayer
will prove all the elements of its tradesecrets cae but one:
actu or threatened
use or disclosure."58 (Emphais add.
court therefore upheld , under Pennylvana law, an injunction preventig the appellants from competi with their former employer, despite
the fact they had not signed noncompete
ageements, becuse they used their former employer's " own confidential information to compete."52
:f th gap, Bayer tred to invoke the in-
Co. v.
thatened miappropriation without evi-
sure. 51 The
Doebler
North Carolina:
In
Merck
cour in Nort Carlia
Lyon
enjoined a former employee frm workig
53 a federal
on a specic product made by the plai-
tis competitor. The cour held that
North Carolina would enjoin threatened misappropriation based upon an
inevitable diclosure theory where the
injunction is limited to protecting
specificaly defined trade secrets , but
the trade secret wi have to be clearly
identied and of signcat value.
Accordig to the cour, an employer could
prove a "likelioo
of diclosur" by show-
ing: (1) the degree of simlarty between
the employee s former and curent position; (2) the value of the inormation; (3)
the degee of competition between the former and new employer; (4) the new em-
20/ The Colorado lawyer / October 2004/ Vol. 33 , No.
10
evitable disclosure doctrine by arguing
that the diclosur of its trde sects was
unavoidable , because Betzelos inevitably
would use them in his new job with
Roe. 59
PepsiCo
The cour dicussed the
decision and note that the
lows plainti employers to
docte "aldemonstrate
dence of an employee s intent to diclose
trade sects.''6
Nevertheless, the court flatly rejected
adoption of the inevitable diclosure doc-
tre. Ind,
the cour held tht
Calor-
"
nia trade-secrets law does not recognze
the theory of inevitable diclosur."61 Such
a theory the cour reasoned, would be inconsistent with the state' s strong public
policy in favor of employee mobilty and
agait covenants that restrct such mo-
bilty62 The inevitable diclosur
doce
essentialy creates an afr-the-fact
noncompete agment. Therefore, in Calor-
nia, a trde-sects
plaiti must show an
actual use of trade secrets or an actual
that ofmiappropriation.63 Bayer could
not make this requisite showing, so
its
Inevitable Disclosure Doctrine
2004
preliar
motion for a
injuncton was
denied.
Flri
A federa cour in Florida re-
ing of the inevitable disclosure doctre.
documents or confdential information
with him when he left Del Monte " and
Afr reviewig
there was "no evidence that he made an
fused to apply the inevitable disclosure
theory the cour note
Del Mont Frsh
doce in
Pruc
Fu
Ca
In ths cae
was a
Senior Vice- President in charge ofRe-
Dole Food
CO.
search and Development for Del Monte.
He signed a confdentiality agreement
with Del Monte , but never signed a noncompete agment. Afr sin yea
servce
resigned and went to work
for Dole as Vice-President of Qualty As-
Fu
The cour had litte diculty
effort to take such information. "73 Al-
Florida (the two states' laws involved in
the cae) had neither adopte the
doce
Del Monte' buses operations, the cour
Therefore
to the cour tht theory could not be relied on to provide the
not recall this information with preci-
nor cited
a cour should
not allow a plaintiff to use inevitable
diclosure as an afr-the-fact
pete ageement to enjoin an employee
frm worki for the employer ofhi or
secets.
noti tht the UTSA provides for only
ty of mippropriation: act and
thtened. However, the cour obsrved
some cour had "derived a
thd tye"68
inevitable diclosurmiappropriation.
her choice.
In so holding, the
cour interpreted the
UTSA to require that a plaintiff prove
theatened miappropriation of trade se-
crets by some means other than the inevitable diclosure doce.
Del Monte reuested an injuncton based
on the theories of threatened and inevitable disclosure. Thus, the cour proceded to analyze the sufciency of these
theories.
noncom-
The
Del Monte
cour alo found that no
threatened disclosure had been shown.
The plaiti
had demonstrated only that
Fu posessed company sects. Howev-
, there was no evidence that he took
Fu had extnsive knowledge of
believed Fus
tetiony that he could
sion. 74 These factrs led the cour to conclude that there was no theat of miap-
proprition.
