On January 14, 2018, IBM’s Chief Diversity Officer resigned to go work for Microsoft in the same role. The caveat: she had a twelve month non-compete clause.

On February 12, 2018, IBM filed a lawsuit to enjoin its former diversity officer to honor her non-compete agreement with IBM and to recover damages. The suit, filed in Southern District New York court, alleges that the IBM non-compete agreement that the defendant signed has a New York federal and state choice of forum provision and is, therefore, enforceable. In addition to a breach of the non-compete agreement, IBM asserts a claim for misappropriation of its trade secrets. According to IBM, if its former diversity officer “is permitted to work for Microsoft, [she] will inevitably (if inadvertently) use and/or disclose IBM trade secrets for her own benefit and for the benefit of Microsoft.” In addition to injunctive relief (seeking an order requiring its former employee to honor the non-compete agreement), IBM is also seeking compensatory damages. It has also demanded that its former employee remit to them her equity compensation because of this alleged breach of her employment agreement. As to the demand that the employee return the equity compensation she had earned as an employee, IBM’s theory is that the employee is engaging directly in a business which is competitive with IBM. Furthermore, IBM asserts that this is considered a “detrimental activity” under the Long Term Performance Plan agreement in which the employee’s equity awards are governed by and, subject to cancellation and in certain circumstances like this, are subject to repayment.

To support its trade secret misappropriation claim, IBM alleges maintaining a diverse workforce is essential to gaining a competitive edge in the IT industry. IBM then claims that its former officer had access to “IBM’s highly confidential, proprietary, and competitively sensitive information regarding the company’s diversity data, strategies, and initiatives.” Specifically, IBM alleges that its former employee knows confidential IBM data about diverse demographics in every segment of IBM’s workforce. In addition to its claims founded on its former employee’s access to its diversity-based data, strategies and initiatives, IBM asserts that its former employee personally oversaw confidential projects to develop Artificial Intelligence-based tools that IBM designed in-house and used (internally) for tracking candidates for executive positions at IBM.

To further prove that its diversity initiatives are highly confidential and are regarded as such in the industry, IBM references a pending class action lawsuit against Microsoft in the District of Washington. In that case, Microsoft made motions to seal because its diversity information contained in those court filings is confidential.

In addition to the enforceability of the non-compete, and whether there is sufficient evidence to satisfy the inevitable disclosure doctrine and/or to prove a claim for threatened misappropriation of trade secrets, at issue will be whether the alleged trade secret(s) give IBM an economic advantage over competitors by virtue of it being secret (to IBM). In other words, one of the key questions in this case is whether IBM’s diversity initiatives can be considered a trade secret.

Stay tuned for the latest developments.