Under the inevitable disclosure doctrine, an employer may prevent a former employee from working for a competitor by simply demonstrating that the employee possesses the employer’s trade secrets and the former employee’s new job duties will “inevitably” cause her to rely upon those trade secrets. The doctrine is not available in California. However, California employers may be able to rely upon a “threatened” misappropriation of trade secrets to protect against the same risk.
California’s Uniform Trade Secrets Act (CUTSA) provides that a court may enjoin a threatened, as well as an actual, misappropriation of trade secrets. According to California’s courts, to establish a claim for “threatened misappropriation” of trade secrets, the employer must show that its former employee has threatened, manifested by words or conduct, an imminent misuse of the trade secret. Currently, it appears an employer may do this in at least one of three ways: First, the employer may establish threatened misappropriation by showing that its former employee possesses its trade secrets and has misused or disclosed those trade secrets in the past. Second, the employer may show that its former employee possesses its trade secrets and intends to improperly use or disclose those trade secrets. Third, an employer may be able to establish threatened misappropriation by showing that its former employee has wrongly refused to return its trade secrets, after it has demanded their return. As can be seen, in all three scenarios, it is insufficient to simply allege that the employee’s mere possession of its former employer’s trade secrets constitutes threatened misappropriation. Instead, California requires something more: the employer must also submit competent evidence of some type of conduct by the former employee – whether it is prior misuse or disclosure, an intent to misuse or disclose, or a failure to return, trade secrets – that gives rise to a claim of threatened misappropriation under CUTSA.
What level of evidence the former employer may need to establish such a claim is presently unclear. There is no bright-line test and it may come down to the former employer’s ability to persuade a court that there although it is unknown whether there’s been an actual misappropriation of trade secrets, there is some compelling reason(s) to be concerned about the imminent misappropriation of the former employer’s trade secrets.
Sources: Central Valley General Hospital v. Smith, 162 Cal. App.4th 501 (2008) (finding that referee’s statement of decision failed to set forth facts sufficient to state a claim for threatened misappropriation where statement did no more than state that defendants possessed trade secrets that they had acquired by proper means); Flir Systems, Inc. v. Parris, 174 Cal. App.4th 1270 (2009) (finding plaintiff failed to state a claim for threatened misappropriation where it alleged nothing more than defendant could misuse plaintiff’s trade secrets and plaintiff feared they would); Les Concierges, Inc. v. Robeson, No. C-09-1510 MMC, 2009 WL 1138561 (N.D. Cal. Apr. 27, 2009) (finding, on motion for preliminary injunction, that plaintiff failed to submit sufficient evidence to show that defendant had made prior improper use of plaintiff’s trade secrets under a threatened misappropriation claim).