On June 19, 2012, a Massachusetts federal court declined to apply an expansive interpretation of the inevitable disclosure doctrine during a preliminary injunction ruling, finding that the rule is best applied to establish irreparable injury supporting enforcement of a non-competition agreement and not as the basis for a future misappropriation of trade secrets claim.
In U.S. Elec. Svcs., Inc. v. Schmidt, 2012 U.S. Dist. LEXIS 84272 (D. Mass. June 19, 2012), plaintiff USESI, a national distributor of electrical products and services, sued two former employees and their current employer, Munro, for breach of contract, misappropriation of trade secrets, and unfair competition, among other allegations. Munro is a regional distributor of electrical products whose national accounts division competes directly with USESI. USESI claims that Munro and its former employees intended to compete with USESI for a specific account, which was scheduled to go out for bid for the first time in four years. One week prior to the bid, USESI filed its complaint and a motion for a preliminary injunction.
The court denied USESI’s motion for a preliminary injunction after a hearing on May 14, 2012 for two reasons. First, the court found that none of the authorities cited by USESI stand for the proposition that allegedly inevitable future misuse of trade secrets is by itself sufficient to establish a violation of either common law or statutory obligations regarding trade secrets. In each case cited by USESI, the plaintiff had established the likelihood of success on the merits of a breach of contract claim based on a non-competition agreement, not (as here) a pure trade secrets claim, and in each case the plaintiff alleged that the defendant’s breach had already occurred by the time of the preliminary injunction proceedings, not (as here) merely that defendant’s actionable conduct was imminent and inevitable.
Second, even if the inevitable disclosure doctrine could provide a basis for demonstrating a likelihood of success on the merits, the court found that USESI failed to show that future disclosure would be inevitable, thereby precluding preliminary injunctive relief. Specifically, the court found that the defendant former employees’ knowledge and level of responsibility with regard to the subject account was limited, particularly given that one of the defendants, a former manager, had not dealt with the customer for over two years.
The full text of the Court’s statement of reasons for denying USESI’s motion for a preliminary injunction can be found here. Also, please see Ken Vanko’s blog on this interesting case.