employee beware: the irreparable damage of the inevitable

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1998

Employee Beware: The Irreparable Damage of the Inevitable Employee Beware: The Irreparable Damage of the Inevitable

Disclosure Doctrine Disclosure Doctrine

John H. Matheson University of Minnesota Law School, [email protected]

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Recommended Citation Recommended Citation John H. Matheson, Employee Beware: The Irreparable Damage of the Inevitable Disclosure Doctrine, 10 LOY. CONSUMER L. REV. 145 (1998), available at https://scholarship.law.umn.edu/faculty_articles/109.

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FEATURE ARTICLES

Employee Beware:the Irreparable Damage of theInevitable Disclosure Doctrine

By John H. Matheson

L IntroductionJohn H. I

For most of us, employment is our most Walter Richsignificant consumer activity. People shop for Corporate Lemployment just as they shop for goods and Minnesota Lservices. Generally, the at-will employment teaches coLdoctrine gives workers the freedom to leave Association:one company for another whenever they Corporate Fdetermine that the alternative employer is Contracts, aoffering the worker (a "consumer" of Closely-Hehemployment opportunities) a more attractive Publicly- Traemployment package or opportunity. Workers Drafting Bucompare wage rates, benefits, skills required, Documents.and restrictions in determining which job books and rpackage to "purchase" with their labor. As a business lasociety we also recognize employment as a frequent coiconsumer activity. Consumer protection laws lecturer. Prregulate workplace safety and health also is Of Cconditions, prescribe a minimum wage for some of Kaplan, 5workers, and specify remedies for workplace PA., Minnezrelated injuries, where he s

Today's businesses, on the other hand, corporate aioperate in an increasingly competitive global transactionseconomy where information is a key to success. graduate ofProfitability turns less and less on building a University Sbetter mousetrap and more and more on he was Edit,formulating and protecting better ideas, namely Review. Pritrade secrets. Trade secret law has evolved to email addreprotect these ideas from disclosure or <matheO01misappropriation. Courts have expanded theprotection of trade secret law beyondtraditional notions, such as formulas, processesand product specifications, to nontechnological

Loyola University Chicago School ofLaw • 145

Iatheson is the S.ey Professor ofaw at the University of.aw School, where herses in Businesss/Corporations,:inance, andnd seminars ond Corporations,ded Corporations, andsiness and Legal

He has published sixiumerous articles onv topics and is aitinuing educationofessor Mathesonounsel to the law firmtrangis and Kaplan,apolis, Minnesota,ecializes in thend businessarea. He is aNorthwesternchool of Law, whereor-in-Chief of the Lawofessor Matheson'sss is5maroon.tc.umn.edu>.

1998

business information, such as customer lists,marketing plans, and other commercialintangibles.

A critical issue arises when a worker withaccess to confidential business informationleaves one employer to work for a competitor.In one sense, the employee is simply actingrationally to increase his or her overallsatisfaction as a consumer of employment.From the former employer's perspective,however, the result of the employee's choicemay be sharing valuable trade secrets with thenew employer.

In circumstances where an employee movesto ajob similar to his or her previous job,employers sometimes seek to prevent theworker from accepting the new employment byarguing that the worker's new position willinevitably result in the disclosure of tradesecrets to the new employer. The disclosure oftrade secrets to the new employer is known asthe "inevitable disclosure doctrine." Somecourts have accepted this theory of "inevitabledisclosure," and have enjoined the employeefrom working at the new job, in effect creatingajudicially fashioned non-competitionagreement. This result may leave the employeewithout recourse, except to find work in a jobor industry unrelated to the former employer'sbusiness. Consequently, the worker's skills andmarketability are devalued. In essence, theemployer's information provides post-employment prophylactic protection at the costof the worker's loss of personal freedom.

This article argues that the inevitabledisclosure doctrine operates to harm theemployee/consumer like a latent defect in aproduct harms consumers. The employee'sinitial employment package does not reflect thecost that the employee ultimately may bear interms of restricted mobility. Because this cost is

hidden, workers cannot make rational decisionswhen comparing alternative employmentopportunities, which is particularly unfortunatesince employers have both the legal means andthe comparative information advantage toprotect themselves in advance by means ofnegotiated non-compete provisions.

An understanding of basic trade secret law,the remedies available to employers for tradesecret misappropriation, and the ways in whichemployers can protect themselves in advance iscrucial to exploring the inevitable disclosuredoctrine. Part II of this article explores thedevelopment of trade secret law and theremedies for misappropriation of trade secrets.Part III addresses the nature of the employmentrelationship and the means by which employerscan protect their confidential information andother trade secrets. Part IV analyzes theinevitable disclosure doctrine and proposes itsrejection when used for purposes of creating anex post facto restriction on worker mobility,arguing that the courts should not rush torescue employers who have not takenprecautions to protect themselves.

II. Trade Secrets and Remedies forMisappropriation

Trade secret law provides intellectualproperty protection that is different from thatprovided by patent' and copyright laws.2 Tradesecret law offers the possibility of substantialprotection for confidential information withrelative ease. For example, trade secretprotection does not require application formsor filing fees normally associated with patentsand copyrights. Generally, trade secret lawprovides a business or individual with a legalmethod to safeguard confidential informationby protecting "commercial intangibles."3

146 ° Loyola Consumer Law Review Volume 10, number 2

Employee Beware: the Irreparable Damage of the Inevitable Disclosure Doctrine

Balanced against this goal of protection isthe policy of free and open competition.4 Whilean understandable desire exists to acknowledgeownership of an alleged trade secret when itappears that another has copied it, unpatentedinformation is prevalent, and courts haverecognized that competition may not always befair. "Competition is ruthless, unprincipled,uncharitable, unforgiving--and a boon tosociety."5

A. The Evolution of Trade SecretProtection

The theory of trade secret protectionevolved under common law. Early trade secretdecisions varied from state to state, with onlymoderate uniformity in interpretation.However, the American Law Institutepublished the Restatement (First) of Torts("First Restatement") in 1939. Section 757 ofthis Restatement represented the first attemptto set forth a national definition of tradesecrets, requirements for protection, andremedies for misappropriation.6 Although theRestatement (Second) of Torts (1978)purposefully omitted numerous sections of theFirst Restatement, including those relating totrade secrets, courts continued to apply thedefinitions provided by § 757 of the FirstRestatement. The recently approvedRestatement (Third) of Unfair Competition(1995) presents a revised statement of tradesecret law.

While § 757 in the First Restatementprovided some guidance and uniformity totrade secret law, confusion remained. In 1979,the National Conference of Commissioners onUniform State Laws approved a Uniform TradeSecrets Act ("UTSA"). The legislatures ofthirty-nine states and the District of Columbia

have adopted the UTSA, with varyingmodifications.7 Two different perspectivesregarding the underlying basis of the UTSAexist. On one hand, some courts have foundthat the First Restatement was the basic sourcefor the UTSA's definition of trade secrets.8

These courts interpret the UTSA as applyingthe principles set forth in § 757 of the FirstRestatement. 9 However, other courts view theUTSA as merely displacing conflicting tort,restitutionary, and other laws regarding civilliability for misappropriation.10

B. Defining Trade Secrets

Analysis of trade secret protection mustbegin by identifying what is meant by "tradesecret." According to comment (b) of § 757 ofthe First Restatement, a "trade secret" is:

[A]ny formula, pattern, device orcompilation of information which isused in one's business, and whichgives him an opportunity to obtainan advantage over competitors whodo not know or use it. It may be aformula for a chemical compound,a process of manufacturing,treating or preserving materials, apattern for a machine or otherdevice, or a list of customers.1'

The UTSA defined "trade secret" in asomewhat more substantive manner than theFirst Restatement:

Trade secret means information,including a formula, pattern,compilation, program, device,method, technique or process, that:(i) derives independent economic


value, actual or potential, from notbeing generally known to, and notbeing readily ascertainable by propermeans by, other persons who canobtain economic value from thedisclosure or use, and(ii) is the subject of efforts that arereasonable under the circumstancesto maintain its secrecy. 12

The UTSA's definition of trade secret thusexpands upon the somewhat theoretical criteriaof the First Restatement's definition andarticulates a more objective means fordetermining whether a given item ofinformation constitutes a "trade secret."

C. Elements of a "Trade Secret"

1.Value

Trade Secrets Possess Economic

For trade secrets to be protected under theUTSA, the trade secret must provide the ownerwith some commercial advantage or economicvalue. The term "economic value" refers to the"value of the information to either the owner ora competitor," including information "thatwould be useful to a competitor and wouldrequire cost, time, and effort to duplicate."' 3 Inother words, where a competitor wouldmaterially benefit from knowing theinformation and would have to spend time andmoney to create the same informationindependently (if not for disclosure of theinformation), the information has economicvalue.14 A former employer can provecommercial or economic value circumstantiallyby proving a former employee's intent to use oractual use of the information, i" or byestablishing "the time and money...

148 * Loyola Consumer Law Review

reasonably expended in developing"' 6 theinformation in question.