Michian
In
Ford Motor Ca
Leach
Mich cour was asked to isue an in-
ened misappropriation ,
cour bega its analysis
by
two
with approval.
though
(a)bsent evidence of actual or threat-
nar injuncton to prevent the defendants
Del Monte
PepsiCo
accrd
requested relief. Intead , the cour held
that
Fu
The
the caes supportg the
tht Calorna and
surance. Del Monte subsequently sued
Dole and
and moved for a preli-
from miappropriatig its trde
in dipos-
juncton to prevent a former Ford executive frm
accpti a poition
with Fit, a
rival car manufacturer. The executive
Leach, had ben with Ford for more
twenty-five year and was bound by both
confdentiality and noncompete agreements. The lattr did not apply if Leach
was involuntarly terminated from the
company. 77 Althoug
there was confct
evidence as to whether Lech reigned or
was involuntary termated , Ford contended that the inevitable disclosure of
trade secets should prevent Leach from
join Fiat, even if he was involuntay
termted.
MADEN
MADEN &
Attorneys & Counselors at Law
JOHN A. CRISWELL
Practice limited to
ARBITRATION AND MEDIATION SERVICES
Litigation and Dispute Resolution
LABOR AND EMPLOYMENT DISPUTES
Accepting referrals and
requests for co-counsel
- Senior Judge , Colorado Court of Appeals
- 25 years '
experience in prosecuting and
defending employment claims
- Hearing Offcer for Denver Civil Service
and Colorado Judicial Department
- American Arbitration Association
Employment Arbitrators Panel
1045 Lincoln Street, Suite 201
Denver, Colorado 80203
Tel: 303- 864- 1664
Fax: 303- 837- 1622
E-mail: CRISWELL1956
OL.COM
JOHN W. MADEN
JOHN W. MADEN
410 17th Street
Suite 530
Denver, Colorado
(303) 436- 1111
The Colorado lawyer / October 2004 / Vol. 33 , No. 1 0 / 21
,"
,"
Inevitable Disclosure Doctrine
The court disagreed with Ford' s conPepsi-
tention. The court noted that the
decion
reste in signcant par on the lower
cour' s determation that the former
employee s conduct evidence a lack of
candor, and proof of his wingness to
misuse trade sects.
There was no such evidence in the
new business or working for DoubleClick' s competitors for a period of six
th,
month. 85 Among oter
the
DoubleClick
cour noted: (1) a high probabilty
that the exectives would inevitably dis-
close trade secrets; and (2) the " defendants' cavaler atttude towar their duties to their former employer." 86
Leach
case. Furthermore , the court cited a
Michga Cour of Appeal cae tht stat, in dicta that the concept of inevitable
diclosur must not compromie the riht
of employees to change jobS. Therefore
Leach
the
cour refued to apply the inevitable diclosur doce based on the
facts presented. Instead, the cour enjoined Ford frm makg any statements
However, subsequent decsions have in-
dicate tht
the inevitable disclosure doc-
trine may be applied in New York only
rarely. In a 1999 case Earth Web, Inc v.
Schlack s7 a New York distrct court re-
preliar
fued to issue a
injuncton to
prevent an EarWeb employee from acceptig a poition at a competitive company. 83 Ear Web ared inter alia tht the
inevitable dilosur
provided an
October
Virginia:
In
Government Technology
Services, Inc. v. Intellsys
Technology
a Virgia state cour grante the
defendant' s demurrer on the plaintiffs
clai for breach of a confdentialty and
nondiclosur agment. In tht cae, the
COrp.
99
plati ared tht there would be an in-
evitable disclosure of confdential information. l00 In grantig the demurer, the
cour held that an alegation of inevitable
disclosure was insufcient to support a
clai for
brech of confdentialty Ind
the plaiti had "to alege diec or indirect disclosure of any confdential information."101 Ths decision implicitly suggests that
VIra cour may not recog-
nize the inevitable
diclosur docte.
doce
claimig that Leach was precluded frm
independent basis for issuance of the inaccepting employment with any Ford juncton. The cour rejec th arent Protecting Trade Secrets
competitors.
and, in doing so, establihed a high sta- Without the Doctrine:
Decisions from New York dard for the futue use of the doce.
