A New Mexico court of appeals recently held that a former employee could not be permanently enjoined from disclosing trade secrets because his employment agreement provided for a five-year limit on the duty of confidentiality.
Lasen, Inc. (“Lasen”), a company that uses trade secret helicopter-mounted LIDAR imaging technology to detect methane gas leaks in natural gas pipelines, sued a former research scientist who wrote the source code for the company’s signature technology. Lasen alleged that the former employee stole the source code and other crucial information as well as deleted Lasen’s copies following his termination in 2009. As a result, Lasen was unable to update its LIDAR technology because it could not decipher the source code. Lasen also alleged that the former employee used its trade secrets in seeking employment with a direct competitor. After a bench trial, the court found the former employee did not misappropriate Lasen’s trade secrets, but he did breach his fiduciary duty and wrongfully retained intellectual property and trade secrets that belonged to Lasen. Therefore, the court permanently enjoined the former employee from disseminating or retaining any of Lasen’s trade secrets (the parties had stipulated that the source code was trade secret).
But on appeal, the former employee successfully argued that the permanent injunction improperly extended the five-year prohibition on sharing Lasen’s trade secrets that he agreed to in his employment contract. The Court of Appeals agreed, explaining that the New Mexico Uniform Trade Secret Act only authorized injunctions to the extent necessary to prevent a party from deriving an unfair commercial advantage from another party’s trade secrets. Because Lasen itself agreed to limit the former employee’s duty of confidentiality to five years following his termination—and because five years has already passed since that termination—the appellate court reversed the injunction.
Although this case was brought under the New Mexico version of the UTSA, the court’s decision is a warning to employers to draft employment agreements with the understanding that their terms may limit the company’s legal remedies down the road.
Lasen, Inc. v. Tadjikov, 2020-NMCA-006, ¶ 32, 456 P.3d 1090, 1099, cert. denied (Jan. 7, 2020)