An employee entered into non-compete and confidentiality agreements with his employer. Following his resignation from that company, he went to work for a competitor. His job functions and territory with both employers were similar. In a suit for violation of the non-compete and confidentiality agreements, a Texas federal court held recently that — absent an injunction — disclosure to his new employer of his former employer’s confidential information was inevitable. The court concluded that all of the prerequisites were met for a preliminary injunction. Brink’s Inc. v. Patrick, Case No. 3:14-cv-775-B (N.D. Tex., 6/26/14).
Summary of the Case
Greco was employed by Brink’s, a provider of secure money transport services. Shortly before resigning from Brink’s to go to work a competitor, he allegedly transferred confidential files from his Brink’s office computer to his personal thumb drive and then deleted the files from the computer. Brink’s sued him in a Texas state court, and he removed to the federal court. Brink’s claimed that disclosure of its trade secrets was inevitable unless Greco was enjoined from competing with Brink’s for the entire two-year term of the non-compete. The court granted the motion in part, limiting the scope of the covenant and enjoining Greco only while the litigation is pending.
Injunctions based on the inevitable disclosure doctrine typically involve specialized and particularized information developed in the course of the former employer’s R&D and used in that company’s highly technical or complex workplace. Often, the new employer is a start-up, or a company planning a significant expansion, which would benefit — by not having to expend significant sums and effort on development — from the former employer’s closely guarded, valuable trade secrets. In that situation, some judges will prohibit the newly hired employee from using or even inadvertently disclosing the secrets.
Other judges, however, express reluctance to invoke the inevitable disclosure doctrine, except in “the rarest of cases.” For one thing, the more experienced the employee, and the more general the information disclosure of which is foreclosed, the harder it is for the parties and a court to differentiate between (a) knowledge gleaned simply from that experience, which the employee should be free to use, and (b) confidential information proprietary to the former employer. For another, an inevitable disclosure injunction might prevent the employee from providing meaningful services to a new employer in the industry in which the employee knows best. Those jurists maintain further that the inevitable disclosure doctrine adds little of substance to a non-compete if the employee agreed to one, but if there is none courts should not impose on the ex-employee a functionally equivalent substitute.
The injunction in the Brink’s Case
Duration. The court declined to issue a two-year “preliminary injunction” as requested by Brink’s because such an order would, in effect, grant 100% of the relief requested but at a time when the dispute’s merits have not yet been adjudicated.
Geography. Greco objected to the request by Brink’s to restrain him from working for a competitor located in Chicago. Although he had been employed in the Chicago office of Brink’s, he maintained that the company’s operations there were outside his responsibility for his final two years with that company. However, the non-competition covenant stated in relevant part that the territory covered includes the entire area served by the office where the employee was located at termination. So, Greco was ordered not to compete with Brink’s in the territory serviced by its Chicago office, but he was not precluded from competing outside that region or providing non-competitive services within that area.
Inevitable disclosure. Brink’s alleged that Greco was intimately familiar with its confidential “customer names, contacts, volume of business and routes for customers, service specifications, service delivery strategies, and staffing and pricing models.” Agreeing with Brink’s that the non-compete was necessary to protect the company’s good will, the court concluded that Greco inevitably would cause irreparable harm by performing competitive services for Garda in the relevant territory. Most courts issuing an inevitable disclosure injunction would emphasize efforts the former employer made to protect the confidentiality of the trade secrets, a subject the Brink’s court did not mention.
Greco was bound by both confidentiality and non-compete covenants. Any employer that wants to maximize protection of trade secrets should insist that high-level employees execute both. Whether the same result would have been reached in the absence of a non-compete, in other words, based solely on the inevitable disclosure doctrine, is unclear. The court’s decision clearly was influenced by the near identity of Greco’s job responsibilities with both employers and by his apparent misuse, as he was exiting, of the computer Brink’s had provided to him. Attorneys representing employers seeking to enforce a confidentiality covenant should stress facts showing why misuse of trade secrets is particularly likely and that the trust placed in the ex-employee by the former employer was abused.