2. Information Not GenerallyKnown or Readily Ascertainable

To be accorded trade secret status under theUTSA, the information in question must not bereadily ascertainable by proper means.Specifically, if competitors can discover theallegedly proprietary information by merelyexamining an existing product that is publiclyavailable and incorporates the trade secret, theinformation is not a trade secret under theUTSA. Whether information is readilyaccessible or easily discoverable by propermeans is a question of fact. Discovering theaccessibility of information requires a factualdetermination of the time and money employedto develop the information. Also, courts mustdiscover how much time and money acompetitor would expend in independentlydeveloping the information.17 Publication of thetrade secret information destroys its status as atrade secret;' 8 however, such disclosure mustbe sufficient "to translate the theoreticalconcepts described into practical application."19

3. Reasonable Efforts to MaintainSecrecy

The owner of the information must utilizereasonable efforts to maintain its secrecy; thetrade secret must be, in fact, secret.20 Decidingwhether information was intended to be secretentails a number of factual inquiries. As astarting point, the "reasonable efforts tomaintain secrecy" element does not require theowner to maintain absolute secrecy over itsinformation; only partial secrecy or qualifiedsecrecy is required. 2' Furthermore, "a trade

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secret does not lose its character when theowner confidentially discloses it to agents oremployees." Agents and employees need toknow these "trade secrets" in order to convertthe information into value for the company. 22

Courts have identified a number of factors indetermining whether a person or company hasemployed reasonable steps to maintain secrecy:(1) keeping secret documents in locked files;23

(2) providing guarded entrances to a plant;24 (3)restricting visitors and requiring badges for allemployees; 25 (4) using non-disclosureagreements with subcontractors; 26 and (5)incorporating a system of passwords to protectsecrecy of computer data and software.27

The owner of an asserted trade secret mustactually enforce its secrecy policy. Merepossession of subjective intent to treatsomething as secret does not suffice.28 Whenreviewing these secrecy steps, courts requireonly reasonable precautions.29 Companies neednot "guard against the unanticipated, theundetectable, or the unpreventable methods ofespionage now available" or create an"impenetrable fortress. 30 As discussed inSection IV below, this element plays animportant role in the proper application of theinevitable disclosure doctrine.

D. Misappropriation of TradeSecrets

The First Restatement explicitly providedthat improper disclosure or use of a tradesecret was actionable:

One who discloses or uses another'strade secret, without a privilege to doso, is liable to the other if...(b) his disclosure or use constitutes abreach of confidence reposed in him

by the other in disclosing the secretto him, or(c) he learned the secret from a thirdperson with notice of the fact that itwas a secret and... that the thirdperson's disclosure of it wasotherwise a breach of his duty to theother .... .1

The recently enacted Restatement(Third) of Unfair Competition expands theconcept of misappropriation articulated in theFirst Restatement. Section 40 of theRestatement (Third) divides misappropriationof trade secrets into two areas. First, one issubject to liability for misappropriation ofanother's trade secret if that person acquiresthe information by improper means.32 Second, aperson is subject to liability for themisappropriation of another's trade secret if heor she improperly uses or discloses the other'strade secret without the other's consent, whenthe trade secret was brought to his or herattention through a confidential relationship,was acquired by improper means, or wasacquired from another who was in breach of aconfidential relationship or was disclosed byaccident or mistake.33

The UTSA's definition of trade secretmisappropriation is quite similar to that of theRestatement (Third). This is not surprisingbecause the Third Restatement was draftedafter the UTSA had been accepted andpracticed. Therefore, the drafters of the ThirdRestatement quite plausibly had the UTSA inmind. The UTSA defines improper acquisition,disclosure or use as acts of misappropriation.Misappropriation includes:

(i) Acquisition of a trade secret ofanother by a person who knows orhas reason to know that the trade


secret was acquired by impropermeans; or(ii) Disclosure or use of a trade secretof another without express or impliedconsent by a person who(A) Used improper means to acquireknowledge of the trade secret; or(B) At the time of disclosure or use,knew or had reason to know that hisknowledge of the trade secret was(I) Derived from or through a personwho had utilized improper means toacquire it;(II) Acquired under circumstancesgiving rise to a duty to maintain itssecrecy or limit its use; or(III) Derived from or through aperson who owed a duty to theperson seeking relief to maintain itssecrecy or limit its use; or(C) Before a material change of hisposition, knew or had reason toknow that it was a trade secret andthat knowledge of it had beenacquired by accident or mistake.34

In this regard "improper means" includes theft,bribery, misrepresentation, breach orinducement of a breach of a duty to maintainsecrecy, or espionage through electronic orother means.35

1. Disclosure or Use WithoutConsent

Under either the UTSA or § 757 of the FirstRestatement, disclosure or use of another'strade secret constitutes misappropriation.Misappropriation by disclosure or use withoutconsent often arises in situations where acontract or confidential relationship exists, such

as employer-employee or licensor-licensee,such that the party receiving trade secrets has aduty to maintain the confidentiality of thatinformation. A receiving party who disclosesthe trade secret information without theowner's consent commits misappropriation.For example, a former employee maymisappropriate his former employer's tradesecret by disclosing technical trade secret dataof his former employer.3 6 Similarly, an insuranceagent may misappropriate a former employer'strade secret by disclosing policyholderinformation.37 It is not necessary that thedefendant physically take possession of adocument containing the trade secretinformation. Misappropriation can occur wherean employee memorizes a customer list anduses his or her memory of that list incompetition with his or her ex-employer.38

"Use" of a trade secret is not limited todirectly copying another's trade secret in themanufacture of a product. For example, wherea company alters a competitor's trade secret,which it has wrongly obtained, that companystill "used" another's trade secret.39 A slightalteration of a competitor's protected secretimplicates the same concerns as cases ofoutright misappropriation. 4° Furthermore, "use"occurs when a party uses a competitor's tradesecret information as a starting point forproducing its own, competing product.41 Inthese circumstances, courts have recognizedthe unfairness of permitting someone tomisappropriate the results of years of researchand development.42

2. Injunctive Relief Is Available forMisappropriation

The UTSA provides injunctive relief fortrade secret misappropriation. The Act states

150 e Loyola Consumer Law Review Volume 10, number 2


that courts can enjoin misappropriation by aninjunction or by requiring the defendant toperform. The Act reads:

(a) Actual or threatenedmisappropriation may be enjoined.Upon application to the court, aninjunction shall be terminated whenthe trade secret has ceased to exist,but the injunction may be continuedfor an additional reasonable period oftime in order to eliminate commercialadvantage that otherwise would bederived from the misappropriation.(b) In exceptional circumstances, aninjunction may condition future useupon payment of a reasonable royaltyfor no longer than the period of timefor which use could have beenprohibited. Exceptionalcircumstances include, but are notlimited to, a defendant's material andprejudicial change of position prior toacquiring knowledge or reason toknow of misappropriation thatrenders a prohibitive injunctioninequitable.(c) In appropriate circumstances,affirmative acts to protect a tradesecret may be compelled by courtorder.43

The comments to the UTSA provide:

Injunctions restraining future use anddisclosure of misappropriated tradesecrets are fiequently sought.Although punitive perpetualinjunctions have been granted, § 2(a)of this Act adopts the position of thetrend of authority limiting theduration of injunctive relief to the

extent of the temporal advantageover good-faith competitors gainedby misappropriation.The general principle of § 2(a) and(b) is that an injunction should lastfor as long as is necessary, but nolonger than is necessary. Theinjunction limitation was created toeliminate the commercial advantageor "lead time" with respect to goodfaith competitors that a person hasobtained through misappropriation.Subject to any additional period ofrestraint necessary to negate leadtime, an injunction accordinglyshould terminate when a former tradesecret becomes either generallyknown to good-faith competitors orgenerally knowable to them becauseof the lawful availability of productsthat can be reverse engineered toreveal a trade secret.44

As with other areas of law, injunctive reliefin the trade secret context can be in the form ofa temporary restraining order, preliminaryinjunction, or permanent injunction. Basically, amotion for injunctive relief requires a court tocarefully weigh "four factors: (1) whether themovant has shown a likelihood of a reasonableprobability of success on the merits; (2)whether the movant will be irreparably injuredby denial of such relief; (3) whether grantingpreliminary relief will result in even greaterharm to the nonmoving party; and (4) whethergranting preliminary relief will be in the publicinterest."45 Notably, while some courts haveassumed irreparable harm in trade secret cases,others have held that the UTSA provisionallowing injunctions on such equitable terms asa court deems reasonable does not create anexception from the general statutory


requirement that injunctions can be grantedonly upon a showing of irreparable harm.46

Injunctive relief should not go beyond theneed to protect the legitimate interests of atrade secret owner and should not undulyburden the defendant.47 In the normal case, asuccessful trade secret plaintiff will receiveongoing injunctive relief that prevents thedefendant from disclosing or using trade secretsfor a certain amount of time. "The duration andscope of an injunction are decided upon thefacts of each case."48 Any information that thedefendant is prevented from using or disclosingpursuant to the injunction cannot be publiclyavailable, such as through a patent or otherpublic disclosure of the trade secret owner.4 9

Further, the injunction cannot prevent the useof trade secret information once the tradesecret is publicly disclosed. 0

Generally, an injunction should last for a"period of time that would be reasonablyrequired for independent development" of thetrade secret information. 1 The plaintiff willnormally describe the length of time it took todevelop the information, whereas the defendantwill attempt to show that it could develop theinformation more quickly. The duration of aninjunction can range from a few months, to afew years,52 to perpetual. 53 With a perpetual or"permanent" injunction, the court normally"maintains jurisdiction to modify or revoke" theinjunction as circumstances dictate.54 Thus,injunctive relief arms trade secret owners witha powerful tool for protecting their proprietaryinformation.