Practice Tips
New York:
cours initially seemed to indicate that
New York would apply the inevitable diclosure docte. For exaple, in a 1997
cae DoubleClick, Inc v. Hendrson 84 the
Supreme Cour of New York for New York
County enjoined two executives who
worked for DoubleClick frm launchg a
The
cour dicued the
Earth Web
bleClick
Dou-
decision and noted that the
cae "appear to represent a
high water mark for the inevitable diclo-
DoubleClick
sur doce in New York"90 Even so, the
DoubleClick
holdig "rest(ed) heaviy on
evidence of the defendants' overt theat of
trde sects and breches of fiduciar du-
ty"
Accordg to the
Earth Web
cour, in
ac-
cases where there was no evidence of
Jacqueline St" Joan
misappropriation , cour were being
asked to bind the employee to an implied-in-fact restrctve covenant based on
fidig of inevitable diclosure."92
result was inconsistent with New York's
tu
strong public policY agaist such agree-
ments. Therefore
Web
cour
accrd
to the
Earth-
the inevitable diclosure doc-
tre treads an exceedigly narow path
thugh judicialy difavored terrtory"94
it SpeiaiAdvoc forCbildren
* Parnting Coordinator
. Mediato - Arbitrltor
* P'dvate Judge
Experiene .
trne should be applied rarely
Following
Earth Web in a 2003 case
Coloniz. com, Inc v. Perlow 95 a New York
federal ditrct
noted that the
Affrdable ,.
ltldme
....c11
'I.ell. JoB -IUffle., at Law
..1.$n$uluao tlnmCO
Pmr.(mm.at82 fuqa932,fGO
WW.5p""kmvocat.
if there is
no evidence of actal miappropriation by
the employee.
cour refued to apply
inevitable disclosure
Interdisciplinary .
Locm
As such, the cour concluded that the doc-
the
docte. The cour
docte "is disfavored in
New York because of the State' s strong
public policY agait retrctve non-competition agreements"96 and, therefore, is
to be used "very sparly to grant injunc-
tive relief only in circumstances where
other evidence of theft of trade secets ex-
ists."97 There was no such evidence in the
Colonize.com
cae, so the cour refued to
issue the requested relief. As the court
noted mere knowledge of the intrcacies
of a business is simply not enough."98
22 / The Colorado lawyer / Ocober 2004 / Vol. 33 , No.
10
Althoug cour in several jurdictons
seemingly have rejected the inevitable
disclosure doctrine , it appears that the
doce has a legtite place in trde secret la-w
the UTSA
adopte) permts in-
parcuarly because
(which Colorado has
junctons to prevent threatened misap-
propriation. l02 Neverteless, given the un-
certaity surundig the doce, Colo-
rado employers should take protective
measures to guard the privacy of their
trade sect inormtion.
The following tips , suggested by the
cae law in th ara, should help employ-
ers protect their valuable trade secrets
and confdential inormation when a former employee join a competitor. The
fit
group of tips involve agreements with
and obligations of; the company's employ-
ees. The second group descrbes actions
employers ca tae to
the risk
mize
of trade secet forfeitu.
Employment Agreements for
Protecting
Secrets
Tr
As noted above , the inevitable disclosure doce essentialy crates an afrthe-fact noncompete agment for which
neither the employer nor the employee
specifically bargained. Thus , the surest
way to avoid havig to rely on the
is to enter into a noncompete ageement
up front-at the
of; or at least
durg, the employment relationship. Al-
doce
begig
though it still may become necessar to
litigate the enforceabilty of the noncom-
pete ageement, a cour is more likely to
enforce a negotiated ageement than to
impose one that was not negotiate at al.
,"
Inevitable Disclosure Doctrine
2004
Followig is a discussion of thee
agree-
ments employers should consider obta-
ing from employees with access to trade
employee with accs to them sign a confidentialty or nondiclosur, ageement.
