Employers are entitled to prevent their former employees from disclosing trade secrets to their competitors. This generally meant waiting until a disclosure was made and discovered and trade secret cases sometimes felt like closing the barn door after the horse got out.
A California court has adopted the inevitable disclosure doctrine which allows an employer to obtain an injunction preventing an employee from working for a competitor in a position where disclosure of the employer's trade secrets would inevitably result. Electro Optical Industries, Inc. v. White (1999) 76 Cal. App. 4th 653.
The following article provides an overview of the case, the resulting decision, and provides some insight into its likely effect on trade secret protection in the state of California.
Background
Before Electro Optical, California law provided for injunctive relief only for actual or threatened misappropriation of trade secrets. An employer could not obtain injunctive relief until there was evidence of actual or imminent disclosure. Often, such evidence could not be obtained until after trade secrets were disclosed and substantial harm was inflicted. The plaintiff sought the right to protect itself from disclosures that had not yet occurred through the use of an injunction commanding the former employee to keep their employer's protected trade secrets in confidence.
The Electro Optical Case
In Electro Optical, the California Court of Appeal adopted the inevitable disclosure doctrine which provides for injunctive relief where, because of the competitive nature of the industry and the position held by the former employee, the employee cannot, as a practical matter, avoid using trade secrets in the employee's new position.
However, acquiring injunctive relief is not simply a matter of claiming concern. The employer must establish some basic elements in order to qualify for relief. A factual inquiry is required before applying the doctrine, but an employer no longer must show actual or threatened disclosure. It is sufficient to show that use of trade secrets would occur in the ordinary performance of the employee's new duties.
Impact on Employers
The manner in which the inevitable disclosure doctrine will be applied in California remains to be seen. In other jurisdictions, courts rigorously analyze the facts to determine whether the new employment would inevitably lead to disclosure of trade secrets. Most often, they have applied the doctrine when high level executives or technical professionals accept employment in the same or similar positions with direct competitors. In view of California's strong public policy favoring employee mobility, the inevitable disclosure doctrine will likely be applied sparingly and only upon a strong showing that the use of trade secrets is unavoidable. By adopting the doctrine, however, the California courts have armed employers with a powerful weapon with which to protect their trade secrets.
Exercise caution before relying upon this or any statement regarding state law. State laws are always subject to change through the passage of new legislation, rulings in the higher courts (including federal decisions), ballot initiatives, and other means. While we strive to provide the most current information available, please consult an attorney or conduct your own legal research to verify the state law(s) you are researching.