III. The Employment Relationshipand Employee Mobility

A. The Doctrine of

Employment-at- Will

152 e Loyola Consumer Law Review

Courts generally recognize the concept ofemployment-at-will.5 In the absence of acollective bargaining agreement or othercontractual limitations, an employmentrelationship is terminable at will. Pursuant tothe employment-at-will doctrine, an employercan discharge a worker for any legal reason orfor no reason, with or without notice. Similarly,a worker can resign from at-will employment atany time for any reason or for no reason, withor without notice. Many employment situationsinvolve at-will employment.5 6

The employment-at-will doctrine is premisedon the principles of freedom of choice andequality of rights. Both parties to theemployment relationship have the freedom tocontinue the relationship or to terminate it. Thisfreedom generally enhances business flexibilityby allowing employers unilaterally to alter theirwork force, by downsizing, relocatingoperations, responding to market conditions, orotherwise, without liability to those employeesaffected. Conversely, this freedom allowsemployees, without fear of liability, to quit theirjob, change jobs or accept new offers ofemployment if a change is desirable ornecessary. The employment-at-will doctrinesatisfies the principle of equality of rights bymaking the freedom of choice to continue ordiscontinue the employment relationship mutualas between employer and employee.

In addition, the employment-at-will doctrineis market-oriented and serves to fostercompetition and the movement of resources,particularly workers, to their highest valueduse. Since the employer can terminate theemployment relationship at any time, workersare encouraged to be productive and efficientor else risk replacement. For their part,employees have the freedom and right to

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consider and accept competing offers ofemployment, thereby encouraging employers tobe competitive with other potential employersin the terms, conditions, and benefits offered toemployees.

A variety of factors, including the emergenceof large corporate employers with specializedjob functions, employee expectations ofjobtenure, and the decline in union representationof the workforce, have contributed to a declinein the popularity of the doctrine ofemployment-at-will. 7 Accordingly, the doctrineof employment-at-will is subject to severallimitations and exceptions, including:

1) The National Labor Relations Act, whichprohibits discrimination on the basis of unionactivity.58

2) Federal and state anti-discriminationstatutes, which prohibit employee dischargesthat discriminate on the basis of specifiedprotected classes, such as race, gender,religion, and national origin. The list ofprotected classifications has grown over theyears and some state statutes now protectagainst discrimination based on age, disability,sexual orientation, and others.59 Many state andfederal statutes also limit the employment-at-will doctrine by prohibiting termination inreprisal for an employee exercising his or hercertain statutory rights.

3) Judicially crafted exceptions, which occurin at least three categories: (i) contracts andquasi-contracts, (ii) torts, and (iii) publicpolicy.

6"

Through case-specific determinations, courtshave imposed several limitations on andexceptions to the employment-at-will rule.Most notable is the contract-based exception,in which contractual obligations relating to jobsecurity or disciplinary procedure are held tolimit the employer's authority to discharge anemployee. Contractual obligations may be

1998

found in oral statements, pre-employmentletters, employee handbooks, or a combinationof circumstances, such as past personnelpractices and longevity of service. Under thisexception, courts generally focus on thelegitimacy of an employee's expectations.

Additional limitations on the employment-at-will rule are grounded in tort law. In thesecases, courts provide tort remedies fordischarges. For example, an employer maydischarge an employee in a manner thatdefames the employee or that intentionallyinflicts emotional distress.61 A discharge mayalso be based on reasons that violate publicpolicy.62 Finally, some courts have found that animplied covenant of good faith and fair dealingarises from the employment relationship. 63 Thiscovenant requires that parties to a contractrefrain from acting in bad faith to frustrate oneanother's expectations of receiving the benefitsof their bargains.

B. Contractual Limitations onEmployee Mobility

Given the ability of a worker to freely leaveor change employment under the at-willemployment doctrine, employers often seek toimpose limitations on a worker's ability toleave his or her current employment or tocompete with the current employer after theemployment ends. These restrictions becomepart of the employment contract and bind anemployee who has voluntarily agreed to themfor valid consideration.

1. Employment for a Term of Yearsor Other Specified Period BindsEmployees

Adopting an explicit contractual term of

Loyola University Chicago School ofLaw 153

years for the length of employment is theclearest manner by which to limit anemployee's ability to exercise his or herfreedom to terminate the employment andaccept a job elsewhere. Thus, employerssometimes give valued workers a contract that,by its terms, is effective for a period of years.Such a provision can prove beneficial for boththe employer and the employee in that itprovides security for both parties with respectto their relationship for the period specified.For example, an employee might be given atwo or three-year employment contract with anoption on the part of the employer to renew theemployment for a similar term. With this typeof contract, the presumption of at-willemployment is modified, the employer is notfree to discharge the employee, and theemployee is not free to leave the employmentwithout breaching the contract.

2. Non-Compete Clauses LimitEmployee Mobility

A second type of contractual provision oftenused to restrict employee freedom is a non-compete agreement (also known as a covenantnot to compete). 64 A "non-compete clause" is aprovision in an employment contract oragreement by which the employee agrees not tocompete with the employer or work for acompetitor after termination of the employmentrelationship.65 A non-compete agreementoperates after the employment relationship endsand generally prohibits a former employee fromengaging in business activity competitive withthe former employer for a period of time in aspecified geographical area. The breach of anon-compete clause often leads to inevitabledisclosure litigation. Section IV of this articlegives examples of this relationship between

154 ° Loyola Consumer Law Review

non-compete clauses and inevitable disclosureissues.

The non-compete clause, unlike thatspecifying a term of years, appears favorable tothe employer but not the employee because itimposes restrictions only on the employee.Additionally, these restrictions operate after theemployment has terminated to limit thefreedom of the employee to market his or herservices or practice his or her trade orprofession. The non-compete clause restrictsthe employee's ability to sell labor, and deprivesthe public of the competition and free trade thatwould exist in the absence of such a contractualprovision. Nevertheless, many employersrequire such agreements of key personnelbecause of the importance of those personnelto the employer's operations and the benefitsthat such personnel could provide to acompetitor. Additionally, workers asked toconsent to this type of restriction may be ableto negotiate for increased salary or benefits inreturn for entry into the non-competitionprovision.

Legal analysis of non-competitionagreements in the employment setting is closelylinked to the analysis of non-competitionagreements in general.66 Traditionally, non-compete agreements were "looked upon withdisfavor, cautiously considered, and carefullyscrutinized." 67 The courts articulate two policyreasons for their disfavor of non-competeclauses: (1) the employee's right to sell his orher own labor;6 and (2) the public's interest inunimpeded trade.69 The former policy reasonrecognizes that the employer usually has aneconomic advantage over the employee. Theemployee, in entering into a non-competeagreement, may succumb to pressure and signaway the right to work in the employment forwhich the employee is most qualified. 70 The

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second policy rationale recognizes thepotentially negative impact of non-competeclauses on competition in the marketplace. 71

Because of the impediment to freecompetition that a non-compete agreementinvolves, courts have generally been reluctantto limit an employee's freedom based on suchprovisions. Thus, courts will not enforce non-compete agreements unless the agreements arevoluntarily executed by the employee andsupported by independent consideration.72

Moreover, the particular provision involvedmust be necessary to protect the business of theformer employer.73 Even then, courts will onlyenforce the restriction imposed to the extent itis reasonable as to subject matter, time period,and geographic application.74

a. Protection of ConfidentialInformation

The primary consideration in determiningwhether to enforce a non-compete agreement iswhether the agreement strikes a reasonablebalance between the legitimate businessinterests of the employer and the employee'sright to work. Despite the policy factorsweighing against the enforcement of non-compete clauses, courts have long recognizedthat some non-compete clauses are necessaryto protect the legitimate business interests ofthe employer.75 Courts have described twointerests, in particular, as legitimate and worthyof protection: (1) the employer's good will 76

and (2) confidential information such as tradesecrets.77

In the context of the current discussion,courts have found that employers have alegitimate business interest to protect when an

1998

employee had access during employment toconfidential information or trade secrets.78 Therole of non-compete clauses in protecting tradesecrets and their relationship to the inevitabledisclosure doctrine will be discussed in Part IV.

b. Enforceable Agreements Need tobe Reasonable

Even if a non-compete agreement furthers anemployer's legitimate business interest, thecourts generally will not enforce an agreementwhich unreasonably restricts a formeremployee's ability to earn a living.79 The typicaltest applied by the courts involves a three-partdetermination of reasonableness, analyzing: (1)the nature and character of the employmentrelationship; (2) the time restriction; and (3) thegeographic restriction."0

i. Nature and Character ofEmployment Under theReasonableness Test

The first prong of the reasonablenesstest focuses on the nature and character of theemployer-employee relationship. Relevantconsiderations include: the employee'sbargaining power in the employment market;81

the likelihood of grievous harm to theemployee if the clause is enforced;8 2 the amountof access the employee had to the employer'sbusiness secrets and future plans;83 and theamount of access the employee had to theemployer's customers."

Applying this test, one court enforced a non-compete agreement by holding that a thirteen-year employee of an employment agency whohad access to the clients and secrets of theemployer could not open a competingemployment agency business. 5 On the other


hand, that same court invalidated a seeminglysimilar non-compete clause. 6 In EutecticWelding Alloys Corp., the employer arguedthat the competing ex-employee had been a"technical representative" with access toconfidential information by virtue of his formerposition. 7 The court "carefully scrutinized" thenature and character of the employee's job andfound that it was basically that of a salespersonand that the restraint imposed by the agreementwas "broader in scope than necessary toprotect a legitimate interest of the employer."88

In some cases, courts will not enforce a non-compete clause if the clause is not tailored toprotect that business interest. This will occureven though the nature and character of theemployment relationship reveals a legitimatebusiness interest. In one such case,8 9 theemployer, a real estate sales organization,sought to enjoin a former employee fromworking as a real estate broker. The courtfound the non-compete clause unreasonablebecause it did not also restrain the formeremployee from working as a real estatesalesperson in which capacity he could just aseasily use knowledge gained from the formeremployer. Because the clause would notoperate to protect the employer's legitimateinterest in maintaining the confidentiality ofinformation concerning its customers, the courtconcluded that its true purpose must be tohinder the former employee. 9

ii. Time and GeographicRestrictions Under the ReasonablenessTest

The time and geographic restrictionsimposed by the agreement represent two otherimportant factors in determining whether anon-compete clause is enforceable. Courts will

156 * Loyola Consumer Law Review

analyze the specific restrictions imposed anddetermine whether they are drawn in a mannerthat restricts the employee only to the extentnecessary to protect the legitimate interests ofthe employer.