The agreement should make clear that
secrets: (1) noncompete ageements; (2)
nonsolicitation ageements; and (3) conf-
the employee may never use or disclose
dentialty ageements.
anyone , and must return any physical
copies of such inormtion to the employer
immediately on termation of employment.
Because noncompete ageements
From the
Noncompete Agreements:
employer's perspectve , every employee
who wi be given access to trade secets
idealy should sign a noncompete ageement
before
he or she begi worki for
Earth Web
cour notClealy, a wrttn agment tht conta a non-cmpete clause is the be way
the company. As the
of promoti
prectbilty dur
the em-
ployment relationship and afrwar."103
Although noncompete ageements are
generaly prohibited by Colorado statute
that same statute permts noncompete
ageements for the proteon of trde secrets , as long as the agreements are not
broader than necssar to protect the legitimate interests of the employer. 104
the employer's trde sect inormation
be enforc
oruy to the
aly prohibited by Colorado statute ,
and
contrac for the
proteon of trde sects, a Colorado em-
ployer seekig to prote tre sects alo
should consider havig its employee execute a foced and nawly taored non-
solicitation agreement. Such an agreement should be simar to the nonsolicitation agement enforcd in
Manaement
Recruiters of Bouldr, Inc v. Miller. IOB
In Miller the Colorado Court of Appeals upheld a nonsolicitation provision
involving an employee , Miller, who had
worked fora rectment agncy The employee was retrct frm contactg, on
behalf of his new employer, any candi-
dates with whom he had contact
dur
reguar pro
noncompete ageement may fid it unecessar
in light of the confdentialty ageement.
However, there is perhaps a grater rik a
with coworkers
di
trai
safeg privac of trde se. Addrs the importce of safegways to
crt inormtion
Tr Secrets
tae a varety
collec the li
some point in the futu, and shredlits on a reguar basis 115
. Consider holdi
program
for their employees , emphasizing
cour would conclude there are no trade
secrets to begi with if the employer did
not have its employee execute confdentialty agements to prevent their diclosure.
ing the employer s trade secrets in
trai
and policy
maua
. Conduct Internet searches for unauthorized website postigs by former
and cunt employee
of other actons to lit and
posure of confdential inormation , both
. Pre-approve aricles and presentations given to outsiders , as well as
outside the organzation. Fol-
any public anouncements about the
lowig are some suggestions employers
company
. Although it sounds obvious , refrain
frm givi public tour of their facities, especaly to the company's competitors 116
contrl the diemition strag,
with
Because noncompete agements ar generNonsolicitation Agreements:
desite the exception for
safeg
siderig the enforceabilty of a
In addition to having employees execute employment agements for the pro
tection of trade secrets , employers can
sonnel.l07
back-up diks113
cedur to
confdential material , such as distributing contact
lists on a weekly basis , precluding
employees from sharng their lists
ments in Colorado if they are contracts
for: (1) the sale or purchase of a busirecovery of certain training
mata
insecconfdential
clte re-
. Consider implementi
113(b), there is some rik tht a cour con-
In
and education expenses; l06 and (3) executive and management personnel, as well
as professional sta to maagement per-
unec
late vault that (is) accsible oruy
those who kn(o)w the combination"114
protect trade secrets under CRS
Other Ways to Safeguard
(2)
on
. Consder
formtion in a "
exnt necar
addition, there are exceptions to the general rue prohibiting noncompete agee-
ness; 105
. Not dissemiate highly confdential
inormtion to any th pares, possibly includig independent contractors l12
. Mark highly confdential docuents
appropriately and never store them
and
and ex-
mize
the risk of losing
can follow to
their trde secets. Employers should:
. Grat
to highy confdential information on a strct "need-toknow"
basis
ac
. Consider notifyng employees that
unauthorized disclosure of trade secrts is grunds for imedate termnation
. Upon termnation, ensure that the
deparg employee retu al confdential inormtion and is remided
. Give employees who need access to
such inormtion password or accs
codes that other employees do not
have
. Periodically change passwords and
reset accss
Achievement: Accomplishing successfully through skil & perseverance
You develop the legal strategy - we provide the medical record foundation
Our proudest achievement -
the last yea ofhi employment. 109 Due to
earning
your confidence
the presence oftrade secrets , the cour
concluded that the provision was neces-
Consultants
sary to safeguard the plaintiff' s business. 110 The court also found that the
term were reaonable
for Medical
Direction,
in their effec and
tailored to prevent the miappropriation
of trade secets by Mier."11
Meg Dunlop RN and Jeannie Stenson RN
CMD Legal Nurse Consultants 303. 693.9991
Confidentiality (Nondisclosure)
Agement
Employers concerned abut
Visit
www. uslegalnurses. com for our complimentary offer
their trade secrets also should have all
The Colorado lawyer / October 2004/ Vol. 33 , No. 10/23
,"
,"
).
