In 2016, the Defend Trade Secret Act, 18 U.S.C. § 1836 (the “DTSA”), passed Congress and went into effect. At its heart, it effectively codified the Uniform Trade Secrets Act at the federal level, creating a federal cause of action. Prior to the enactment of the DTSA, a large body of federal common law had developed around the remedies available to a plaintiff after a defendant allegedly misappropriated a trade secret, including the “inevitable disclosure doctrine.” Through this doctrine, even in the absence of a non-compete or non-solicitation agreement, a court could fashion a remedy that enjoined a defendant from performing certain or all work on behalf of their new employer. The seminal decision on the inevitable disclosure is PepsiCo. v. Redmond, a 1995 Seventh Circuit decision. 54 F.3d 1262 (7th Cir. 1995). Through PepsiCo., the Seventh Circuit found that a court had the inherent power to enjoin a former employee from working with a new employer, in whole or in part, if that defendant misappropriated trade secrets, and their conduct was duplicitous in so doing. Following this decision, numerous courts throughout the country have adopted the inevitable disclosure doctrine. See Phoseon Technology, Inc. v. Heathcote, 2019 WL 7282497, at *11 (D. Or. 2019) (identifying states adopting the inevitable disclosure doctrine).
However, with the passage of the DTSA, one of the provisions contained within the DTSA created uncertainty as to the ongoing viability of the inevitable disclosure doctrine. In particular, 18 U.S.C. §1836(b)(3) states:
Remedies.—In a civil action brought under this subsection with respect to the misappropriation of a trade secret, a court may—
(A) grant an injunction—
(i) to prevent any actual or threatened misappropriation described in paragraph (1) on such terms as the court deems reasonable, provided the order does not—
(I) prevent a person from entering into an employment relationship, and that conditions placed on such employment shall be based on evidence of threatened misappropriation and not merely on the information the person knows
(Emphasis added). And to that end, some courts have determined that inevitable disclosure relief is unavailable under the DTSA as a result. See, e.g., IDEXX Labs., Inc. v. Bilbrough, 2022 WL 3042966, **5-6 (D. Me. Aug. 2, 2022) (discussing and collecting cases).
Late last week, though, the Northern District of Illinois in My Fav Electronics, Inc. v. Currie, 24-c-1959, 2024 WL 4528330 (N.D. Ill. Oct. 18, 2024) (Pallmeyer, J.), further muddied the waters on this question, when it enjoined the defendant Currie based on the inevitable disclosure doctrine. Specifically, the court entered a preliminary injunction enjoining the defendant from performing certain work, including soliciting former customers of the plaintiff, for a year from the date of the order, despite the fact that the defendant had not signed a non-compete or non-solicitation agreement with the plaintiff.
While the full extent of the defendant’s conduct is discussed in the court’s detailed opinion, for purposes of this article, defendant Currie’s conduct can be summarized as follows:
- Left plaintiff’s employ after perceiving to have been demoted;
- Following her demotion, she downloaded via email and external media scores of files from plaintiff;
- Attempted to hide such downloads by renaming files to appear to be personal in nature;
- Returned the plaintiff’s laptop computer in an unusable state, after allegedly “dropping it in the bathtub”;
- Allegedly retained the documents to defend herself if plaintiff was ever sued for purported unscrupulous conduct and allegedly turned over the documents to an attorney; and
- Denied accessing documents post-termination, despite metadata showing she had accessed several of the documents post-termination and at times that would suggest use on behalf of her new employer.
On this record, the court analyzed the extent to which defendant would be enjoined. It is important to note that Currie agreed to certain injunctive relief, including returning plaintiff’s property, and not using it further, but she argued against further injunctive relief (though her arguments more focused on the lack of trade secret status than the scope of the injunction).
Despite that, the court still determined that it had the power to enjoin defendant in a manner that, at least at first blush, would call into question the interplay between DTSA and PepsiCo. And while that is seemingly inconsistent with certain federal court decisions, the My Fav court’s decision actually appears to be wholly consistent with the statutory framework of the DTSA.
To wit, while the DTSA prohibits a court from “prevent[ing] a person from entering into an employment relationship,” the statute also appears to permit the court to place “conditions” “on such employment” “based on evidence of threatened misappropriation.” In other words, provided that a plaintiff can demonstrate that the defendant threatens continued misappropriation, the court may place conditions on that employment. And this, in turn, is the lynchpin of the PepsiCo. decision; i.e., based on the defendant’s prior conduct, they cannot be trusted to differentiate between information that must be protected from their prior employment and will “inevitably disclose” that information in performing their job on behalf of their new employer. 54 F.3d at 1271.
In this case, the My Fav court restrained Currie from “contacting, soliciting, or otherwise participating in the procurement of Apple device buyback services, any of [Plaintiff’s] existing customers”, which has the effect of “screen[ing]” defendant “from working on procurement matters related to [plaintiff’s] most important opportunities … but will not be restricted from performing job responsibilities unrelated to the confidential information at issue here.” 2024 WL 4528330, at *18. This decision seems to thread the proverbial needle between the inevitable disclosure doctrine and the DTSA’s prohibition on outright prevention of new employment. What this means, practically speaking, is that PepsiCo v. Redmond and the inevitable disclosure doctrine appear to be alive and well, provided that the court does not completely restrict the defendant’s employment and tailors the relief to prohibiting activities that would threaten the plaintiff’s trade secrets. For plaintiffs seeking injunctive relief against a former employee, the My Fav decision may provide a roadmap for tailoring the relief sought and should be considered heavily.
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