The Utah Supreme Court ruled that a company made a showing of irreparable harm, supporting a grant of summary judgement, based on a former employee’s theft of trade secrets.

Background

In 2008, InnoSys hired Amanda Mercer as an engineer immediately following her graduation from the University of Utah. Based on its standard practice, the company had Mercer sign a nondisclosure agreement. The NDA required Mercer not to “copy, transmit, reproduce, summarize, quote or make any commercial or other use of any Protected Information, except for the benefit of [InnoSys].”

The NDA also required Mercer to “return to [InnoSys] all items and material in [Mercer’s] possession or control which contain any Protected Information” when she was terminated.

The NDA included a clause which Mercer acknowledged that “it may be impossible to measure in money the damage to [InnoSys] resulting from [a] breach [of the NDA],” and thus agreed that “in the event of any such violation or threatened violation, [InnoSys] shall be entitled to an injunction. . . to minimize or prevent damage to [InnoSys].”

The company eventually fired Mercer based on her poor job performance. She filed a claim for unemployment benefits with the state’s Department of Workforce Services. Her claim was initially denied, and she appealed. With her appeal, she submitted a number of documents, including company emails and a confidential business plan.

As the Court noted, “InnoSys was displeased.” It asserted that Mercer’s possession and disclosure of the materials instituted the breach of the NDA.

Gmail

Mercer initially insisted that she had “permission from the IT department” to forward the emails to her personal Gmail account, although she later admitted she had no such permission. She initially said that she had the confidential business plan at home because she was working on it over the weekend before she was fired, but later admitted that she copied it on the day of her termination.

After the hearing, Mercer deleted all her emails and files with company information and informed the company about this.

InnoSys then sued Mercer for breach of the NDA.

Mercer filed a motion for summary judgment, asserting that InnoSys’s claims failed in light of its failure to establish any actual or threatened harm.

The District Court granted Mercer’s motion, entered sanctions against InnoSys, and awarded attorney’s fees to Mercer.

One basis for the sanctions was that InnoSys failed to present a copy of the original NDA signed by Mercer.

Irreparable Harm

When the case eventually reached the state Supreme Court, the Court noted that:

[i]nventions cannot be patented in other countries after public disclosure, and cannot be patented in the US after the expiration of a one year grace period following a public disclosure.

InnoSys submitted a declaration from an intellectual property attorney who explained that

[t]he Google Terms of Service associated with Gmail accounts in force at the time of this statement do cast a colorable cloud on the value of confidential intellectual property transmitted using a Gmail account.

For that and other reasons, the Court concluded that InnoSys made an ample showing of irreparable harm.

The case is InnoSys, Inc. v. Mercer.

Takeaway

Most trade secret cases are brought under state law, and this decision is binding only in Utah. However, the court’s reasoning may prove persuasive in other jurisdictions in cases where employees use Gmail or similar email services to forward company IP.

This case also emphasizes the importance of good corporate record-keeping – including the need to keep (and be able to find when needed) original copies of NDA’s.

About Us

Leech Tishman’s Intellectual Property Group is based in Pasadena, California with a team of highly-regarded legal professionals with prosecution and litigation expertise in the fields of patent, trademark, copyright, and trade secrets.

Please also visit us online for more information about our services.

Photo Attribution: “MountVanCott” by FancyPants – Own work. Licensed under Public Domain via Commons.

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