"). );
);
);
Inevitable Disclosure Doctrine
of his or her obligations under the
for proteg trde sects at the sour.
In addition, they buid a solid foundation
varous agments dicused above.
Employers are not reuied to adopt al
to support a claim for injunctive relief
stadar
based on the inevitable disclosure doc, should an employee decide to 'join
the
before the big gae."122
or even most of these measures to seek
trade secret protection from the cour.
Colorado cour do not impose a
of perfecton or uneasonable expense.
Each case is fact-specific and must be
viewed in context. Nevertheless, an employer should tae reasonable steps and
measurs to prote its trde sects and
if it doe so, it may never nee to rely on
the inevitable diclosure
doce.
Conclusion
The inevitable disclosure doctrine
would seem to be proper as long as it is
somewhat naIwly constred. The caes
discused in th arcle suggest dierent
ways the cour have reached
result.
th
Under the
stct of these caes, employ-
ers have been required to present evidence of
actual
misappropriation or
thatened miappropriation
of confden-
tial inormation or trade secrts. 118 Em-
reui
ployers alo have ben
to preent
some evdence oflack of cador by the employee or apparent wigness
to miuse
tre
oppo te
23. See, e.g., Colonize.com v. Perlow No. 03CV- 466 2003 US. Dist. LEXS 20021 , at *9,
*13, *15 (N.
Y. Oct. 23 , 2003) ("A covenant
not to compete in an employment settg wi
be specificaly enforceable only to the extnt
that it is alo necessar to prote employer's
legitite intere, not
ha
to the geeral
public and not uneasonably burdensome to
NOTES
1. See, e. g.,
October
the employee.
Del Monte Frsh
Produce Co.
(Intern quotatins omittd.
24. See BarilaAm, Inc , supra note 5 at *33
(S. D.Iowa July 5 , 2002) ("Te public interes in
Dole Foo
, 148 F.Supp. 2d 1326 , 1335 (S.
Fla. 2001) (In an inevtable diosure cas
proteg valuable trade sects is embodied
cour ca issue an injuncton to prvent
sage of the Iowa Trade Secrets Act. . . . The
Cour therefore fids tht the public interest is
an em-
and arculate in
the Iowa legislatu's
pas-
ployee frm worki for the fonner employer's
competitor if the employer ca demonsate a
served by
real and preent dager of diclos.
crts. (Intern citans and quotans omit-
2. PepsiCo, Inc
54 F.3d 1262 (7th Cir 1995).
enjoin the diclosur of trade se-
ted.
Unionn Trade Sets Ac ("UK)
2(a) (1990) (" (a)ctal or thatened miappro
threatened misappropriation may be en-
priation may be enjoined"
joined" Resttement (Tird) of Unfair Compe-
3. See
4. Notably, Colorado ha adopted
includig the proon
the UTA,
authorizig injunctve
"prevent or restrai actal
or threat-
relief to
miappropriation of a trade secrt. (Emphais mkd.)