There is general agreement on the analyticalframework for testing time and geographicrestrictions.9' The geographic restrictiontypically should extend only to the area wherethe employee had actually worked whileemployed or the area encompassed by theemployer's business. The duration restriction issometimes tested under either of the followingalternative standards: "the length of timenecessary to obliterate the identificationbetween employer and employee in the mindsof the employer's customers [or] the length oftime necessary for an employee's replacementto obtain licenses and learn the fundamentals ofthe business."12

Courts will uphold competitive restrictionsthat comport with these time and areaguidelines for reasonableness. In one case,9 forexample, the non-compete agreement signed bythe employee stipulated that he would notcompete after termination in any region inwhich he had sold aluminum siding whileemployed by the former employer. Because theemployee had pre-employment sales experiencein some of the areas encompassed by theclause, the employer urged the court to adopt anarrow reading of the non-compete clause. Thecourt enforced the clause to the extentrequested by the employer, stating that both thetime and geographic limitations werereasonable.94

Courts are less likely to enforce a non-compete agreement if either the time orgeographic restriction is greater than thatnecessary to protect the employer's legitimatebusiness interests.9" For example, a court founda work prohibition agreement overbroad where

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the agreement prohibited the employee, a discjockey, from working for any radio ortelevision station whose station, offices, orantenna were located within a thirty-five mileradius of any of the six U.S. cities where theemployer broadcasting company owned oroperated broadcasting stations for eighteenmonths.96 The geographic restriction severelylimited the employee's ability to pursue futureemployment in his chosen profession because iteliminated several regions of the country aspossible locations for employment.97 Inaddition, it was more restrictive than necessaryto serve the employer's legitimate businessinterest because the disc jockey would berecognized only by listeners in the one city inwhich he had worked, not in the other fivecities in which the employer simply hadstations. Thus, the clause was overly restrictiveand went beyond the goal of protecting thegood will of the company.

Although overly broad non-compete clausesare disfavored, the lack of a geographicallimitation does not render a covenant per seunenforceable. 98 The lack of a territorialrestriction may be reasonably necessary incertain instances, such as employment withmulti-national corporations.99 Accordingly,courts will use a reasonableness analysis todetermine the enforceability of non-competeclauses lacking geographical restrictions.

c. Remedies for Violations of Non-Compete Clauses

i. Injunctive Relief

The most frequently invoked remedy forbreach of a non-compete clause is an injunctionthat restrains the former employee fromviolating the agreement. An injunction is

typically the preferred remedy because it is themost effective method for eliminating the harmto the employer.

An injunction may be either permanent ortemporary in nature. A court will issue apermanent injunction if it finds after trial that anon-compete clause is enforceable and thatirreparable harm will result in the absence ofinjunctive relief.100 A court may extend theinjunction beyond the period specified in thenon-compete agreement if further harm to theemployer is likely to occur.'01

An employer may also seek temporary reliefwhile the case is still pending in the form ofeither a temporary restraining order or apreliminary injunction. This type of relief istypically sought in inevitable disclosure cases,where employers believe ex-employees willinevitably disclose the employer's trade secrets.A court typically will grant a preliminaryinjunction based upon a consideration of thefollowing factors:

(1) the nature of the relationship between theparties before the dispute giving rise to therequest for relief;

(2) administrative burdens in enforcing atemporary decree;

(3) whether the harm to be suffered by themoving party if the preliminary injunction isdenied outweighs that inflicted on the non-moving party if the injunction issues;

(4) the likelihood of success on the merits;(5) the public interest.102If an employer seeking preliminary relief can

show that the employee already has engaged incompetitive conduct prohibited by a non-compete agreement, the court may inferirreparable harm from such conduct and grantthe injunction. 103 This preference for earlyinjunctive relief recognizes that it often "is theonly effective way an employer can preventdisclosure or use of confidential information or


use of goodwill by a terminated employee."'

ii. Damages as a Remedy

A court also may award monetary damagesfor breach of a non-compete agreement. Courtsfind damage awards particularly appropriate insituations where a former employee has alreadyinjured the employer's business, renderingprospective injunctive relief inadequate toremedy the injury.' 05 In seeking damages, anemployer bears the burden of showing that itsmonetary loss resulted from conduct prohibitedby the non-compete clause as opposed to someother reason. 106

While punitive damages are not available in asuit to enforce a non-compete clause, a courtmay assess punitive damages against a thirdparty that tortiously assists the breach of a non-compete covenant. For example, one courtruled that a business engaged in tortiousinterference with a contract was liable forpunitive damages where it knowingly hired twoindividuals who had signed non-competeclauses with their former employer and thenencouraged the employees to use confidentialtrade secret information in violation of thatnon-compete clause. 107

3. Importance of NegotiatedRestrictions on Employment

Contractual restrictions on an employee'smobility serve several significant functions.Fundamentally, negotiated restrictions clarifythe parties' obligations. The employer dealswith an employee with the knowledge andcomfort that the employee is bound to theemployer, either in terms of a period ofemployment, or restriction on post-employmentactivity. With this security, the employer can


plan its use of the employee's services and caninvolve the employee in significant andconfidential business decisions and operations.The employer is encouraged to "invest" in theemployee through training or responsibility.The security for this investment lies in thenegotiated contractual provisions tying theemployee to the employer.

For the employee, the clarity of contractuallimitations also serves to assist the employee'splanning process. The employee knows that theemployer is treating the employee as animportant participant in the business. With aterm of years employment contract, theemployee, secure in his or her position, can"invest" in the employment by expending extraeffort or participating in education or trainingprograms.

An additional benefit of negotiatedrestrictions is the ability of the worker to refusean initial offer of employment or seek adjustedcompensation to reflect the restriction. With anon-compete covenant, as opposed to a term ofyears contract, the employee will lack thesecurity of the current position. The employeecan, however, negotiate for benefits inexchange for accepting the non-competerequirement. For example, the employee maybe able to secure a term of years contract.Alternatively, the employee may seek additionalcompensation for the non-compete restrictionor have compensation continue during the non-compete period. Ultimately, a worker who isnot satisfied with the benefit offered inexchange for the non-compete provision canseek employment elsewhere.

All the benefits of the planning process applyto negotiated contractual restrictions. Thecontracting parties are able to determine theexistence, nature, and extent of their ownobligations. Adjustments to the contractualrelationship can be made at the outset to reflect

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the various parts of the resulting agreement andrelationship. There is no surprise and nodisappointment of expectations. However,courts can jeopardize all of these benefits byapplying the inevitable disclosure doctrine incertain circumstances as described below.

IV The Inevitable DisclosureDoctrine

A. The Theory and Several CaseExamples

The basic theory of the inevitable disclosuredoctrine is as simple as it is devastating. Theinevitable disclosure doctrine posits that theformer employee will "inevitably disclose"those trade secrets in his or her new positionwith a competitor employer.0 8 The rationale ofinevitable disclosure is that even absent actualmisappropriation of trade secrets, and evenabsent a negotiated non-compete agreement,disclosure will occur because of the closefunctional relation of the new employment tothe former position.

If a court accepts the premise of thispotential inevitable disclosure, then the formeremployer can seek to enjoin the employee fromaccepting the new employment. In terms of theUTSA, injunctive relief is sought not becausetrade secrets have actually beenmisappropriated, but rather because of alleged"threatened misappropriation" resulting fromthe new employment. The misappropriation is"threatened" not because the employee intendsto steal the former employer's trade secrets, butrather because the employee cannot avoid suchmisappropriation in performing his or herjobresponsibilities.

Using its equitable injunctive powers, a courtmay grant an injunction, that is, enforce a

1998

judicially fashioned non-competitionagreement. The result is that the employee nolonger has the original employment and isjudicially prevented from accepting the newemployment. The original employer obtains thebenefit of a non-compete restriction withoutbargaining for it or paying for it.

Probably the most prominent, thoughcertainly not the first, 10 inevitable disclosurecase is PepsiCo, Inc. v. Redmond,"0 involving aPepsiCo managerial employee, Redmond, wholeft to work for The Quaker Oats Company.Quaker and PepsiCo were competitors in thesports drinks and "new age" drinks (non-carbonated and tea-based fruit drinks)categories, with Quaker producing Gatoradeand Snapple drinks and PepsiCo producing AllSport and several others. While employed byPepsiCo, Redmond had access to PepsiCo'sstrategic financial, production, and marketingplans for these products. Redmond was an at-will employee and not bound by any non-compete agreement.

