When an employee trusted with access to trade secret information leaves to join a competitor, many former employers have concerns. Merely warning a former employee and his/her new employer not to make use of the former employer’s “trade secrets and confidential information” may be insufficient to hold the new employer accountable for such employee’s transgressions, at least according to one New Jersey federal district court. As that court said in Givaudan Fragrances Corporation v. Krivda, decided October 25, 2013, “The onus is on the former employer to come forward and put the current employer on specific notice of trade secret protection, or else lose that protection. This burden includes immediately describing the alleged trade secret with precision so as to inform the defendant exactly what the plaintiff is alleging to have been misappropriated.” The court went on to grant partial summary judgment to defendant limiting plaintiffs to 34 of the 616 formulas of concern to the plaintiff because plaintiff had failed to fulfill its obligation to put defendant on notice of what trade secrets plaintiff contended were at issue by advising defendant specifically of the details of 582 of the formulas at issue. This is a duty that a plaintiff must fulfill by specific “disclosure at the outset of the litigation, if not before.”
Read literally, such a rule would create a real conundrum for trade secret owners. According to the court, plaintiff should have “disclosed the specification of each formula,” because “then appropriate discovery procedures could have precisely identified whether [defendant] had received any or all of the allegedly purloined formulas.” While that is true, and makes perhaps a certain amount of sense within any litigation, the court also suggested that such specificity may be required pre-litigation. But, informing a competitor pre-litigation and without the benefit of a protective order of, as the court noted, “exactly what the plaintiff is alleging to have been misappropriated” could itself amount to disclosure that ends the secrecy attendant to the protected information. Yet, relying on more general descriptions would seem insufficient to provide the sort of notice that the court in Givauden seemed to require. While the court in Givauden was dealing with a situation in which plaintiff’s discovery responses defining its trade secrets had remained throughout the litigation a bit too circumspect, the court’s language expressly goes beyond the litigation context to pre-litigation notice issues. In fact, the Givauden court, citing Fox v. Millman, 210 N.J. 401, 425-27 (2012), stated that “The law does not ‘impose on [subsequent employers] like Mane an affirmative duty to undertake an inquiry, independent of the information given to them by [the employee] as to the source’ of the employee’s work product. An employer is permitted to rely on the representations of the employee that no breach occurred without any further duty of inquiry. The employee’s contractual or fiduciary ‘duty to safeguard confidential information’ is not imputed to subsequent employers.” Because the Givauden court saw the law this way, it concluded that a subsequent employer’s duty would only arise upon being given sufficiently detailed information to require inquiry.
Despite Givauden, trade secret owners should be slow to provide a former employee’s new employer thedetailed specifics of the trade secrets of concern. Unilateral disclosure at the outset aimed at ameliorating suspected previous unauthorized disclosures seems ill-considered. Reading between the lines of Givauden, it seems that the court tired of plaintiff’s years-long, unvaried approach of lack of specificity. The lesson of Givauden is not, therefore, to disclose too early, but to avoid disclosing too late. Failing to disclose during the course of discovery, with a protective order in place, just smells funny to the court and leaves a bad taste in its mouth.
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Managing Director / Member of the Firm