CRS
74-103. Under th Colorado UTSA, "trade secrets" are "the whole or
any porton or pha of any scentic or
ened
teca inonntion, desgn, prss, prour
, for-
25. See
2(a) (1990) (" (a)ctual or
UTSA
44 (1995) (" injunctive relief may be
awared to preent a contiui or thateed
tition
appropriation of another's trade set"
26. See, e.g., Colonize.com, supra,
note 23 at
agt the use by a fonner
acculate
*13 ("Rstrctons
employee ofhi
exprience, ski
appreciation of intangibles and judgment in
hi new employment would effecvely bar
legali-
mula, improement, confdential busess or fi-
frm al employment and ar beyond
nancial inonnation
its and would have to be decar void. CMI
Int'l , Inc. v. Intermet Int'l Corp. 649 N. W.2d
lig of naes, addrs-
es, or telephone numbers, or other inonntion
buses or profession which is
asumg
the former employer's trade secrets-
relati to any
other word, a ' 'nefarous intent."119
Some cour have required employers
808 813 CMch. CtApp. 2002) (' 'Een
secret and of value. To be a 'trade secret,' the
that the concept of
owner thereof must have taken measures to
prevent the secet frm bemig avaiable to
those selec by the owner
persns other
tion' of trade secets encompasses a concept of
to demonstrte that the employee not only had
to trade secets , but that he
or she would be able to remember the
acs
trade secret information in a usable
form. l20 One commentator has sugeste
that employers should show that it is inevitable the employee wi use a specic
trade secret in the course of performng
an identied job reponsbilty inerent in
the employee s new position. 121
Employers who seek to avail themselves of the inevitable diclosure doce
in Colorado should be mindful of these
factrs and demonste their presence to
the greatest
extnt possible. Conversely,
employers and employees seeking to
avoid application of the docte should
show that these "inevitabilty-plus requiments" ar absent and , therefore, the
inevitable disclosur
should not
be applied.
Abve al, every employer should avoid
the need to rely on the inevitable disclosure doce if possible, by
meas-
doce
ta
ures to protect their trade secrets before
their employee defec to competitors. Although there is no perfec way for a company to guarantee that its trade secets
wi remai private and sec, the tips in
th arcle provide a good
stag point
th
to have access thereto for limted
purposes.
74-102(4).
5. See, e.g., BarillaAm. , Inc v. Wriht No. 402-CV-90267 , 2002 US. Dit.
12773 at
*25 (S. D.Iowa July 5 , 2002).
6. See Del Monte Frsh Pruce Co. , supra
CRS
LE
note 1 at 1335.
PepsiCo, Inc, supra note 2.
8. Interestingly, PepsiCo, Inc. and Quaker
Oats merged. in 2001. Accordg to a PepsiCo
7.
statement Quaker s powerful Gatorade
brand, the world's number one sport dr
the clea leader in the United States in non-carbonated beverages. See
http://ww. pepsico. comlinvestors/annualreport2000/quaker.shtInl.
wi make PepsiCo
9. PepsiCo, Inc, supra,
note 2 at 1264.
1OId.
11. Id.
12. Id.
13. Id.
14. Id.
15. Id.
16. Id.
17. Id.
18. Id.
19. Id.
at 1265.
at 1264.
at 1265.
at 1266.
at 1272.
at 1269.
at 1270.
20. Id.
21. Id. at 1271.
22. See, e. , Eastman Kodak Co. v. Powers
189AD. 556 (N.Y.1919).
FilmPr
24/ The Colorado lawyer / October 2004 / Vol. 33 , No. 10
'tateed
misappropria-
inevitable disclosure, that concept must not
compromise the right of employees to change
jobs. Bayer Corp. v. Roche Molecular Sys., 72
F.Supp. 2d 1111 , 1118 (N. Cal. 1999) (notig
that courts were reluctant to apply the inevitable diclosure doce
"buse of strng
public policies in favor of employe mobilty"
27. See, e.g., Colonize.com, supra note 23 at
*13 , *15 (the doctrie is disfavored in New
York because of state s strong public policy
agait restrctve
Bayer Corp. ,
noncompete
agments);
supra note 26 at 1119 ("Calor-
nia public policy favors mobilty and freedom.
);Lafourche Speech
Juckett,
Lange Servs. v.