PepsiCo sought a preliminary injunctionpreventing Redmond from going to work in theposition he had accepted with Quaker, and thetrial court granted it."' On appeal, PepsiCoargued that Redmond would inevitably discloseits trade secrets if he was allowed to acceptemployment with Quaker. In response,Redmond and Quaker listed several facts,which they claimed established that Redmondwould not inevitably disclose PepsiCo secrets.For example, Redmond would be implementinga pre-existing Gatorade and Snapple integrationplan. In addition, Redmond had signed aconfidentiality agreement with Quakerprecluding him from disclosing others' tradesecrets. Furthermore, Redmond had agreed toseek the advice of Quaker's in-house counsel ifconfronted with a situation that might involveuse or disclosure of PepsiCo confidential


information.' 2

The Seventh Circuit noted that the primaryissue related to the likelihood of PepsiCo'sultimate success on the merits of trade secretmisappropriation.'13 The Court also noted thatthe UTSA allows a court to issue an injunctionon the basis of "threatenedmisappropriation."" 4 Despite the fact that theUTSA does not refer to "inevitable" disclosureas a basis for relief, the court equated"threatened" misappropriation with thepotential use of trade secrets by an employee inthe new employment; "a plaintiff may prove aclaim of trade secret misappropriation bydemonstrating that defendant's newemployment will inevitably lead him to rely onthe plaintiff's trade secrets. ' On this basis,the Seventh Circuit affirmed the preliminaryinjunction, precluding Redmond from acceptinghis negotiated employment with Quaker basedon a non-negotiated restriction imposed at thebehest of PepsiCo.

Subsequent to PepsiCo, other courts haverelied upon the theory of inevitable disclosure.For example, in Uncle B " Bakery v.O 'Rourke,116 an employee, O'Rourke, left onecompany to work for a competitor. Despite thelack of a non-compete restriction or actualmisappropriation, the court granted apreliminary injunction to the employer because"there is sufficient threat of irreparable harm inthis case to weigh in favor of enjoining bothdisclosure of trade secrets and O'Rourke'semployment with Brooklyn Bagel Boys.' '117

Other courts have accepted the inevitabledisclosure theory, but found it inapplicable onthe particular facts of a given case." 8

B. Negative Effects of the InevitableDisclosure Analysis


1. In General

Acceptance of the inevitable disclosureanalysis has deleterious effects, includingseveral that flow from the fact that most ofthese cases are decided at the preliminaryinjunction stage. A court grants a preliminaryinjunction not on a finding of wrongdoing, butrather on a likelihood of success. However, theentry of the injunction may be tantamount to adetermination of ultimate relief. For example, ifa court enjoins an employee from acceptingnew employment pending trial, and if the trialdoes not occur for a number of months (oreven a year or longer), the employer, inessence, wins.

The application of the inevitable disclosuredoctrine also results in the judicial rewriting oftwo employment agreements. First, the originalemployer/employee contract is rewritten by theaddition of the non-compete terms of theinjunction. The employee is bound to a court-fashioned contractual provision with nocorresponding opportunity to negotiate (oreven reject) the terms proffered. The employerobtains the benefit of a contractual provision itdid not pay for. The significant value of thatbenefit can be gauged by the employer'swillingness to engage in litigation to secure it.Arguably, if the issue instead had beenaddressed ex ante, the employer likely wouldhave been willing to increase the prospectiveemployee's compensation to avoid the costinvolved and uncertainty inherent in litigation.

In addition to the rewriting of the employer/employee contract, the enforcement of theinevitable disclosure doctrine also rewrites ornegates the worker's prospective contract withthe new employer. The worker and prospectiveemployer negotiate in terms of what the workeris able to bring to the new organization.Without a contractual term of years or non-

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compete restricting the worker from leaving thenew employment, the negotiations proceed,even if the new employer is a competitor of thecurrent or former employer. When the courtssubsequently impose a judicially-fashioned non-compete decree preventing or restricting thenew employment, they negate thesenegotiations. The new employer either does notget the new employee or gets a worker withlimitations that were not negotiated. It is noanswer to say that the new employer canemploy the worker in a different position ordifferent capacity. "9 That is not what the newemployer sought and probably is not what itwants.

Most fundamentally, however, application ofthe inevitable disclosure doctrine createssignificant uncertainty in the labor market. Thedetermination of whether trade secrets existand whether their protection is warrantedthrough preliminary injunctive relief isinherently a fact-intensive and fact-specificdetermination. Moreover, the stakes escalate asthe position of the employee involves moreresponsibility and access to an employer'soperations. The former employer that has notprotected itself in advance has an incentive toseek injunctive relief because the nature of thefact-finding process gives it a reasonable basisfor requesting relief. Even if it loses, the formeremployer has hampered the former employeeand the new employer through the cloud of thelitigation process.

Prospective employers, on the other hand,must not only look to the agreements theirprospective employees had with pastemployers, but also to what claims thoseformer employers can make even in the absenceof contractual restrictions. Prospectiveemployers must attempt to weigh the likelihoodand expense of being involved in expensive

litigation as part of the cost they incur in hiringa new employee, particularly one with technicalor management expertise. These costs do notresult in productive benefit and make theworker appear less attractive to employ.

Ultimately, workers are the big losers. Theymay have the theoretical freedom to leave theircurrent employment, but, in reality, they arerestricted through subsequent inevitabledisclosure exposure. This potential representsan extra cost of switching jobs. Moreover, theworker may actually be prevented fromaccepting the new employment, or be forced toaccept work outside the area of his or herhighest valued use, namely, competing with theformer employer on behalf of the newemployer. In extreme case, the worker maysimply be out of ajob, period.

Application of the inevitable disclosuredoctrine chills competition for workers byexposing workers, former employers, andprospective employers to costly and uncertainlitigation. Workers lose through lostopportunities, and the economy loses bydecreased competition, which can leadultimately to higher consumer prices in themarket.

These negative effects alone may or may notbe sufficient to justify rejection or restriction ofthe inevitable disclosure doctrine. Theseeffects, however, need to be at least consideredin deciding whether the doctrine is justified inits use, especially given that the doctrine isapplied not to remedy a wrong or compensatefor an injury that has taken place. Rather, whenit is applied, the inevitable disclosure doctrineserves to prevent a perceived potential harmfrom occurring. In this light the negative effectsof the doctrine's application, if not dispositive,deserve significant weight in the calculus.


2. The California Situation

Potential application of the inevitabledisclosure doctrine in California presentsparticularly interesting questions. California isregarded as a place where significanttechnological research and development occur,thereby giving rise to numerous potential tradesecret lawsuits. California, however, prohibitsnon-compete provisions by statute, except inlimited circumstances. 120

California's rejection of contractual non-compete agreements as they relate to workersshould be commended on many levels. First, itbrings clarity to an otherwise murky area ofjurisprudence. Second, by rejecting theseprovisions, California fosters maximumfreedom for workers, thereby enhancing theirbargaining position with potential employersand creating competition among employers forworkers. This encourages employers to providepositive incentives for worker stability, such ashigher wages, contracts for a period of years,or even giving employees an ownership interestin the company.21 Finally, California's rejectionof non-compete clauses also recognizes thatworkers may not be in an advantageousposition to negotiate these terms of a contractor may not focus on their significance whencommencing employment.

California courts, however, have not alwaysinvalidated contractual restrictions on formeremployees. Even with the statutory prohibitionin place, courts have upheld contractualprovisions that serve to protect trade secrets.For example, a court has upheld an agreementnot to use a customer list for a period of timeafter employment, determining that it wasnecessary to protect the former employer'strade secrets. 122 An employee cannot disclosehis former employer's confidential customer

lists or other trade secrets, and cannot solicitthose customers.

23

As discussed above, the inevitable disclosuredoctrine transforms employee access to tradesecrets into a defacto non-competitionagreement. If accepted by the California courts,contractual non-competition agreements couldbe upheld under the guise of protecting tradesecrets despite the statutory mandate that suchagreements are generally void. Also, theinevitable disclosure doctrine could be used toprevent workers from accepting newemployment with a competitive company evenwhere no contractual restriction exists, that is,by court-ordered preliminary injunctive relief.In any event, the possibility of such aconclusion once again serves to chill the marketfor workers and limits their mobility, a resultdirectly at odds with the purposes of theCalifornia statute.

C. Defects in the InevitableDisclosure Doctrine

If, as urged herein, application of theinevitable disclosure doctrine represents anunfortunate and dangerous development inintellectual property law, what are theweaknesses in the analysis used by the courts inapplying it? There are at least two majorproblems with the way in which courts haveapplied the inevitable disclosure analysis. Thefirst problem relates to their interpretation ofthe justification for granting relief under theUTSA. The second relates to the manner inwhich trade secrets, as predictable interests, aredefined, and the failure of employers to takereasonable precautions to protect theseinterests.

1. Relieffor "Threatened"

162 e Loyola Consumer Law Review Volume 10, number 2


Misappropriation

At common law, trade secrets wereprotected in two ways: (1) as a legitimatebusiness interest protected by non-competeclauses, and (2) through the common law tortof misappropriation.'24 The Uniform TradeSecrets Act, while sharing many characteristicswith the traditional misappropriation cause ofaction, preempts the common law tort. Moreimportantly, the UTSA allows courts to grantrelief not only for actual misappropriation oftrade secrets, but also provides that "threatenedmisappropriation may be enjoined.' 1 25 Oneimportant key to identifying the weakness ofthe inevitable disclosure doctrine is to focus onthe meaning of the term "threatened" as used inthe UTSA. After all, courts have relied uponthis term in granting injunctive relief forperceived inevitable disclosure.

The primary definition of "threaten" is "tomake threats against; express one's intention ofhurting, punishing, etc." or "to expressintention to inflict" harm. 126 In legal terms, theprimary definition of "threat" is a "declarationof intention or determination to inflictpunishment, loss, or pain on another, or toinjure another by the commission of someunlawful act.' ' 27 The sense of these terms isthat there is some action or expression by thesubject party to indicate an intention to violateanother's rights.

