Managing Marine Technology: Can An Employee Be Prohibited From Working For A Competitor
Authors: Hodgson Stephen S. 
Published: October 2008

I. Introduction

Cement Company developed a proprietary method for cementing wells drilled in deep water that has been highly successful. A technical manager instrumental in the development of the proprietary method announced plans to accept a position as vice president of research and development at Competitor Cement, Inc. Corporate officers at Cement Company are concerned that the technical manager will introduce the proprietary method to Competitor Cement, Inc. What can Cement Company do to prevent the disclosure of its proprietary method to Competitor Cement, Inc.? Can Cement Company prevent the technical manager from working as vice president of research and development at Competitor Cement, Inc.?

The purpose of this paper is to provide an analytical framework for addressing these questions. An employee, the technical manager in this example, is generally free to leave one employer and accept a position at a new employer and can use his general knowledge, skills and experience.1 However, the employee cannot rightfully use a former employer's trade secrets for the benefit of anyone other than the former employer, including himself and a new employer.2

In this example, to determine whether the technical manager can be prevented from accepting the position as vice president of research and development at Competitor Cement ("Competitor"), one first needs to determine whether Cement Company's proprietary method qualifies for trade secret protection. This will be determined by considering the definition of a trade secret and requirements for qualification for trade secret status. If indeed the proprietary method qualifies for trade secret protection, then one determines whether the technical manager has knowledge of the trade secrets, and if so, whether he learned those trade secrets as a result of his employment with Cement Company ("Cement"). If the technical manager learned Cement Company's trade secrets as a result of his employment with Cement Company, then those trade secrets should not be disclosed to Competitor Cement.

To prevent the disclosure of the trade secrets to Competitor Cement, officials at Cement Company should have an exit interview with the technical manager and emphasize the ongoing obligation that the technical manager has to not use or disclose Cement Company's trade secrets.3 Cement officials can also send a letter to Competitor stating that the technical manager has knowledge of Cement's trade secrets and that Competitor should not employ the technical manager in a position where it will be likely that Cement's trade secrets will be disclosed to Competitor.4

Cement officials may continue to find indications that lead them to believe that the technical manager will disclose Cement's trade secrets to Competitor and use those trade secrets for the benefit of Competitor. If so, Cement officials can analyze the threat of disclosure and consider filing a lawsuit to prevent the disclosure.

II. Is The Proprietary Method A Trade Secret?

The first step in determining whether the technical manager can be prevented from working for Competitor is to determine whether Cement has a trade secret. The definition of a trade secret provides a starting point, and the definition used in Texas is similar to the definition used in many political jurisdictions.