Opinion ID: 2371423
Heading Depth: 4
Heading Rank: 2

Heading: Inevitable Disclosure / Threatened Disclosure

Text: Concluding that LeJeune misappropriated trade secrets by acquiring them improperly does not end our inquiry with respect to whether the Circuit Court's injunction was appropriate in this case. Injunctive relief, by its nature, addresses only what could happen in the future and cannot remedy misconduct, such as the improper acquisition of trade secrets, that occurred in the past. In fact, the injunctive remedies of Section 11-1202(a) of MUTSA provide no remedy at all for the past misappropriations. In other words, if LeJeune already had misappropriated the trade secrets and returned them, the court cannot craft a injunction to reverse time and erase whatever harm LeJeune caused by taking the trade secrets without consent. Nevertheless, MUTSA's injunctive remedies could serve to protect Coinco if the evidence demonstrates a likelihood of some future misappropriation. As we stated previously, MUTSA permits a court to enjoin either (1) actual or threatened acquisition of a trade secret by improper means or (2) actual or threatened disclosure of trade secrets. With respect to the first category, the evidence clearly is insufficient to support a finding that LeJeune continues to acquire trade secrets improperly or that he has threatened other acquisition of Coinco's trade secrets by improper means. As to the second category, the record does not reveal any evidence that LeJeune actually had disclosed Coinco's trade secrets and that an injunction is necessary to stop that conduct. The sole question in the case at bar, therefore, is whether any threatened future disclosure or use of a trade secret justifies an injunction at this stage of the proceedings. [8] The Circuit Court, however, did not make a finding of threatened disclosure of Coinco's trade secrets. Rather, it decided to issue the preliminary injunction based on a theory known as inevitable disclosure. In making its ruling, the trial judge stated: I know I don't have to make a final ruling on whether the inevitable disclosure doctrine applies or not, but it is the court's position that with the knowledge that [LeJeune] has, it would be inconceivable to the court how he could do his job as the national accounts representative for the amusement industry without considering or weighing or taking into consideration the information that he acquired while he was employed with Coinco, and so for that reason, I do believe ... that [Coinco] will suffer irreparable injury. The theory of inevitable disclosure has been applied in courts outside of Maryland to enjoin a departing employee from working for a competitor when the court is persuaded that it is inevitable that the departed employee will use or disclose trade secrets in his or her work for the competitor. Babirak at 198. Put another way, inevitable disclosure cases are so named because they are based on the original employer's claim that a former employee who is permitted to work for a competitor willeven if acting in the utmost good faithinevitably be required to use or disclose the former employer's trade secrets in order to perform the new job. LAWRENCE I. WEINSTEIN, Revisiting the Inevitability Doctrine: When Can a Former Employee Who Had Never Signed a Noncompete Agreement nor Threatened to Use or Disclose Trade Secrets Be Prohibited from Working for a Competitor?, 21 AM. J. TRIAL ADVOC. 211, 212 (1997) (hereinafter  Weinstein ). Another commentator explained that the doctrine arises often when the former employee did not sign a noncompete agreement: Significantly, the inevitable disclosure doctrine is utilized in cases where the employee has not signed, or has even refused to sign, a non-competition agreement or non-disclosure of proprietary information agreement with his prior employer, and where the employee has not threatened, directly or indirectly, to use or disclose the trade secrets of his former employer to his new employer. Babirak at 198. LeJeune claims that, because this Court has not recognized the theory of inevitable disclosure, the Circuit Court erred in using it as a ground for issuing the preliminary injunction limiting his employment at Mars. LeJeune argues, however, that, even if this Court decides to adopt inevitable disclosure, it should not be applied to his case. According to LeJeune, any trade secrets that LeJeune may have acquired while working in the Vending Channel at Coinco would not be useful to him while working in the Amusement Channel at Mars. Disclosure of the vending trade secrets, therefore, is