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The “inevitable disclosure” doctrine permits the
plaintiff in a trade secrets case to establish threatened
misappropriation by showing that the defendant’s new employment
will inevitably lead the defendant to rely on the plaintiff’s
trade secrets. In the seminal case that articulated this doctrine,
the court enjoined the defendant from working for the competitor
because “there is a high degree of probability of inevitable
and immediate . use of . trade secrets.”1
The doctrine is controversial because it potentially
“requires a court to recognize and enforce a de facto
noncompetition agreement to which the former employee is bound,
even where no express agreement exists.”3 Accordingly,
“the inevitable disclosure doctrine treads an exceedingly
narrow path through judicially disfavored territory.”3
One federal court surveyed state trade secret laws in 2019 and
concluded that 17 states appear to have adopted the inevitable
disclosure doctrine in one form or another: Arkansas, Connecticut,
Delaware, Florida, Indiana, Illinois, Iowa, Minnesota, Missouri,
New Jersey, New York, North Carolina, Ohio, Pennsylvania, Texas,
Utah and Washington. It concluded that five states appear to have
rejected the doctrine: California, Colorado, Louisiana, Maryland
and Virginia.4 The other 28 states have not yet
taken a position on the doctrine.
Since then, a Florida federal court has indicated that Florida
has not adopted or declined to adopt the inevitable disclosure
doctrine.5 And an Oregon federal court has
opined that Oregon would be unlikely to adopt the doctrine.6
Given this division among the states on the inevitable
disclosure doctrine, considerable attention has been focused on
whether the federal Defend Trade Secrets Act (DTSA) adopts this
doctrine. “[T]here is no judicial consensus on whether DTSA
permits application of the inevitable disclosure doctrine” and
so “many federal courts look to state law for
guidance.”7 No federal court has yet embraced
the inevitable disclosure doctrine under the DTSA where application
of that doctrine would contravene that state’s trade secret
law.
However, the DTSA does limit the scope of injunctive relief that
it affords. The DTSA authorizes a court to “grant an
injunction to prevent any actual or threatened misappropriation .
provided the order does not prevent a person from entering into
an employment relationship, and that conditions placed on such
employment shall be based on evidence of threatened
misappropriation and not merely on the information the person
knows[.]”8 Thus, in an alleged inevitable
disclosure situation, the DTSA does not permit a federal court to
enjoin the former employee from going to work for a competitor.9 But
the court could potentially grant narrower relief, such as placing
limits on the type of work the former employee may perform for the
new employer or the customers the former employee may contact.
One federal court recently concluded, based on this statutory
provision and a portion of the legislative history, that the
inevitable disclosure doctrine does not apply to claims brought
under the DTSA.10 This conclusion is subject to
question.
Limited Relief
The legislative history explains that the DTSA limit on
injunctive relief was “included to protect employee mobility,
as some members . voiced concern that the injunctive relief
authorized under the bill could override state-law limitations that
safeguard employee mobility and thus could be a substantial
departure from existing law in those states.”11 Congress intended
the injunctive remedies provided by the DTSA “to coexist with,
and not to preempt, influence, or modify applicable State law
governing when an injunction should issue in a trade secret
misappropriation matter.”12 Thus, it provided that no
injunction issued under the DTSA shall “conflict with an
applicable State law prohibiting restraints on the practice of a
lawful profession, trade, or business.”13 Note that the
inevitable disclosure doctrine is a method of proving
threatened misappropriation in order to obtain
judicial relief. However, the DTSA limits the equitable remedies
available for either threatened or
actual misappropriation.
Likewise, the additional DTSA limitation that injunctive relief
“shall be based on evidence of threatened misappropriation and
not merely on the information the person knows” is consistent
with the inevitable disclosure doctrine. Inevitable disclosure does
not turn on what information a former employee knows, but, rather
“showing that an employee’s new job so closely resembles
her old one that it would be impossible to work in that job without
disclosing confidential information.”14
In jurisdictions that have adopted the inevitable disclosure
doctrine, three factors are considered in determining whether to
grant injunctive relief based on threatened misappropriation: 1)
whether the employers in question are direct competitors providing
the same or very similar services; 2) whether the employee’s
new position is nearly identical to his old one, such that he could
not reasonably be expected to fulfill his new job responsibilities
without utilizing the trade secrets of his former employer; and 3)
whether the trade secrets at issue are highly valuable to both
employers.15 This three-factor analysis is
fully compatible with the DTSA’s limitation on when injunctive
relief can be granted.
In sum, the drafters of the DTSA were careful not to take a side
in the debate between the states over the inevitable disclosure
doctrine. The DTSA, by its terms, neither embraces nor rejects
“inevitable disclosure” as a means of proving threatened
misappropriation. It does, however, preclude courts from imposing a
de facto noncompete requirement on a former employee as a remedy
for threatened or actual misappropriation of trade secrets.
Footnotes
1 See PepsiCo, Inc. v. Redmond, 54 F.3d 1262,
1269 (7th Cir. 1995).
2 Kinship Partners, Inc. v. Embark Veterinary,
Inc., 2022 WL 72123, at *7 (D. Or. 2022).
3 EarthWeb, Inc. v. Schlack, 71 F. Supp. 2d 299,
310 (S.D.N.Y. 1999).
4 Phoseon Technology, Inc. v. Heathcote, 2019 WL
7282497, at *11 (D. Or. 2019).
5 Future Metals LLC v. Ruggiero, 2021 WL
5853896, at *17 n.18 (S.D. Fla. 2021).
6 Kinship Partners, 2022 WL 72123, at
*7.
7 Sunbelt Rentals, Inc. v. McAndrews, 552 F.
Supp. 3d 319, 331 (D. Conn. 2021).
8 18 U.S.C. § 1836(b)(3)(A)(i)(I) (emphasis
added).
9 Kinship Partners, 2022 WL 72123, at
*7.
10 IDEXX Laboratories, Inc. v. Bilbrough, 2022
WL 3042966, at *5-6 (D. Me. 2022).
11 S. Rep. No. 114-220 at 9 (2016).
12 Id.
13 18 U.S.C. § 1836(b)(3)(A)(i)(II).
14 Amazon.com, Inc. v. Powers, 2012 WL 6726538,
at *7 (W.D. Wash. 2012).
15 See Sunbelt Rentals, 552 F. Supp. 3d at
331.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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