Transcript Protecting the Crown Jewels Customers, Trade Secrets and

How to Protect the Company’s Crown
Jewels – Customers & Trade Secrets –
Against Unfair Competition
William M. Corrigan, Jr.
Armstrong Teasdale LLP
One Metropolitan Square
St. Louis, Missouri 63102
314.621.5070
[email protected]
Public Perception and Unfair Competition
“Some companies use non-competes as a retention tool to hang
over employees’ heads.”
The New York Times
“It isn’t unusual for employers to pursue legal action…to protect
against the loss of trade secrets…but these cases usually
settle out of court.”
Wall Street Journal
Non-Compete Agreements
Drafting with an Eye for Enforcement
1. Non-solicit v. Non-competes
•
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Protection needed
Enforcement
2. Time limitations justified by the time necessary to
protect company
Drafting with an Eye for Enforcement
3. Geographic scope consistent with the employee’s work area
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Keeps the focus on where the harm is
4. Consideration
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New v. current employee
Drafting with an Eye for Enforcement
5. Attorneys’ fee + costs in the event of breach
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Creates additional leverage for enforcement
6. Blue pencil authority to allow the court to refashion
questionable terms
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Authorizes judicial flexibility
7. Forum Selection Clause
8. Choice of Law Provision
Building a Successful Noncompete Case –
5 Steps to a Winning Strategy
1. Well-Drafted Noncompete
2. Contract Execution:
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Signature of employee
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Employee’s opportunity to consult
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Q&A session
Building a Successful Noncompete Case –
5 Steps to a Winning Strategy
3. End of Employment: reaffirmation of obligations
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Contract affirmation to employee
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Exit interview – identify employee’s future plans
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Create documentation
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Follow-up letter
Building a Successful Noncompete Case –
5 Steps to a Winning Strategy
4. Pre-Litigation Investigation: gather the facts
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Demand letters
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Customer loss analysis
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Interviews – customers/employees
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Computer forensic analysis
Building a Successful Noncompete Case –
5 Steps to a Winning Strategy
5. Litigation: key strategy decisions
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Jurisdiction
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TRO/Injunction/Damages
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Expedited discovery
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Naming new employer
Trade Secret Litigation = “High Stakes”
•
In 2007, 8th Circuit affirms $2 million verdict for actual
and punitive damages
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In 2004, 8th Circuit remits punitive verdict to $7 million
Missouri Uniform Trade Secrets Act
Provides remedies for misappropriation of trade secrets
with or without a non-compete agreement
Elements to Recover
• The information at issue constitutes a trade secret;
• The existence of actual or threatened misappropriation
by the defendant;
• The plaintiff took reasonable steps to maintain the
information’s secrecy.
What is a Trade Secret?
• The Act defines a trade secret as “technical or non-technical
data, a formula, pattern, compilation, program, device, method,
technique or process that derives independent economic value,
actual or potential, from not being generally known to, and not
being readily ascertainable by proper means by other persons
who can obtain economic value from its disclosure or use.”
Examples of Trade Secrets:
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A price book containing detailed compilation of customer, product
and price information. Lyn-Flex West, Inc. v. Dieckhaus, 24 S.W.3d
693 (Mo.App. 1999)
Customer lead sheets and loan files. Conseco Financial Services
Corp. v. North American Mortgage Co., 381 F.3d 811 (8th Cir. 2004)
A list of customers and a code for determining discounts, rebates or
other concessions in a price list. Mid-States Paint & Chemical Co.
v. Her, 746 S.W.2d 613 (Mo.App. 1988)
What is Misappropriation?
• Misappropriation is the acquisition, disclosure or use of a trade
secret with knowledge that it was acquired by “improper
means.”
• “Improper means” includes “theft, bribery, misrepresentation,
breach or inducement of a breach of a duty to maintain
secrecy…”
Reasonable Steps to Maintain Confidentiality
1.
2.
3.
4.
5.
6.
7.
Confidentiality agreement
Confidentiality policy
“Confidential Documents” stamp
Passwords
Locked cabinets
Prohibit copying
Exit interview
Remedies Available
• Injunctive Relief
The court may enter an injunction for a reasonable time to
eliminate any commercial advantage that would be derived
from the misappropriation.
• Compensatory Damages
• Punitive Damages