• Paul Peter Nicolai

Trade Secret Misappropriation Judgment Reversed

Updated: Nov 16, 2020

After an executive left the company, it accused him of misappropriating trade secrets by using the company’s strategy to provide tax services to former clients using company documents the clients provided to him. The company also accused him of misappropriating trade secrets by downloading the company’s documents to analyze client tax situations.

The trial court granted summary judgment to the company. The appeals court reversed, finding that while client information may not have been available to the public, the company did not prove it had trade secrets. Trade secrets in the documents were not identifiable because the company did not separate them from other information known to the trade.

The court also reversed the verdict in the company’s favor on its claim that the executive violated his nondisclosure agreement, finding that the agreement, which covered essentially any information he obtained through his work, was overly broad.

Why This Is Important…The case is a warning to employers that they cannot restrict a former employee’s ability to compete just because the contract says everything in the business is confidential or proprietary. Companies must identify trade secrets with specificity. They must show they have not only taken steps to keep the information confidential, but that a member of the public or a competitor cannot figure it out simply by doing their homework and reading other publicly available information.

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