Alleged trade secret sparks employment litigation

A trade secret is a secret that has economic value or provides a competitive advantage over others in the same field which the holder, typically a company, takes reasonable measures to keep secret. Reasonable measures often include confidentiality clauses within termination agreements.

As many New Jersey businesses may know, trade secrets have become a prevalent risk for businesses, especially because of the regular turnover of at will employees in larger enterprises. In addition, employment litigation over trade secrets seldom starts with an FBI raid. However, that is exactly what happened with a company involved in building next generation aircraft including the F-35 and the since-scrapped Comanche helicopter.

At issue in the trade secret litigation is whether former company engineers improperly provided confidential information to subsequent employers. According to the company's standard termination agreement, an employee declares that they have turned over all technical data and software to the company.

In court documents, one of the engineers alleged that the company is simply trying to "make an example" of the engineers in order to discourage current employees from leaving the company in favor of their competitors.

This is a common tactic for companies, according to one expert. Even if the company's trade secret claim ultimately fails, the company can reap interim benefits such as blocking the former employee from working for a competitor during the litigation through a court injunction. In many cases, because of the slow pace of litigation and the rapid rate of progress, that delay can be long enough to protect the company's alleged trade secret during the brief window it actually confers a business benefit.

Source: The Plain Dealer, " Eaton's trade-secrets case began with a FBI raid," Alison Grant, Aug. 5, 2012

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