One of the nation’s largest home building companies applied to court for injunctive relief to prevent one of his former employees from misappropriating alleged confidential and trade secret information. He had worked for his company for over ten years in a senior position. Importantly, he was not subject to a non-compete agreement.
During his employment, the former employee signed a Human Resources Policies and Procedures Acknowledgement which contained provisions governing the access and protection of confidential and trade secret information. To further protect its proprietary and sensitive information, the company used a web-filtering program designed to trap emails which contained potentially confidential information.
Following his resignation, the employee accepted a position with a direct competitor.
Discussion of Confidential Information and Trade Secret Law in NJ
In deciding whether to issue a preliminary injunction against the employee, the court weighed four factors: (1) whether the employer had shown a reasonable probability of success on the merits; (2) whether the employer could be irreparably injured by denial of the relief; (3) whether granting preliminary relief will result in even greater harm to the employer; and (4) whether granting the preliminary relief will be in the public interest.
In this case, the court analyzed the most all-encompassing claim, misappropriation under the New Jersey Trade Secrets Act, N.J.S.A. 56:15-1, et seq. Under this Act, misappropriation is defined as:
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Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or
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Disclosure or use of a trade secret of another without express [*5] or implied consent of the trade secret owner by a person who: (a) used improper means to acquire knowledge of the trade secret; or (b) at the time of disclosure or use, knew or had reason to know that the knowledge of the trade secret was derived or acquired through improper means; or (c) before a material change of position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired through improper means. N.J.A.S. § 56:15-2.
The Act further provides that “[a] person who misappropriates a trade secret shall not use as a defense to the misappropriation that proper means to acquire the trade secret existed at the time of the misappropriation.” N.J.A.S. § 56:15-5.
Outcome of the Case
The court here did not enjoin the employee from using the generalized industry knowledge and even company specific information he obtained through his years of employment. This court did not restrict the use of information the employee retained by memory because the employer could not show a likelihood of success on the merits that such information was obtained through improper means, as required by the statute. The key language of this case was the term “improper means”. To be clear, the court draws a distinction between information learned from years of employment in the industry and information an employee directly and wrongfully takes in anticipation of a resignation.
In this case, the former employee admittedly left with thousands of internal documents, downloaded and copied in violation of corporate policy. The evidence supported the conclusion that the employee obtained this information with the intent of benefitting himself financially and harming the commercial interests of the former employer in favor of his new employer.
The court issued a narrow injunction which enjoined the employee and anyone else acting in concert with him, from directly or indirectly accessing, disclosing, reproducing or otherwise using the documents and electronic records obtained and retained improperly or otherwise using any information derived from those documents and electronic records. The injunction included relief to insure the injunction is complied with. However, the court did not bar the employee from using his general industry knowledge and even company specific information so long as that information was disclosed during the ordinary course of his many years of employment.
To discuss your NJ employment matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com. Please ask us about our video conferencing or telephone consultations if you are unable to come to our office.
By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, NJ Employment Law Attorney