The Pacific Coast Business Times is reporting that two medical device makers who focus on aesthetic or cosmetic procedures (however, they are not competitors) are locked in a battle over some files that an employee of one company emailed to an employee of another company. The complaint, filed in Santa Barbara County Superior Court, alleges that Mark Kelly, a consultant for Mentor Corporation emailed files to Jamie Diggs, a Den-Mat Holdings employee, after Diggs had requested certain files. The article is here.
Mentor alleges that the emailed files contained Mentor’s trade secrets and that many were stamped “confidential” or “trade secret” at the top.
“Before Kelly sent the contested message, Mentor had installed a software program to monitor e-mail for potentially sensitive file attachments making their way outside the company, Mentor said in court filings.
“The program flagged as suspicious Kelly’s e-mail to Diggs. The message was then forwarded all the way up to the executive suite, Mentor said in court declarations.”
I haven’t spoken much about this type of software, but with the increasing amount of trade secrets litigation stemming from employee actions and misappropriation, it could make sense to add it as part of your trade secrets protection plan on at least two levels: (1) it is further evidence in court that you were actively seeking to protect your trade secrets and to keep them from becoming generally known to the public, or to a competitor; and (2) more practically, a company might be able to detect a trade secrets leak early on and prevent altogether the need for litigation (and its attendant costs) by taking decisive action early on.
There are some good companies that make such software. I will post later on some of them.
An interesting issue that I am sure will come up in this litigation is the degree of competitive advantage the documents provided to Den-Mat since the companies are not necessarily competitive with each other. The article states that the documents at issue contained “quality management policies, various accounting forms and policies, corporate procedures for expenditures and dispositions, human resources policies, corporate policies regarding inventory, computer system policies, and codes of conduct and ethics.” While much of this could be considered trade secret because it would allow a competitive advantage between competitors, it is not so clear when the companies are not competitors. It could raise interesting issues. We will follow this litigation as it develops.
Two rival Hispanic bakeries in Portland are caught up in a trade secrets skirmish over recipes that two former employees took to another bakery. Notice the emphasis on former employees.
“These recipes and baking methods constituted valuable trade secrets not publicly known and … the cakes and pastries made from them were and are in great demand by the Hispanic community in the greater Portland-Vancouver metropolitan area.”
There may be hope for the Plaintiff in this case as it appears that his trade secrets protection plan was in place because the complaint attaches confidentiality agreements signed by the former employees. Bravo.
“The Supreme Court of Ohio today ruled that use of protected trade secret information by a former employee who had memorized it during his employment violated the state’s trade secrets law.”
“…protected trade secret information does not lose its character as a trade secret under the Uniform Trade Secrets Act (UTSA), R.C. 1333.61(D), merely because a former employee memorized it rather than writing it down or copying it in some other tangible medium.”
“…the determination of whether a client list constitutes a trade secret pursuant to R.C. 1333.61(D) does not depend on whether it has been memorized by a former employee. … It is the information that is protected by the UTSA, regardless of the manner, mode, or form in which it is stored – whether on paper, in a computer, in one’s memory, or in any other medium.”
The facts are as follows:
“The case involved a dispute between Al Minor & Associates, a company providing third-party pension administration services to client companies, and a former employee, Robert Martin of Columbus. Martin, who worked for Minor as a pension analyst, was an at-will employee and was not bound by any formal non-competition or trade secrets agreement. Martin resigned in 2003 and opened his own pension analyst business. He began soliciting clients including a number of companies that he recalled from memory as being current or former clients of Minor. ”
It will be interesting to see how many jurisdictions follow this unanimous ruling of the Ohio Supreme Court.
I can see arguments on both sides. On one hand, it can be argued that an employee who has cultivated relationships with clients should have the right to contact those clients, if he can do so from memory, when he has left for another employer. On the other hand, there needs to be some reasonable protection for businesses when a former employee can contact a customer and have a competitive advantage because of the employee’s knowledge of the prices and terms the customer has with the former employer, even if derived from memory. Incidentally, California’s Uniform Trade Secrets Act reads similarly to the Ohio Act. I will have more to say on this subject later.
By the way, notice that this was yet another case of a former employee’s misappropriation of the trade secrets of his former employer. Food for thought.