652 So. 2d 679 , 680 (La.App. 1st Cir.
1995) (noncompete agrements
not favore in
Louiiaa and generaly "deemed to be
public policy
agt
28. PepsiCo, Inc , supra note 2.
29. BarillaAm., Inc , supra note 5.
30. Id. at *6.
31. Id. at *6-8.
32. Id. at *3 , *9.
33. Id. at *10- 11.
34. Id. at *21.
35. Id.
36. Id. at *25.
37. Id. at *28.
38. Id. at *31.
39. Id. at *33.
40. Id. at *35.
41. Hyman Cos.,
2000).
119 F.Supp. 2d 499 (E. D.Pa.
.iA. .:m...ofumtS ano. DeuCUes
Avalale
..ASfred..A'pnCationP
.r4f..
.S5,o..D:pli...De
ChSC'..verm
4iFuU;PrJQfA.Ctf..ve.raeAWUabJe
toQQalFi
J&k
Newletr
").
);
Inevitable Disclosure Doctrine
cied as miconsg Florida law, which, un-
42. Id. at 501.
43. Id.
at 502.
44Id.
at504n.
lie Calorna, does not render void noncompete agreements in the employment context
and, thus, doe not have the strong public poli-
45. Id.
46. Id.
at 505.
employee
mobilty
See
, "Tade Secet Inevitable
Diclosur: Substative, Predural and Praccy against covenants that restrct
Scer
47. Id. at504.
48. Id.
at 505.
49. Dobler Seeds IL 88 FedAppx. 520 (3d
2004).
at 522 n. citing Air Products &
Chemicals, Inc 442 A2d 1114 (Pa. Super. Ct.
Ci Feb. 12
tical Implications of an Evolvig Doctrie
1982).
51.
Chemicals, Inc., supra
Air Products
76. Leach,
79. PepsiCo, Inc , supra,
80. Leach, supra note
note 49 at
522-23.
53. Merc
Co. 941 F.Supp. l44 (M. D.N.
at 1267).
See id
note 2.
76.
81. See id. , citing CMI Int' , Inc, supra note
1996).
54. Id. at 1460.
55. See id. (citing PepsiCo, Inc, supra note 2
56.
Mich.
2004).
77. Id. at 764.
78. Id. at 775.
note 50 at 1124-25.
52. Doebler Seeds, LLC, supra
336, 345 (May 2004).
299 F. Supp. 2d 763 (E.
JPS
50. Id.
at 1460.
57. Bayer Corp. , supra note 26.
58. Id. at 1117.
59. Id.
60. Id. at 1118.
61. Id. at 1120.
62. See Cal. Bus. & Prf. Code
16600 (renderig noncompete
agrments in the context
of an employment relationship void).
63. Bayer Corp. , supra note 26 at 1120.
64. Id. at 1121.
65. Del Mont Frsh Pruc
Ca, supra,
note
66. Id. at 1328.
67. Id. at 1335.
68. Id.
69. PepsiCo, Inc , supra note 2.
70. Del Monte Frsh Pruc
1 at 1336-37.
71.Id.
at 1337.
72. Id.
supra,
note
26 at 813.
82. Leach, supra,
83. Id. at 777.
84. DoubleClick, Inc.,
LES
87. EarthWeb,
Y.Co. Nov. 7,
71 F. Supp. 2d 299
89. DoubleClick, Inc, supra, note 84.
Inc, supra note 87 at 310.
91. Id.
92. Id.
93. See id.
94. Id.
95. Colonize.com, Inc , supra, note 23.
96. Id. at *15.
97. Id.
98. Id. at *16.
99. Gov t Tech. Servs. , Inc. 51 Va. Cir. 55
(Va. CiCt. Oct. 20 , 1999).
90. Earth Web,
102. CRS
at 55.
105. CRS
113(2)(b).
113(2)(a).
106. CRS
edge of trde
113(2)().
107. CRS
or her next job overlap with the duties oflr or
previous job, but tht he or she would be able
113(2Xd). Management per-
ar "i ch"
unperv
to remember the trade sect inormation in
of the busess and who actin an
maer.
Atml Corp. v. Vitesse Semiconductor
usable form.