Instead of relying on the primaryunderstanding and definition of the wordthreaten, courts granting relief in inevitabledisclosure cases rely on a secondary meaning ofthe term. According to that definition, threatenmeans "to be a menacing indication of' or "tobe a source of such danger, harm, etc."' 128 And alegal definition of threat in this manner is a"menace; especially, any menace of such a

nature and extent as to unsettle the mind of theperson on whom it operates."' 29 This secondarydefinition identifies a status, not an act orintent. As stated by the court in PepsiCo v.Redmond, "Redmond cannot help but rely on..• [PepsiCo's] trade secrets" in his new job. 130

No doubt many former employers perceive alost employee as a threat in this secondarymanner and this perception forms the basis ofinevitable disclosure suits.

The primary definition of "threaten" shouldguide the courts in granting relief under theUTSA. First, this interpretation of the term"threatened" in the UTSA is consistent with theaction that must be threatened, namely,"misappropriation." Misappropriation is anaction, not a status. Someone who displays anintent to violate another's rights threatensmisappropriation.

More fundamentally, defining the threat ofmisappropriation in terms of the employee'sstatus is fundamentally unfair to the employee.It allows an employer, by giving trade secretsto a worker, to thereby plant the seeds bywhich the worker will subsequently beprevented from gainful employment with acompetitor. Furthermore, the employee has nonotice that access to confidential information orother trade secrets will have such an effect, aswould be required to execute a non-competition agreement.

Employment under these circumstances ismisleading. The employee accepts the originalemployment with no indication that he or shewill be restricted in leaving that employment.The employer's trade secrets, as protected bythe inevitable disclosure doctrine, serve as alatent defect in the employment relationship.When the employee later tries to switch jobs,this defect serves to harm the worker byrestricting that opportunity. Thus, an employeewho has not actually misappropriated trade


secrets and who has not threatenedmisappropriation in the traditional, active, senseof that term, may have his or her employmentmobility severely restricted simply by the statusof having been employed by another companyand having been in a position where tradesecrets were disclosed to him or her as part ofthat former employment. "Threatenedmisappropriation," as that term is used in theUTSA, should require more.

One suggestion is that for "threatenedmisappropriation" to exist, the employee mustevidence some bad faith in switching jobs, suchas taking confidential documents with him orher. Even the PepsiCo case could bedistinguished on this basis, since the trial courtfound, as the Seventh Circuit noted, thatRedmond had lied to PepsiCo concerning thecircumstances surrounding his departure, thusevidencing bad faith. 11

2. Reasonable Efforts to SecureSecrecy of Trade Secrets

As discussed earlier, the UTSA definition oftrade secret requires that the purported tradesecret must be "the subject of efforts that arereasonable under the circumstances to maintainits secrecy."' 32 If an employer does notimplement reasonable efforts to protect itsalleged trade secrets, by definition no tradesecrets exist. If no trade secrets exist, theemployer is not entitled to protection by way ofinjunctive relief under the inevitable disclosuredoctrine.

The employer knows what its trade secretsare and the harm that might result from theiruse or disclosure outside the company. Theprospective employee does not. Given thepresumptive at-will nature of employment,what efforts are reasonable to protect trade

164 • Loyola Consumer Law Review

secrets from potential use by employees inalternative employment situations?

A confidentiality agreement is only a partialsolution. Confidentiality agreements highlightfor the employees that they are being givenconfidential information or trade secrets. Theseagreements also add a contractual obligation tothe employee's fiduciary responsibilities duringthe term of employment. A confidentialityagreement does not, however, restrict theemployee from leaving at-will employment.

As Part III. B. explains, employers haveseveral means available to contractually restrictemployee mobility. Either a term of years or anegotiated non-compete provision will suffice.Employers are well aware of these options anduse them in many circumstances. They coulduse them just as well to protect their tradesecrets from being disclosed by an employeeleaving to work for a competitor. In fact,protection of trade secrets is one of the primarypurposes of a non-compete provision. Butemployers who require such agreements mayhave to compensate employees for therestriction, thereby increasing the employer'scost of employment but benefitting theemployee in the process.

Given that the employer alone knows theextent and value of a trade secret and giventhat contractual means are available to restrictdisclosure by limiting employee mobility, it issuggested that the failure of an employer toobtain these contractual protections istantamount to a failure to employ "efforts thatare reasonable under the circumstances tomaintain its secrecy." '133 Put another way, if thedisclosure of an employer's trade secrets by anemployee who leaves to work for a competitoris "inevitable," then the employer can foreseethat circumstance. If the employer fails toprotect against such "inevitable" disclosure by

Volume 10, number 2


contractually limiting the ability of theemployee to switch jobs, it has not usedreasonable efforts to protect its trade secretsand should not be entitled to protection underthe inevitable disclosure doctrine or otherwise.

In IBM v. Seagate Technology,134 a formerIBM employee, Bonyhard, left IBM to workfor Seagate, a competitor. Although Bonyhardwas not subject to a contractual non-competeprovision, IBM sought a preliminary injunctionto prevent Bonyhard from working for Seagate.The court refused: "Merely possessing tradesecrets and holding a comparable position witha competitor does not justify an injunction. Aclaim of trade secret misappropriation shouldnot act as an ex post facto covenant not tocompete."' 35

Even more directly on point is Merck & Co.v. Lyon. 3 6 In that case, Merck sought toprevent a former employee, Lyon, fromworking for a competitor. Merck sought apreliminary injunction, arguing inevitabledisclosure. In reviewing the efforts undertakenby Merck to protect its trade secrets, the courtstated that Merck "could have... pursued acontract including a covenant not tocompete"' 37 but did not. Instead, all that existedwas a confidentiality agreement.

Despite finding that the employee's memoryof alleged trade secrets was sufficient to showthat he or she had knowledge of the tradesecret and despite concluding thatmisappropriation was likely because it wouldbe inevitable in the new position, the courtdenied a preliminary injunction preventing thenew employment. "[I]t must be pointed out thatplaintiffs did not seek a non-competitionagreement from Lyon. [P]laintiffs must rely ontheir confidentiality agreement with Lyon. TheCourt cannot add to that agreement a covenantnot to compete." '138

1998

D. The Proper Role for theInevitable Disclosure Doctrine

Up to this point, this article has urged courtsto not apply the inevitable disclosure doctrineto prevent employees from acceptingalternative employment where the originalemployer has not contractually limited theemployee's mobility. There is, however, a placewhere application of the inevitable disclosureconcept does make sense, namely indetermining whether to enforce an otherwisevalid non-compete agreement.

For example, in Medtronic, Inc. V. Sun,139 aformer Medtronic employee, Sun, wanted towork for Medtronic's primary competitor. Sun,who had agreed to a two-year non-competeprovision, argued that the provision could notbe enforced merely to prevent potential orinadvertent disclosure of trade secrets orconfidential information. The court rejected thisargument and enforced the agreement becauseno actual use of the trade secrets was required.The likely inevitable disclosure of thisconfidential information was enough to justifythe agreement. 140

In another case, Lumex, Inc. v. Highsmith,4'Lumex sought a preliminary injunction toenforce a six-month non-compete agreement.In upholding the non-compete covenant as areasonable restriction, the court determinedthat no actual harm to Lumex was required.Rather, because disclosure of Lumex's tradesecrets in the former employee's new positionwould be inevitable, the court grantedenforcement. The court specifically rejected theclaim that the non-compete covenant could notbe enforced unless the employee had evidencedan intent to divulge trade secrets or otherwiseacted in bad faith. Rather, enforcement was


justified because the "court finds thatHighsmith will inevitably divulge [Lumex] tradesecrets and confidential information.' '142

The Eighth Circuit Court of Appeals hasexplained that where an employer takes theprecaution of having an employee sign a non-compete clause, it need not prove the existenceof a trade secret in order to enforce the non-compete clause. 143 Thus, in cases where theparties have entered into a non-competeagreement, the employer has a lower burden ofproof than if suing in a tort action formisappropriation of a trade secret, and needonly show that the employee had access toconfidential information. '44

It is most logical that the inevitabledisclosure doctrine be applied in thesecircumstances. The employer has protecteditself and its trade secrets through a non-compete provision. The employee knows of,and arguably has been compensated for, theresultant restricted mobility. The packagepurchased by accepting the originalemployment is fully disclosed. There is nolatent or hidden defect in the process or theresulting agreement. The non-competeprovision should be enforced based on a findingof inevitable disclosure of trade secrets in thenew employment.

Endnotes

See Patentability of Inventions, 35 U.S.C.A. §§101-103 (West 1984).

2 See Subject Matter and Scope of Copyright, 17

U.S.C.A. § 102(b) (1995). Copyright law protectsexpressions of an idea, not the idea itself.

3 See Kewanee Oil Co. v. Bicron Corp., 416 U.S.470, 481 (1974); Salsbury Labs., Inc. v. Merieux Labs.,Inc., 908 F.2d 706, 710 (1lth Cir. 1990).

See PepsiCo., Inc. v. Redmond, 54 F.3d 1262,1268 (7th Cir. 1995).

5 Composite Marine Propellers, Inc. v. Van DerWoude, 962 F.2d 1263, 1268 (7th Cir. 1992) (quotingrenowned economist Adam Smith).