not inevitable in LeJeune's opinion. According to Coinco, however, inevitable disclosure, although not expressly recognized in Maryland, was correctly applied in this case because it is a form of threatened misappropriation under MUTSA. Coinco claims that LeJeune inevitably would disclose his extensive knowledge about Coinco's business strategies while working for Mars, giving his new employer an unfair competitive advantage. This is so, in Coinco's view, because LeJeune has demonstrated a lack of candor and a willingness to use or disclose trade secrets. Coinco believes, therefore, that the theory of inevitable disclosure is appropriate in this case because LeJeune understands Coinco's strategic plan for the Amusement Channel, the market on which he would focus at Mars as a National Accounts Representative for the Amusement Industry. We disagree with Coinco and decline to adopt the theory of inevitable disclosure under the present circumstances. Long before the adoption of the Uniform Act, the first reported cases applying inevitable disclosure involved extraordinary situations in which a company tried to guard the secrecy of some technology that had propelled the company into industry leadership. See Allis-Chalmers Manufacturing Co. v. Continental Aviation & Engineering Corp., 255 F.Supp. 645 (E.D.Mich.1966); E.I. duPont de Nemours & Co. v. American Potash & Chemical Corp., 200 A.2d 428 (Del.Ch.1964); B.F. Goodrich Co. v. Wohlgemuth, 117 Ohio App. 493, 192 N.E.2d 99 (1963); [9] see also Weinstein at 223. Since the Uniform Act's adoption and widespread recognition by the states, the most notable case involving inevitable disclosure is PepsiCo, Inc. v. Redmond, 54 F.3d 1262 (7th Cir.1995). In that case, PepsiCo sought to enjoin one of its former senior executives, Redmond, from working for Quaker Oats Company, PepsiCo's rival in the sports beverage market. Id. at 1264. While at PepsiCo, Redmond had access to confidential marketing strategies and pricing architecture. Id. at 1265. Redmond continued to work for PepsiCo while he secretly negotiated for employment with Quaker. Redmond accepted a senior sales position at Quaker and, when he informed PepsiCo of that decision, misrepresented the nature of his new position. Id. PepsiCo sued and obtained a preliminary injunction, barring Redmond from assuming any duties with Quaker relating to beverage pricing, marketing, and distribution. Id. at 1263. On appeal before the Seventh Circuit, PepsiCo argued that Redmond would inevitably disclose trade secrets acquired at PepsiCo because, at Quaker, he would be involved significantly in the marketing, pricing, and distribution of sports beverages. Id. at 1266. The court of appeals agreed, affirming the injunction and holding that a plaintiff may prove a claim of trade secret misappropriation by demonstrating that defendant's new employment will inevitably lead him to rely on the plaintiff's trade secrets. Id. at 1269. The appellate court accepted the district court's reasoning that unless Redmond possessed an uncanny ability to compartmentalize information, he would necessarily be making decisions about [Quaker's beverages] by relying on his knowledge of [PepsiCo's] trade secrets. Id. No court interpreting the provisions of MUTSA has applied the theory of inevitable disclosure. See Padco Advisors, 179 F.Supp.2d at 611 (The doctrine of inevitable disclosure has not been expressly adopted by the Maryland state courts.). Among other courts, including those interpreting other versions of the Uniform Act, the theory remains the subject of considerable disagreement. Compare Whyte v. Schlage Lock Co., 101 Cal.App.4th 1443, 125 Cal.Rptr.2d 277 (2002) (rejecting the inevitable disclosure doctrine after surveying the cases that have considered the theory), Del Monte Fresh Produce Co. v. Dole Food Co., 148 F.Supp.2d 1326 (S.D.Fla.2001) (same), Bayer Corp. v. Roche Molecular Systems, Inc., 72 F.Supp.2d 1111 (N.D.Cal.1999) (same), and EarthWeb, Inc. v. Schlack, 71 F.Supp.2d 299 (S.D.N.Y.1999) with Strata Marketing, Inc. v. Murphy, 317 Ill.App.3d 1054, 251 Ill.Dec. 595, 740 N.E.2d 1166 (2000), PepsiCo, Inc. v. Redmond, 54 F.3d 1262 (7th Cir.1995), Merck & Co., Inc. v. Lyon, 941 F.Supp. 1443 (M.D.N.C.1996), and Uncle B's Bakery, Inc. v. O'Rourke, 920 F.Supp. 1405 (N.D.Iowa 1996); see also Comment, An Overview of Individual States' Application of Inevitable Disclosure: Concrete Doctrine or Equitable Tool?, 55 SMU L. REV. 621 (2002); Babirak at 198-99 (stating that courts do not agree about the application of inevitable disclosure). The court in Whyte v. Schlage Lock Co., 101 