Employee Mobility
Intro to IP – Prof Merges
4.9.09
Agenda
• Defining trade secrets in the employment
context (Wexler v Greenberg)
• Employee invention ownership
• Noncompetition agreements
• “Inevitable disclosure” doctrine
Defining Trade Secrets in the
Employment Context
• Distinguishing “general skills and knowledge”
from protectable trade secrets
Wexler v. Greenberg
• Departing employee case
– Also, a special type of “squeezout”: squeezing
out the former supplier: “customer” becomes
competitor
• Special twist: no “disclosure” to exemployee; ex-employee developed TS info
himself
Greenberg
• Note that Greenberg was employed to
“reverse engineer”
• No evidence of disclosure to Greenberg; only
development by Greenberg
Crucial facts
• No employment K
• Formulas not patentable
• No proof of Buckingham resources used to
develop formulas (is this plausible? Failure of
proof by plaintiff/appellee Buckingham)?
Opposing cases
• Winston Research: implied obligation
• Healthcare Associates (PA): use of corporate
assets and disclosures to develop trade secret
information
• Wexler is surely an outlier; shows importance
of evidentiary issues in TS law
“The employer . . . Has the burden of showing
two things: (1) a legally protectable trade
secret; and (2) a legal basis [duty], either a
covenant or a confidential relationship, upon
which to predicate relief . . . .” – p. 84
“Since it is impossible to elicit an implied
pledge of secrecy [here] . . ., the appellees
must show a different manner in which the
circumstances support [existence of TS].” Id.
Two objections
• TS in fact contributed by employer
• General skills vs. specific formulae
Common Law Obligation: 3
categories of employee
• “Employed to invent”
• “Inventions made with employer resources”
• “Independent invention”
Employment Contracts: IP
Assignment Clause
• Typically broad and sweeping (why not?)
• Some states regulate the effect of broad
clauses
– “Right to invent” states
• Merges, The Law and Economics of
Employee Inventions, 13 Harv. J L.
& Tech 1 (1999)
• “Pro-employer” rules, balanced by
practical issue:
• Difficult under patent law to
prevent employees from leaving
with “about to be conceived”
inventions
Trailer Clauses
• General Signal: the value of waiting . . .
Comprehensive Technologies, Inc.
Noncompetition Agreements
• “It will often be difficult to prove”
misappropriation of specific TS info
• P. 90
• BUT: they must be “reasonable” in scope
• Cal Bus & Prof Code 16600 – p. 92
Inevitable Disclosure
• PepsiCo v. Redmond
• What is the IS info?
• Proof of misappropriation?
Confidentiality agreement
• Scope
• Proof of breach?
Teradyne and Pepsico
• What is the difference
• Specificity of info presented?
• Importance of position involved?
• Raging debate! – p. 97
California developments
• Bus & Prof Code 16600
• Rejection of “inevitable duisclosure” theory
Defining Trade Secrets in the
Employment Context
A party seeking to protect trade secrets must
“describe the subject matter of the trade secret
with sufficient particularity to separate it from
matters of general knowledge in the trade or of
special knowledge of those persons who are
skilled in the trade, and to permit the defendant
to ascertain at least the boundaries within
which the secret lies.” -- Diodes, Inc. v. Franzen
(1968) 260 Cal.App.2d 244, 253, 67 Cal.Rptr. 19.
Inevitable disclosure rejected
•Whyte v. Schlage Lock
Company, 101 Cal. App.
4th 1443, 1463 (Cal. Ct.
App. 2002)
Our survey confirms the majority of
jurisdictions addressing the issue
have adopted some form of the
inevitable disclosure doctrine. . . . A
smaller but growing band of cases
rejects the inevitable disclosure
doctrine. -- 101 Cal.App.4th 1443,
1460
Business and Professions Code section 16600
generally prohibits covenants not to compete, and
California public policy strongly favors employee
mobility. … Business and Professions Code section
16600 protects a person's right to “follow any of
the common occupations of life” . . . and to pursue
the “ ‘business or profession he may choose’ ” . . .
We agree the doctrine of inevitable disclosure
“creates a de facto covenant not to compete” and
“runs[s] counter to the strong public policy in
California favoring employee mobility.” -- 101
Cal.App.4th 1443, 1462
Remedies
• “Head start” injunction – SI Sys. V. Heisley, p.
81
• Gear injunction to length of time that was
“saved” due to misappropriation