6

(1939).See RESTATEMENT (FIRST) OF TORTS § 757

7 See ALA. CoDe §§ 8-27-1 to 8-27-6 (1993);ALASKA STAT. §§ 45.50.910 to 45.50.945 (Michie 1996);ARiz. REv. STAT. ANN. §§ 44-401 to 44-407 (West 1994);ARK. CODE ANN. §§ 4-75-601 to 4-75-607 (Michie1996); CAL. CIV. CODE §§ 3426-3426.11 (West 1993);COLO. REv. STAT. §§ 7-74-101 to 7-74-110 (1990); CONN.GEN. STAT. §§ 35-50 to 35-58 (1997); DEL. CODE ANN.tit. 6, §§ 2001-2009 (1993); D.C. CODE ANN. §§ 48-501to 48-510 (1981); FLA. STAT. ch. 688.001-688.009(1990); GA. CODE ANN. §§ 10-1-760 to 10-1-767(1994); HAw. REv. STAT. §§ 482B-1 to 482B-9 (1995);IDAHO CODE §§ 48-801 to 48-807 (1993); 765 ILL. COMP.STA. ANN. 1065/1-9 (West 1993); INDo. CODE §§ 24-2-3-1 to 24-2-3-8 (1993); IOWA CODE §§ 550.1-550.8 (1997);

KAN. STAT. ANN. §§ 60-3320 to 60-3330 (1994); Ky.REv. STAT. ANN. §§ 365.880-365.900 (Michie 1996); LA.REv. STAT. ANN. §§ 51: 1431-51:1439 (West 1987); ME.REv. STAT. ANN. tit. 10, §§ 1541-1548 (West 1997); MD.CODE ANN., COM. LAW II §§ 11-1201 to 11-1209 (1990);MN N.STAT.ANN. §§ 325C.01 - 325C.08 (West 1995);Miss. CODE ANN. §§ 75-26-1 to 75-29-19 (1981); MONT.CODE ANN. §§ 30-14-401 to 30-14-409 (1997); NEB.REV. STAT. §§ 87-501 to 87-507 (1994); NEV. REv. STAT.

§§ 600A.010-600A.100 (1994); N.H. REv. STAT. ANN.§§ 350-B:1 to 350-B:9 (1995); N.M. STAT. Am. §§ 57-3A-1 to 57-3A-7 (Michie 1978); N.D. CENT. CODE §§47-25.1-01 to 47-25.1-08 (1978); OIo REv. CODE ANN.§§ 1333.61-1333.69 (Barks-Baldwin 1994); OKLA. STAT.tit. 78, §§ 85-94 (1995); OR. REv. STAT. §§ 646.461-646.475 (1988); R.I. GEN. LAWS §§ 6-41-1 to 6-41-11(1992); S.C. Code Ann. §§ 39-8-1 to 39-8-11 (Law Co-op 1985); S.D. CODIIED LAWS §§ 37-29-1 to 37-29-11(Michie 1994); UTAH CODE ANN. §§ 13-24-1 to 13-24-9 (1996); VA. CODE ANN. §§ 59.1-336 to 59.1-343(Michie 1992); WASH. REv. CODE §§ 19.108.010 to19.108.940 (1989); W.VA. CODE §§ 47-22-1 to 47-22-10((1996); and Wis. STAr. § 134.90 (1989).

8 See Minuteman, Inc. v. Alexander, 434

N.W.2d 773, 777 (Wis. 1989).

166 ° Loyola Consumer Law Review Volume 10,number 2


9 See Electro-Craft Corp. v. Controlled Motion,Inc., 332 N.W.2d 890, 898 (Minn. 1983).

10 See Boeing Co. v. Sierracin Corp., 738 P.2d

665, 673 (Wash. 1987) (interpreting Washington'sversion of the UTSA).

11 RESTATEMENT (FIRST) OF TORTS § 757 cmt. b(1939). The new RESTATEMENT (TIRD) OF UNFAIRCOMPETITION § 39 (1995) provides a different definitionof a trade secret: "[A]ny information that can be usedin the operation of a business or other enterprise andthat is sufficiently valuable and secret to afford anactual or potential economic advantage over others."Courts may consider numerous factors in determiningwhether information constitutes a trade secret,including: (1) the extent to which the information isknown outside of the owner's business, (2) the extent towhich the information is known by employees andothers involved in the owner's business, (3) the extentof measures taken by the owner to guard the secrecy ofthe information, (4) the value of the information to theowner and to his competitors, (5) the amount of effortor money expended by the owner in developing theinformation, and (6) the ease or difficulty with whichthe information could be properly acquired orduplicated by others.

12 UNIF. TRADE SECRETS ACT § 1(4) (1996).

13 US West Communications, Inc. v. Office of

Consumer Advocate, 498 N.W.2d 711, 714 (Iowa1993).

14 See Surgidev Corp. v. Eye Tech., Inc., 648 F.

Supp. 661, 688, 692 (D. Minn. 1986), aff'd, 828 F.2d452 (8th Cir. 1987).

15 See Surgidev, 648 F. Supp. at 692.

16 Electro-Craft, 332 N.W.2d at 901 n.12.

17 See id. at 899.

IS See Picker Int'l, Inc. v. Parten, 935 F.2d 257,

264 (11th Cir. 1991).

19 Jostens, Inc. v. National Computer Sys., Inc.,

318 N.W.2d 691, 700 (Minn. 1982).

1998

20 See Kewanee Oil, 416 U.S. at 475.

21 See Electro-Craft, 332 N.W.2d at 901.

22 See Surgidev, 648 F. Supp. at 693 n.15.

23 See id. at 693.

24 See Electro-Craft, 332 N.W.2d at 902.

25 See Sigma Chemical Co. v. Harris, 794 F.2d371, 374 (8th Cir. 1986).

26 See Pioneer Hi-Bred Int'l v. Holden Found.

Seeds, Inc., 35 F.3d 1226, 1236 (8th Cir. 1994).

27 See Trandes Corp. v. Guy F. Atkinson Co., 996

F.2d 655, 664 (4th Cir. 1993).

28 See Arco Indus. Corp. v. Chemcast Corp., 633F.2d 435, 443 (6th Cir. 1980) (applying Michigan law).

29 See Pioneer, 35 F.3d at 1235-36.

30 E.I. DuPont deNemours & Co. v. Christopher,

431 F.2d 1012, 1016-17 (5th Cir.1970), cert. denied,400 U.S. 1024 (1971), reh "g denied, 401 U.S. 967(1971).

31 RESTATEMENT (FIRST) OF TORTS § 757 (1939).

32 See RESTATEMENT (TuRD) OF UNFAIRCOMPETITION § 40(a) (1995).

33 See id. at § 40(b).

34 Urw. TRADE SECRETS ACT § 1(2)(i) (1996).

35 Id. at § 1(1).

36 See Syntex Ophthalmics, Inc. v. Novicky, 591F. Supp. 28 (N.D. Ill. 1983), aff'd, 745 F.2d 1423 (Fed.Cir. 1984), cert. granted and vacated on other grounds,470 U.S. 1047 (1985).

37 See Prudential Ins. Co. of Am. v. Pochiro, 736P.2d 1180, 1183 (Ariz. Ct. App. 1987).

38 See Stampede Tool Warehouse, Inc. v. May,

651 N.E.2d 209, 217 (1st Dist. Ill. 1995).


39 See Superior Flux & Mfg. Co. v. H & S Indus.,Inc., 210 U.S.P.Q. 669 (N. D. Ohio 1980).

40 See Pioneer, 35 F.3d at 1239.

41 See Salsbury, 908 F.2d at 713.

42 See Alk Assoc., Inc. v. Multimodal Applied

Sys., Inc., 647 A.2d 1359, 1363 (N.J. Super. Ct. App.Div. 1994).

43 UNIF. TRADE SECRETS ACT § 2 (1996).

4 Id. at cmt.

45 SI Handling Sys. v. Heisley, 753 F.2d 1244,1254 (3rd Cir. 1985).

46 See Bishop & Co. v. Cuomo, 799 P.2d 444,

446 (Colo. App. 1990).

47 See Stampede, 651 N.E.2d at 217.

48 Boeing, 738 P.2d at 681.

49 See Scharmer v. Carrollton Mfg. Co., 525 F.2d95, 98-99 (6th Cir. 1975).

50 See SI Handling, 753 F.2d at 1266 (citing

Kewanee, 416 U.S. at 473-74).

51 Surgidev, 648 F. Supp. at 696.

52 See Baxter Int'l, Inc. v. Morris, 976 F.2d 1189,

1195 (8th Cir. 1992).

53 See Integrated Cash Management v. DigitalTransactions, 920 F.2d 171, 175 (2d Cir. 1990).

5 See Wolfe v. Tuthill Corp., 532 N.E.2d 1, 3(Ind. 1988).

55 See, e.g., White v. Wmona State Univ., 474N.W.2d 410 (Minn. Ct. App. 1991); Pine River StateBank v. Mettille, 333 N.W.2d 622 (Minn. 1983).

56 See generally Farber & Matheson, Beyond

Promissory Estoppel: Contract Law and the InvisibleHandshake, 52 U. Cm. L. REv. 903 (1985).

57 See Stephen F. Befort, Employee Handbooks

168 • Loyola Consumer Law Review

and the Legal Effect of Disclaimers, 13 INDus. REL. L.J.326 (1991-1992) (generally discussing the employment-at-will doctrine).

58 See 29 U.S.C.A. §§ 158(a)(1), (3), and (4)

(West 1997) (Labor-Management Relations).

59 See Stephen F. Befort & Karen G. Schanfield,Minnesota Practice: EMPLOYMENT LAW AND PRACTICE

(West 1996) §§ 9 and 10 (discussing the lawsprohibiting discrimination in employment.)

60 See, e.g., Flesner v. TechnicalCommunications Corp., 575 N.E.2d 1107, 1110, 1112(Mass. 1991). In addition, some jurisdictions recognizean implied covenant of good faith and fair dealing in allemployment contracts.

