Protect yourself against an inevitable-disclosure lawsuit

By David Essex, ITworld.com |  Career

Nothing but the facts

Though it sounds like the title of a John Grisham novel, inevitable disclosure isn't fiction. It has played an important role in a half dozen highly publicized cases in the
IT industry, according to press reports and legal articles on the Web. In 1996,
chipmaker Advanced Micro Devices (Sunnyvale, Calif.) used it to block five engineers
from working on flash-memory projects at Hyundai Electronics America (San Jose,
Calif.). Motorola (Schaumburg, Ill.) argued inevitable disclosure against Intel (Santa
Clara, Calif.) and reached an undisclosed settlement. Web advertising company
DoubleClick, based in New York, got an injunction against two employees who left to
start their own company.

In the IT industry, engineers, programmers, marketing personnel, and upper
management are most vulnerable to inevitable disclosure suits, said Elizabeth Sackett,
an associate in the Boston office of Robinson & Cole, a New York-based law firm. Under
inevitable disclosure, "trade secrets," says Sackett, can mean formulas and processes,
strategic plans, or "anything else" that, the court says gives a competitive
advantage.

Judicial interpretation of inevitable disclosure varies by state, as do punishments,
according to Sackett. An injunction is the typical penalty for misappropriation of
trade secrets, but fines and jail time are possible. The doctrine isn't applied
abstractly. "They really go into the facts of this -- who you are, what information you
have, how well protected was it, and are you really going to use it in your new job,"
cautions Sackett.

Sackett was part of a legal team that defended an ITworld.com employee against an
inevitable disclosure charge last November. However, that case ultimately hinged on the
wording of a non-compete agreement.

Negative knowledge

Merkey says a key issue in his trial was the concept of negative knowledge, which holds
that knowing what doesn't work is as valuable as knowing what does. It's often a
justifiable argument because without it, competitors could potentially get millions of
dollars' worth of a company's research and development for free, said R. Mark Halligan,
an attorney at Welsh & Katz in Chicago. Halligan maintains an href="http://www.execpc.com/~mhallign">informational Website on related legal
issues and is chairman of the American Bar Association's Trade Secrets and Interference
with Contracts committee.

Negative knowledge's relevance usually depends on whether the new employer has built
up the same technology bank as the old employer. If it has gone through
similar trial and error to develop a product, the employee's negative knowledge has
little value. But if the competitor gets a head start from the new employee's
experience, then it has an unfair advantage, Halligan said.

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