Cal.App.4th 1443, 125 Cal.Rptr.2d 277 (2002) recently presented a comprehensive discussion of the theory within the context of California law. Schlage Lock Company competed with Kwikset Corporation in the business of manufacturing and selling locks and related products to retailers. Id. at 1447, 125 Cal.Rptr.2d 277. The Home Depot, one of the largest retailers of these products, accounted for a large percentage of Schlage's sales. As Schlage's vice-president of sales, Whyte was responsible for sales to several large retailers, including The Home Depot. Id. Although Whyte had signed a confidentiality agreement as to Schlage's proprietary information, he had not signed a covenant not to compete. Whyte was lured to join Kwikset, and Schlage sued, seeking an injunction based on the theory of inevitable disclosure. Id. at 1448, 125 Cal.Rptr.2d 277. After surveying the cases that have considered the doctrine, the court opted to join those jurisdictions that have rejected it: The decisions rejecting the inevitable disclosure doctrine correctly balance competing public policies of employee mobility and protection of trade secrets. The inevitable disclosure doctrine permits an employer to enjoin the former employee without proof of the employee's actual or threatened use of trade secrets based upon an inference (based in turn upon circumstantial evidence) that the employee will use his or her knowledge of those trade secrets in the new employment. The result is not merely an injunction against the use of trade secrets, but an injunction restricting employment. Id. at 1461-62, 125 Cal.Rptr.2d 277 (emphasis added). The application of the doctrine, the court stated, `creates a de facto covenant not to compete' and `runs counter to the strong public policy in California favoring employee mobility.' Id. at 1462, 125 Cal.Rptr.2d 277 (quoting Bayer Corp., 72 F.Supp.2d at 1120). The court continued: The chief ill in the covenant not to compete imposed by the inevitable disclosure doctrine is in its after-the-fact nature: The covenant is imposed after the employment contract is made and therefore alters the employment relationship without the employee's consent. When, as here, a confidentiality agreement is in place, the inevitable disclosure doctrine in effect convert[s] the confidentiality agreement into such a covenant [not to compete]. Or, as another federal court put it, a court should not allow a plaintiff to use inevitable disclosure as an after-the-fact noncompete agreement to enjoin an employee from working for the employer of his or her choice. Id. at 1462-63, 125 Cal.Rptr.2d 277 (citations omitted); see also EarthWeb, 71 F.Supp.2d at 311 ([S]uch retroactive alterations [as a result of applying inevitable disclosure] distort the terms of the employment relationship and upset the balance which courts have attempted to achieve in construing non-compete agreements.). The court was disturbed that the inevitable disclosure doctrine could rewrite[ ] the employment agreement by providing the employer with the benefit of a contractual provision it did not pay for, while the employee is bound by a court-imposed contract provision with no opportunity to negotiate terms or consideration. Id. at 1463, 125 Cal.Rptr.2d 277. We find this reasoning persuasive, especially as applied to the circumstances in the case before us. Maryland has a policy in favor of employee mobility similar to that of California. See Becker v. Bailey, 268 Md. 93, 299 A.2d 835 (1973); Tawney v. Mutual System of Maryland, Inc., 186 Md. 508, 47 A.2d 372 (1946). Furthermore, Coinco decided not to enter into a confidentiality agreement or a covenant not to compete with LeJeune. To recognize inevitable disclosure in this case would allow Coinco the benefit of influencing LeJeune's employment relationship with Mars even though Coinco chose not to negotiate a restrictive covenant or confidentiality agreement with LeJeune. See International Business Mach. Corp. v. Seagate Technology, Inc., 941 F.Supp. 98, 101 (D.Minn.1992) (A claim of trade secret misappropriation should not act as an ex post facto covenant not to compete.). Adopting the theory also would tend to permit a court to infer some inevitable disclosure of trade secrets merely from an individual's exposure to them. See H & R Block Eastern Tax Servs. Inc. v. Enchura, 122 F.Supp.2d 1067, 1076 (W.D.Mo.2000) (stating that no inference of inevitable disclosure can flow from exposure to trade secrets). For these reasons, we conclude that the theory of inevitable disclosure cannot serve as a basis for granting a plaintiff injunctive relief under MUTSA.