The Difficulty of Proving Trade Secret Violations

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A recent Georgia Court of Appeals opinion highlights the difficulty employers have in proving trade secret violations and thus reinforces the need for employers to use enforceable non-compete and non-solicitation covenants as their primary means of protecting against unfair use of confidential information by former employees.

In Contract Furniture Refinishing & Maintenance Corp. v. Remanufacturing & Design Group, LLC, 730 S.E. 2d. 708 (Ga. App. 2012), the plaintiff-employer sued its former employee and his new company for violations of the Georgia Trade Secrets Act, alleging that  the defendants had used the plaintiff’s sales and marketing reports in connection with the defendants’ competing business.   In affirming summary judgment for the defendants on the trade secrets claim, the Court of Appeals held that the following evidence was insufficient for the claim to proceed to trial:

  • The former employee remained employed by the plaintiff for four months while running operations for his newly formed competing company (without disclosing the new company to the plaintiff, of course);
  • The employee received thousands of pages of marketing and sales reports while employed with the plaintiff;
  • The employee’s new company made two successful bids on jobs for which the plaintiff provided the employee with leads;  both of the bids were nearly identical to bids previously submitted by the plaintiff, and one of them was submitted while the employee was still employed by the plaintiff, while the other was submitted a week after the employee resigned;
  • The employee used the same flash drive on both his personal computer and company-issued laptop on the day he resigned from the plaintiff;
  • The employee’s company-issued laptop, which he returned upon his resignation, had been stripped of all proprietary and customer information of the plaintiff.

As would be expected, the employee denied that he retained hard copies of any of the marketing reports, denied copying or transferring any files or information of the former employer, and denied providing any of the former employer’s information to the new company.   The employee had further explanations for how the new company found out about the two jobs for which it successfully bid without the misappropriation or use of information obtained from the former employer.

It might seem reasonable that the above-described competing evidence would be left for a jury to sort out.  The Court of Appeals even acknowledged that the employer-plaintiff produced “strong” circumstantial evidence of use or disclosure of alleged trade secrets.  In affirming the trial court’s summary judgment ruling against the employer, however, the court relied on the rule of law that “a finding of fact that may be inferred from, but is not demanded by, circumstantial evidence has no probative value against positive and uncontradicted evidence that no such fact exists, provided that the circumstantial evidence may be construed consistently with the direct evidence.”

BURR POINT:  To prevail on a trade secrets claim, an employer will usually need direct, as opposed to circumstantial, evidence of the misappropriation, which is often hard to come by.  Accordingly, employers need contractual non-compete and non-solicitation protection, in addition to that provided by trade secret statutes, to bolster their potential claims against an unfairly competing employee.

 

Published In: Civil Procedure Updates, General Business Updates, Intellectual Property Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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