Managing the Risk of Trade Secret Loss Due to Job Mobility in an Innovation Economy with the Theory of Inevitable Disclosure

By Reder, Margo E. K.; O'Brien, Christine Neylon | The Journal of High Technology Law, July 2012 | Go to article overview

Managing the Risk of Trade Secret Loss Due to Job Mobility in an Innovation Economy with the Theory of Inevitable Disclosure


Reder, Margo E. K., O'Brien, Christine Neylon, The Journal of High Technology Law


III. Representative Inevitable Disclosure Cases

The doctrine of inevitable disclosure is best considered in the context of a representative sample of decisions. The cases illustrate how courts' reliance on the doctrine often overprotects trade secrets while simultaneously leaving departing employees out of work. (180) Courts agreeing with an employer's perspective construe the balance of equities in favor of employers over employees. (181) Even when employees sign a hygiene agreement with a new employer, each agreeing not to use or disclose the former employer's trade secrets, the doctrine of inevitable disclosure forecloses the employee's ability to work for a competitor, without any reasonableness standard governing review of allegations concerning inevitable disclosure. (182)

A. IBM v. Papermaster--Federal District Court in New York Applying New York Law

IBM v. Papermaster (183) illustrates the significance of one court's excessively broad interpretation of inevitable disclosure and the outsize impact choice of law has on the outcome. (184) In this case the employee departed IBM, based in New York, for Apple, based in California, for a job unlike the IBM work and where the degree of competition between the two companies was questionable. (185) The case highlights the significant prohibitions on employee mobility resulting from issuance of a temporary restraining order based on New York's recognition of the inevitable disclosure doctrine. (186) The case was brought in federal district court in New York, which had diversity jurisdiction on IBM's motion for a preliminary injunction. (187)

Mark Papermaster worked primarily in product design and development roles in IBM's systems and technology group from 1991 until 2006. (188) His positions included that of Vice President of the Microprocessor Technology Development where he became the top expert in IBM's "Power" architecture, and later as Vice President of IBM's Blade Development Unit within Systems and Technology. (189) In 2006, when Papermaster joined IBM's elite Integration and Values team that developed corporate strategy, he had access to confidential information including strategy and marketing, product development and business opportunities, and consequently he was required to sign a non-compete agreement restricting him from working for a competitor for one year after termination of employment within the same geographic areas for which he had job responsibilities at IBM. (190) He also agreed to a two-year non-solicitation covenant requiring him to forego soliciting IBM customers with which he had done business in the year prior to termination and also prohibited from soliciting IBM employees for two years after termination. (191) Papermaster also served on a leadership team that recruited IBM's talented technical workforce. (192) Immediately following his departure on October 24, 2008, IBM secured a temporary restraining order prohibiting Papermaster from starting at Apple due to the risk of inevitable disclosure of IBMs trade secrets. (193)

IBM immediately filed a motion for a temporary restraining order after it became aware of Papermaster's employment at Apple. (194) IBM asserted that Papermaster's employment at Apple would irreparably harm IBM due to his possession of trade secrets and sensitive information. (195) The court noted the following factors associated with a trade secret determination:

(1) the extent to which the information is known outside of the business; (2) the extent to which it is known by employees and others involved in the business; (3) the extent of measures taken by the business to guard the secrecy of the information; (4) the value of the information to the business and its competitors; (5) the amount of effort or money expended by the business in developing the information; (6) the ease or difficulty with which the information could be properly acquired or duplicated by others. …

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