Inevitable Disclosure Doctrine and Trade Secrets Lawyers

The inevitable disclosure doctrine is a way for an employer to prevent a former employee from working for a competitor under the principle that the employee would inevitably disclose their former employer’s trade secrets. Once a trade secret has been disclosed, it cannot be regained.

As a result, employers should be able to prevent a disclosure if allowing a former employee to work for a competitor is inevitable.

What are Trade Secrets?

Generally, a trade secret is a piece of valuable information that gives a business a competitive edge. The following information may be included:

• Formulas;
• Patterns;
• Compilations;
• Programs;
• Devices;
• Methods;
• Techniques; or
• Processes.

Specifically, trade secrets consist of three components:

• Members of the public cannot access the information;
  • In many cases, the employees of the company may not be able to access the secret;
• The information is economically beneficial to the owner, providing the owner with a significant advantage in the marketplace; and
• The information owner makes reasonable efforts to maintain its secrecy.

Trade secrets are a subcategory of intellectual property, in addition to:

• Trademarks;
• Copyrights; and
• Patents.

Trade secrets are behind some of the most famous products on the market, including:

• The Colonel’s famous Kentucky fried chicken recipe: When it began, only the Colonel himself knew the recipe. Currently, the recipe is only shared with a very small number of employees;
• The formula for Coca-Cola: An employee and two accomplices stole the formula for Coca-Cola and tried to sell it to Pepsi in 2006. After Pepsi informed Coke management, the perpetrators were arrested;
• The New York Times bestseller list: The formula used by the newspaper to compose its bestseller list has never been made public. Some people think the list is based on sales volume, but that’s not true;
• Krispy Kreme doughnuts: Reportedly, the secret is not in the recipe but in the process used to make the doughnuts;
• Twinkies: Some say that the manufacturer of Twinkies does not want to reveal the ingredients because the names of chemicals used would discourage people from feeding them to their children;
• Google’s search algorithm: Reportedly, Google modifies its secret algorithm just to keep others from gaming the system and figuring out its secret; and
• The special sauce for MacDonald’s Big Mac: This recipe was kept secret so well that no employee could find it for some time. The Big Mac lovers were eventually able to locate it.

Such secrets are kept in vaults by companies that own them and are shared with only as many people as needed. If their secrecy is compromised, they will typically respond by taking legal action.

There may be cases where a company refrains from patenting a trade secret to avoid disclosing it.

What are the Differences Between Trade Secrets, Trademarks, and Patents?

Different types of intellectual property are protected under different statutes. Federal statutes, including the Lanham Act and the Patent Act, protect trademarks and patents.

Trademarks are also subject to state laws. Several agencies require trademark registration, including:

• State;
• Federal;
• Foreign; and
• International.

The federal government protects copyrights. Individuals must register the material they want to have copyrighted with the U.S. Copyright Office.

Copyright protections are available for:

• Literary works;
• Visual artwork;
• Music;
• Song lyrics;
• Sound recordings;
• Computer programs;
• Movies;
• Photographs; and
• More.

Since trademarks appear on logos and website graphics, they cannot be considered trade secrets. The public also has access to copyrighted material, so it needs to be protected.

Both state and federal laws protect trade secrets. Most states have enacted the Uniform Trade Secrets Act (UTSA).

The theft or misappropriation of certain trade secrets may be a federal crime. The Defend Trade Secrets Act (DTSA), passed by Congress in 2016, made pursuing a federal civil case for the theft of a trade secret possible.

Trade secret theft can be pursued in federal court under the DTSA. The statute of limitations is three years.

Trade secret theft is subject to remedies similar to those found in state laws. Patents and trademarks are not secret. However, trade secrets are not supposed to be revealed. In some cases, trade secret owners do not seek patent protection.

They would have to reveal their trade secret if they applied for a patent. A trademark or patent owner may find it advantageous to let as many individuals as possible know they own that trademark or patent.

Conversely, a trade secret is concealed from the public because, if it became public, the owner would lose their competitive edge. In recent years, court decisions have made patent protection more difficult, another consideration related to protecting trademarks and trade secrets.

As a result, more companies are protecting their competitively advantageous information as trade secrets rather than patents. Trade secrets are not subject to the same exemptions as trademarks and patents.

In general, trademarks can be satirized or parodied. The First Amendment generally protects parodies and satires of trademarks.

Furthermore, patents expire after 20 years, whereas trade secrets remain protected indefinitely.

Does There Need to Be Evidence That the Employee Will Disclose the Trade Secret Information?

In the inevitable disclosure doctrine, the intent is not relevant. According to the inevitable disclosure doctrine, even if the employee has no intention of betraying his former employer, he will naturally be able to provide trade secrets to his new employer.

As an example:

• A Pepsi employee with knowledge of the company’s strategic business plans was prevented from working at Quaker Oats, maker of Gatorade. Their knowledge of Pepsi’s marketing and business plans would inevitably affect their work on Gatorade despite not stealing any information illegally. Without Pepsi’s trade secrets, it would be nearly impossible for the employee to do his job at Quaker.

What Does an Employer Have to Show for Courts to Apply the Inevitable Disclosure Doctrine?

Employers must prove the existence of trade secrets before applying the inevitable disclosure doctrine. A former employee cannot disclose a trade secret if the employer cannot prove it.

States differ in their requirements for applying the inevitable disclosure doctrine once the employer establishes the existence of a trade secret:

• It is sufficient to show that there is a substantial likelihood of disclosure of trade secrets in some states
• Malicious intent or deception may be required in some states
• Some states will not apply the inevitable disclosure doctrine at all

What Kinds of Remedies Are Available under the Inevitable Disclosure Doctrine?

Former employers can only seek permanent injunctions against former employees. Former employers are not entitled to monetary damages or court fees under the inevitable disclosure doctrine.

Can My Employer Prevent Me from Accepting Any Job in the Same Industry as His Own?

In general, inevitable disclosure doctrine injunctions must be as broad as necessary. Often, the courts balance the employee’s need to find work in his field with the employer’s need to protect their trade secrets. Former employees may be restricted from certain activities in their new jobs but not from the employment itself.

Do I Need a Lawyer Experienced in Trade Secrets?

A lawyer is recommended if you want to use the inevitable disclosure doctrine to prevent employees from disclosing trade secrets or if you are an employee concerned that the inevitable disclosure doctrine may prevent you from working in your industry.

An experienced intellectual property lawyer will be able to explain your rights and help you take the appropriate action. States apply the inevitable disclosure doctrine differently, which can be very complex. An IP lawyer can explain your state’s IP laws.