From a practical standpoint, it is important that employees understand the potential ramifications of disclosing confidential and proprietary information as well as trade secrets belonging to their former employers. Typically, employers protect such interests by way of restrictive covenant agreements. Restrictive covenant agreements generally include post-employment non-compete, non-solicitation, and confidentiality obligations. In the event that a former employee breaches said post-employment obligations, the former employer’s recourse is to bring legal action seeking injunctive relief (namely, a court order prohibiting the former employee from engaging in the conduct that violates the restrictive covenant agreement). To obtain injunctive relief, the former employer must demonstrate (among other things) irreparable harm that may not be adequately remedied by money damages.
In 2012, the New Jersey Trade Secrets Act came into effect. The New Jersey Trade Secrets Act essentially codified existing case law and provides remedies to employers for the protection of their trade secrets. While the New Jersey Trade Secrets Act states that it supersedes “conflicting tort” law (among other laws), the Act also states that “the rights, remedies and prohibitions” under the Act are “in addition to and cumulative of any other right, remedy or prohibition provided under the common law or statutory law of this State . . .”
The inevitable disclosure doctrine is a theory of liability upon which employers typically rely in the context of seeking injunctive relief, prohibiting a former employee from misappropriating their trade secrets. Under the inevitable disclosure doctrine, an employer “need not establish that its former employee has actually used or disclosed trade secrets.” See Osteotech, Inc. v. Biologic, LLC, 2008 U.S. Dist. LEXIS 17718 (D.N.J. March 7, 2008). Rather, an employer must demonstrate that “there is a sufficient likelihood of ‘inevitable disclosure’ of its trade secrets to a competitor.” See id.
In SCS Healthcare Mtkg. LLC v. Allergan, USA, Inc., 2012 N.J. Super. Unpub. LEXIS 2704 (Ch. Div. 2012), following the enactment of the New Jersey Trade Secrets Act, the court reaffirmed that the inevitable disclosure doctrine remains a “factor guiding the court’s determination as to whether injunctive relief is appropriate.” Therefore, it appears as though the inevitable disclosure doctrine remains as a potential common law theory of liability for the issuance of injunctive relief in the misappropriation of trade secrets context. Accordingly, it is important that employees remain aware of this theory of liability.
If you have any questions about the New Jersey Trade Secrets Act, the inevitable disclosure doctrine, and/or restrictive covenant agreements, please contact the Law Office of Frank A. Custode, LLC.