Court Clarifies Best Way to Plead Inevitable Disclosure

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Many states applying the Uniform Trade Secrets Act recognize the “inevitable disclosure doctrine,” under which an individual may be precluded from working for another employer because the new position would inevitably (or, in some states, likely) lead the individual to disclose his former employer’s trade secrets.  Because of the doctrine’s novelty in many states, difficulty in articulating why the defendant is likely (at some point in the future) to misappropriate the former employer’s secrets, and recent tightening of federal pleading standards, employers sometimes struggle to plead an inevitable-disclosure claim.  In Mobile Mark, Inc. v. Pakosz [pdf], the district court provided a blueprint for such employers. 

Mobile Mark, an antenna manufacturer, based its inevitable-disclosure claim on the allegations that one of its engineers transferred proprietary data to himself shortly before ceasing employment, ran a “Window Washer” program on his computer to cover his tracks, and then went to work for a competitor.  According to the complaint, the employee then turned over the information to the competitor, which used the data to manufacture knock-offs of Mobile Mark’s antennas.

The decision in Mobile Mark teaches that, to plead inevitable disclosure, the former employer should, where possible, plead facts establishing that (1) there is a high level of competition between the former employer and new employer; (2) the employee’s position with the new employer is similar to the job he held with the former employer; (3) the new employer did not try to prevent the new employee from using or disclosing the former employer’s trade secrets; and (4) the employee or new employer, if not enjoined, would intentionally use the trade secrets to the plaintiff’s detriment.  Although not all of these elements are necessary to plead an inevitable-disclosure claim, Mobile Mark’s claim survived a motion to dismiss, in part, because Mobile Mark alleged each of these elements.  In addition to setting forth the elements of an inevitable-disclosure claim, two other aspects of Mobile Mark provide guidance for employers contemplating an inevitable-disclosure theory. 

First, the court allowed Mobile Mark’s claim to proceed even though Mobile Mark did “not identify particular trade secrets” that the employee allegedly copied.  The lesson is that, if a former employee downloads data in suspicious enough circumstances, an inevitable disclosure theory may proceed even where the plaintiff is vague about what information the former employee allegedly misappropriated.

Second, in denying the motion to dismiss, the court placed particular emphasis on the allegation that the employee copied Mobile Mark’s confidential information shortly before leaving the company, reasoning that such copying “leads to the conclusion of inevitable disclosure.”  Although Mobile Mark also alleged that the employee’s new employer had encouraged him to misuse Mobile Mark’s data, the tone of the opinion suggests that, even without allegations about the new employer’s intent, the court would have allowed the inevitable-disclosure claim to proceed against both the employee and his new employer.  The take-away point is that, where there are sufficient allegations suggesting that the former employee intends to misuse his former company’s confidential information, an inevitable-disclosure claim may proceed against a new employer even where there is no evidence that the new employer has a blameworthy intent.  Thus, a company hiring an individual who may have been privy to a competitor’s trade secrets should establish a record that it took measures to ensure that the individual does not retain, use, or disclose, his former employer’s trade secrets.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.