Corp.,
Del Monte Frsh Prduce Co. decsion supra note 1 , taes a miority view in analyzg the inevitable disclosu dQGe as a
75. The
"t ty" of misappropriation in addition to
actal and thatened. Oter cour
the
inevitable disclosure doctrine as simply a
mea of establig thtened miapprpriation. The Del Monte
decision ha been critiview
Sf!
alMgmt. Recruiters of Boulder, Inc. v. Miler
794 (ColoApp. 2001); see
762 P.2d 763 , 765 (ColoApp. 1988) ("account
priy
exective " who was
an "iormation
gatherer " was not a manager or executive).
Prfessional employees and
professional
to maagement have ben defied
include "such persns as lega,
sta
narwly to
eneerig, sci-
entific and medical personnel together with
26/ The Colorado Lawyer / October 2004 / Vol. 33 , No.
10
113. See Storae Tech. Corp. v. Cisco Sys., Inc
Civ. No. 00- 2253 (JNE/JGL), 2003 U.S. Dist.
17347 (D.Mi. 2003) at *20-22.
114. In re Bass 113 S. 3d 735 , 742 (Tex.
2003).
115. See Netork Telecomms , Inc v. Boor- Cre-
LE
peau 790 P.2d 901 , 903 (ColoApp. 1990) (tral
cour err in
forelosing employer's
opport-
tion).
116. See Hildreth Mfg. LLC v. Semco, Inc, 785
2d774, 786 (Ohio App. 2003) (inormtion
did not constitute trade secets and thus not
entitled to proteon
inormation "not
subjec to reasnable effort to
its se-
crec).
maita
cice
under the
and do not reui tht extme
and unduly expnsive proedures be taen to
crec ar those tht ar reasonable
prote trade sets"
118. See, e.g., Colonize.com, supra note 23 at
*16 ("New York cour have used the
very spargly to grant inunctve relief only in
doce
cicutaces where other evidence of theft of
trade secrets exists. see also, e. , Bridgestone/Firestone, Inc. v. Lokhart 5 F.Supp.
667 682 (S. D.Ind. 1998).
119. Barilla Am. , Inc. , supra note 5 at *31.
1076 (WD. Mo.
sonnel ar thos employee who
30 P.3d 789,
112. See Colora Supply
Co. v. Stewart , 797
P.2d 1303 , 1306 (ColoApp. 1990).
e. , Leach, supra note 76 at 775 (no
evidence of employee s lack of candor or wilingness to mius trde sets);
H&R Block E.
Tax Servs. v. Enchura 122 F. Supp. 2d 1067
74-103.
74. Id. See also, e.g., BarillaAm. , Inc , supra,
note 5 at *28 (" (Ajn employer must prove not
only tht the employee had access to or !mowl-
sects and tht the duties oflr
111. Id.
See also,
103. Earth Web, supra note 87 at 311.
104. CRS
at 766.
117. See Netork Teleomms , Inc, supra note
115 at 902 (notig tht "effort to maita se
lOUd.
73. Id. at 1339.
109. Id.
110. Id.
beus
(S. D.N. Y. 1999).
88. Id. at 303, 317.
100. See id.
Ctr v. Moore,
set
No. 116914/97 , 1997
Inc.,
Boulder Med.
651 P.2d 464 (Colo. App. 1982).
108. Miller, supra note 107.
junor professional assistats.
nity to present evidence showig tht its customer li were entitled to trade
prote-
note 76 at 775.
Y. Misc.
577 (Sup. Ct.
1997).
85. Id. at *23.
86. Id. at *16- 17.
October
2000) ("To prevail under this
theory, employers must demonstrate inevitabilty exits with fact indicatig tht the
natu of the sets at issue and the natue of
the employee s pas and futue work jus an
inference that the employee canot help but
consider set inormation.
120. See Barilla Am., Inc. , supra
note 5 at
*28.
121. See Shi, ' The Inevitable Diclosur
Doctrie-A Necessar and Precise Tool for
Trade Secet Law "
11 Business Thrts J.
No.
at 1 (Winter 2004).
122. PepsiCo,
Inc , supra,
note 2 at 1270.