Search form

Utah Supreme Court Adopts Presumption of Harm in Trade Secret Litigation

By Conrad S. Kee
  • September 8, 2015

In a 3-2 decision, the Utah Supreme Court has held that there is a presumption of harm for claims made under the Utah Uniform Trade Secrets Act, Utah Code § 13-24-1, et seq., and for claims for breach of a non-disclosure agreement when a former employee takes confidential information or trade secrets from her recent employer. InnoSys v. Mercer, 2015 UT 80 (Aug. 28, 2015).

Background

Amanda Mercer, an engineer formerly employed by InnoSys, allegedly forwarded InnoSys’s confidential information to her Gmail account, copied a confidential business plan to a flash drive, and used some of that information as evidence in an unemployment hearing. The day after the hearing, Mercer claimed she deleted all of the emails and files.

InnoSys filed suit against Mercer asserting claims for misappropriation of trade secrets, breach of her non-disclosure agreement, and breach of fiduciary duty. Following rounds of discovery, Mercer prevailed on a summary judgment motion primarily on the grounds that InnoSys had not produced any evidence of actual or threatened harm in light of Mercer’s purported destruction of the information. Further, the trial court found that Mercer had not engaged in spoliation by purportedly deleting the files because she neither knew nor should have known that there was anticipated litigation. Finally, the trial court awarded sanctions against InnoSys.

Supreme Court Decision

The Utah Supreme Court reversed the trial court.

First, the Court concluded that the undisputed evidence shows Mercer had misappropriated the trade secrets:

(a) by disclosing them through emailing them to her Gmail account and disclosing them in the unemployment proceeding, and

(b) by unlawfully acquiring the business plan when she downloaded it.

In light of the prima facie case of misappropriation, the Court concluded there was a presumption of irreparable harm to InnoSys and the failure to quantify the harm was not fatal to InnoSys’s case. Mercer, theoretically, could rebut the presumption of harm, but the Court held there was no way she could meet her “formidable” burden in light of the evidence.

The Court further held that the same principles applied to establish damages under the breach of contract and breach of fiduciary duty claims. Accordingly, the Supreme Court also reversed the sanctions award.

Lessons

This case provides helpful lessons for employers to consider in protecting trade secrets and other confidential information and succeeding in litigation. First, InnoSys had Mercer sign a non-disclosure agreement at the time she was hired. Second, in addition to the range of forensic investigation available to InnoSys at the time Mercer misappropriated its trade secrets in 2010, as described in the decision, advances in technology now may provide additional options. Counsel might recommend preventive forensic work that may identify the alleged misappropriation even earlier, possibly permitting the employer to seek emergency injunctive relief before many issues over confidential information arise. Third, there may be alternative ways to quantify damages in trade secret litigation – even where a former employee claims to have destroyed the information after the alleged misappropriation came to light.

Jackson Lewis attorneys are available to answer inquiries regarding this case and other workplace developments.

©2015 Jackson Lewis P.C. This Update is provided for informational purposes only. It is not intended as legal advice nor does it create an attorney/client relationship between Jackson Lewis and any readers or recipients. Readers should consult counsel of their own choosing to discuss how these matters relate to their individual circumstances. Reproduction in whole or in part is prohibited without the express written consent of Jackson Lewis.

This Update may be considered attorney advertising in some states. Furthermore, prior results do not guarantee a similar outcome.

Jackson Lewis P.C. represents management exclusively in workplace law and related litigation. Our attorneys are available to assist employers in their compliance efforts and to represent employers in matters before state and federal courts and administrative agencies. For more information, please contact the attorney(s) listed or the Jackson Lewis attorney with whom you regularly work.

See AllRelated Articles You May Like

August 27, 2018

Non-Compete Covenants Must be Reasonable for Preliminary Injunction, Nevada Supreme Court Affirms

August 27, 2018

A non-compete agreement in Nevada “must be limited to the geographical areas in which an employer has particular business interests,” the Nevada Supreme Court has affirmed. Shores v. Global Experience Specialists, Inc., 134 Nev. Adv. Op. 61 (Aug. 2, 2018). The Court also concluded that when an employer seeks to enforce a non-compete... Read More

August 1, 2018

Massachusetts Legislature (Finally) Passes Non-Compete Law

August 1, 2018

The Massachusetts Legislature, at long last, has passed a bill regulating the use and enforcement of non-compete agreements in the private sector. Once “An Act relative to the judicial enforcement of noncompetition agreements” is signed by Governor Charlie Baker, it will take effect on October 1, 2018. The Legislature has attempted... Read More

April 20, 2018

Brazilian Labor Courts Continue to Emphasize Importance of Non-Compete Clause Limitations

April 20, 2018

A recent Brazilian labor court ruling clarified the procedural requirements for employers drafting non-compete clauses in employment agreements. Although the Brazilian Federal Constitution establishes “freedom of work,” and the Brazilian Industrial Property Law (Law 9.279/1996) prevents an employee from disclosing an employer’s... Read More