By Erik Weibust and Ryan Malloy
In an action for misappropriation of trade secrets, unfair competition, and other claims, Judge Hillman of the U.S. District Court of Massachusetts recently granted a former employer’s motion for a preliminary injunction against three defendants who allegedly stole trade secrets from the plaintiff, without a showing that the defendants actually used that information for the benefit of a competitor. In ruling that the plaintiff could be irreparably harmed if he did not issue an injunction based on the trade secrets claim, even absent a non-competition agreement, Judge Hillman may have expanded the “inevitable disclosure” doctrine in Massachusetts. The case is Advanced Micro Devices, Inc. v. Feldstein, et al., C.A. No. 13-40007 (D. Mass. May 15, 2013).
Plaintiff Advanced Micro Devices, Inc. (AMD) is a designer and manufacturer of microprocessors and other computer parts. Defendants are former AMD employees who left AMD and were hired by AMD’s competitor, Nvidia Corp. Each of the defendants previously signed employment agreements with AMD that contained restrictive covenants. Nevertheless, three of the defendants copied substantial amounts of AMD information before leaving AMD. In addition, three of the defendants spoke with and allegedly encouraged one or more of the others to meet with and accept employment offers from Nvidia.
In granting AMD’s request for preliminary injunction, Judge Hillman first ruled that even though there was no evidence that defendants actually used any of AMD’s trade secrets or gave them to Nvidia, AMD would likely win its trade secret claim under Massachusetts law so long as it could prove “the acquisition, through improper means, of a trade secret with the intent to convert it for use by a party other than the rightful owner.”
Interestingly, Judge Hillman determined that AMD could be irreparably harmed if an injunction based on the trade secrets claim was not granted, even though defendants claimed that they submitted all confidential AMD information to a neutral third-party for examination after the suit was commenced. His basis for the ruling, which echoes, but does not expressly reference, the “inevitable disclosure” doctrine, was that defendants “must all remember large amounts of confidential AMD information that they learned during their employment.” Although Judge Hillman does not provide significant analysis on this issue, the opinion seems to suggest that the “inevitable disclosure” doctrine may apply wherever trade secret theft has occurred, even without a non-competition agreement. Another opinion from the District of Massachusetts limited application of the doctrine to where a non-competition agreement has first been breached. See U.S. Electrical Services, Inc. v. Schmidt, et al., C.A. No. 12-10845 (D. Mass. June 19, 2012).
Judge Hillman also ruled that AMD was likely to win on its breach of non-solicitation agreement claims against two of the defendants, but not against the third, based on his conclusion that “mere discussion of facts … is not sufficient to establish that solicitation occurred.” Even indirect solicitation, Hillman ruled, “should only be found where the finder-of-fact is satisfied that the solicitor actually intended to induce the solicitee.”