61 See, e.g., Willis v. County of Sherburne, 555

N.W.2d 277, 282 (Minn. 1996); Hubbard v. UnitedPress Int'l, 330 N.W.2d 428 (Minn. 1983).

62 See, e.g., Bradley v. Hubbard Broad., Inc., 471

N.W.2d 670 (Minn. App. 1991), rev. denied; Phipps v.Clark Oil & Ref. Corp., 408 N.W.2d 569, 570 (Minn.1987); Freidrichs v. Western Nat'l Mut. Ins. Co., 410N.W.2d 62, 63 (Minn. App. 1987).

63 See Wilder v. Cody County Chamber of

Commerce, 868 P.2d 211, 220 (Wyo. 1994) (and casescited therein).

64 See generally Hutter, Drafting EnforceableEmployee Noncompetition Agreements to ProtectConfidential Business Information, 45 Aus. L. REV. 311(1981); Blake, Employee Agreements Not to Compete,73 HARv. L. REv. 625 (1960).

65 See Note, Employment Contracts: Covenants

Not to Compete in Minnesota, 9 Wm. MrrcHELL L. REv.

388, n. 1 (1983) (citing list of sources that providegeneral background for covenants not to compete).

66 See National Benefit Co. v. Union Hosp. Co.,47 N.W. 806, 807 (Minn. 1891).

67 Bennett v. Storz Broad. Co., 134 N.W.2d 892,

898 (Minn. 1965).

6 See Menter Co. v. Brock, 180 N.W. 553, 555(Minn. 1920).

Volume 10, number 2


69 See Jim W. Miller Constr., Inc. v. Schaefer,298 N.W.2d 455, 458 (Minn. 1980).

70 In Menter Co. v. Brock, the Supreme Court of

Minnesota summarized this concern as follows:To many persons the right to labor is the mostimportant and valuable right they possess; it istheir fortune, constituting the only means theyhave to obtain food, raiment, and shelter and toacquire property. To such persons a deprivation ofthis right is ruin, and to abridge it is to do theman injury which will very likely result in theirruin. When, therefore, a court is asked either todeprive a person of this right, or to abridge it, it isits duty, before it acts, to consider with the utmostcare whether, if it does what it is asked to do, itwill not, on a careful comparison ofconsequences, do more injustice than justice.

180 N.W. at 555 (quoting Sternberg v. O'Brien, 2 A.348 (N.J. Ch. 1891)). See also Eutectic Welding AlloysCorp. v. West, 160 N.W.2d 566, 571 (Minn. 1968).

71 See Miller Constr. 298 N.W.2d at 458;Bennett, 134 N.W.2d at 898.

72 See Sanborn Mfg. Co. v. Currie, 500 N.W.2d

161 (Minn. Ct. App. 1993) (where employee acceptedemployer's written offer of employment which did notcontain a non-compete clause, but was then required tosign such a clause upon subsequently arriving at thejob, court found clause lacking in consideration andunenforceable); National Recruiters, Inc. v. Cashman,323 N.W.2d 736, 740 (Minn. 1982) (where employeewas told during interview of conditions of employmentbut was not informed of non-compete clause untilcompelled to sign clause upon reporting for work, courtfound clause lacking in consideration andunenforceable).

73 See Bennett, 134 N.W.2d at 899.

74 See id. (citing Am. JuR. Master and Servant, §99; 36 AM. JuR. Monopolies, Combinations, andRestraint of Trade §§ 78 and 79).


76 See id. at 899.

1998

77 See id. at 898.

78 See Equipment Advertiser, Inc. v. Harris, 136

N.W.2d 302 (Minn. 1965). See also Thermorama, Inc.v. Buckwold, 125 N.W.2d 844 (Minn. 1964)(granting the employer's motion for an injunction tostop a former employee from soliciting the employer'scustomers). Cf Davies & Davies Agency, Inc.v. Davies, 298 N.W.2d 127, 131 (Minn. 1980).

79 See generally Hutter, Drafting EnforceableEmployee Noncompetition Agreements to ProtectConfidential Business Information, 45 ALB. L. REv. 311(1981).


s See Roth v. Gamble-Skogmo, Inc., 532 F.

Supp. 1029, 1032 (D. Minn. 1982) (noting that chiefexecutive officer was not "an average employee," andholding that provision of non-compete clause thatallowed employer to cease payment of deferredcompensation owed to officer, if he engaged in directcompetition with employer, was enforceable); B & YMetal Painting, Inc. v. Ball, 279 N.W.2d 813,815 (Minn. 1979) (where defendant sold businessincluding good will to plaintiff and signed anemployment contract to work for plaintiff which wasdrafted by his own attorney and included a non-competeclause, the court was not concerned about unequalbargaining power or oppressive circumstances andenforced the clause after termination).

82 See Roth, 532 F. Supp. at 1032 (finding no

danger of "industrial peonage" to chief executive officerif non-compete clause is enforced).

83 See Alside, Inc. v. Larson, 220 N.W.2d 274,

280 (Minn. 1974) (holding that non-compete clausewas enforceable where aluminum siding salespersonhad been trained in the business operations of theemployer).

8 See id. (noting employee's close relationshipswith employer's customers).

85 See Walker Employment Serv., Inc. v.

Parkhurst, 219 N.W.2d 437, 440 (Minn. 1974). See alsoHedberg v. State Farm Mut. Auto. Ins. Co., 350 F.2d924 (8th Cir. 1965) (holding that non-compete clause


prohibiting defendant, a former insurance agent, fromsoliciting business from clients of plaintiff insurancecompany for one year was enforceable because itspurpose was to prohibit defendant from utilizing thecustomer contacts he had made while working forplaintiff).

86 Eutectic Welding Alloys Corp. v. West, 160

N.W.2d. 566, 571 (Minn. 1968).

87 See id. at 571.

88 Id.

89 See Miller Constr., 298 N.W.2d at 455.

90 Id. at 459. One court has suggested a relative"pecking order" among varying types of non-competecovenants in terms of potential enforceability. The courtstated in a 1993 decision that covenants which prohibitan employee from revealing confidential information orfrom soliciting the former employer's customers mightbe more deserving of enforcement than a covenantwhich prohibits an employee from working altogether.See Dynamic Air, Inc. v. Bloch, 502 N.W.2d 796(Minn. Ct. App. 1993).

91 See, e.g., Davies & Davies, 298 N.W.2d at131.

92 Id.

93 See Alside, 220 N.W.2d at 274.

94 See id. at 280. See also Walker, 219 N.W.2d437 (upholding as reasonable a covenant, whichstipulated that a former employee would not engage inthe employment agency business within HennepinCounty for a period of one year following terminationof employment).


96 See id. at 900.

97 See id. at 894. See also Eutectic Welding, 160N.W.2d at 571 (noting that an agreement's territorialrestriction was "peculiarly unreasonable" whereemployee's sales territory had not included HennepinCounty but the non-compete clause would prohibit himfrom working there).

98 See, e.g., Weed Eater, Inc. v. Dowling, 562S.W.2d 898, 902 (Tex. App. 1978); Dynamic Air, 502N.W.2d at 799.

9 See Dynamic Air, 502 N.W.2d at 800.

100 See Menter, 180 N.W. at 555.

101 See Cherne Indus., Inc. v. Grounds & Assoc.,

Inc., 278 N.W.2d 81, 93 (Minn. 1979).

102 See Edin v. Jostens, Inc., 343 N.W.2d 691, 693

(Minn. Ct. App. 1984).

103 See Thermorama, 125 N.W.2d 844 (holding

that where employer submitted affidavits alleging thatformer employee had solicited the employer's customersthrough advertising, and former employee did not rebutthis showing, the employer was entitled to a temporaryinjunction).

104 Note, Employment Contracts: Covenants Notto Compete in Minnesota, 9 WM. MrrcHELL L. REV. at407, n.143 (1983).

105 See, e.g., Walker Employment, 219 N.W.2d at

442 (remanding the case to determine amount ofcompensatory damages where the former employee'scompeting business already had been in operation formore than nineteen months).

106 See B & Y Metal, 279 N.W.2d at 816-17.

107 See Cherne Indus., 278 N.W.2d 81.

108 See generally, Suellen Lowry, Inevitable

Disclosure Trade Secret Disputed, 40 STAN L. REv. 519(1988); Johanna L. Edelstein, Intellectual Slavery?:The Doctrine of Inevitable Disclosure of Trade Secrets,26 GOLDEN GATE U. L. REV. 717 (1996).

109 Cases have addressed the inevitable disclosureissue under both the common law and the UTSA longbefore PepsiCo v. Redmond. See, e.g., Teradyne, Inc. v.Clear Communications Corp., 707 F. Supp. 353 (N.D.Ill. 1989); AMP, Inc. v. Fleischhacker, 823 F.2d 1199(7th Cir. 1987); Carborundum Co. v. Williams, 468 F.Supp. 38 (E.D. Tenn. 1978), aff'd mem., 590 F.2d 334(6th Cir. 1978); Sybron Corp. v. Wetzel, 385 N.E.2d1055 (N.Y. App. Ct. 1978); Weed Eater, Inc., 562S.W.2d 898.

110 54 F.3d 1262.

170 " Loyola Consumer Law Review Volume 10, number 2


III See PepsiCo, Inc. v. Redmond, No. 94-C6838,1995 U.S. Dist. LEXIS 19437 (N.D. Il1. Jan. 26,1995)(the preliminary injunction was imposed for aperiod of five and one-half months).

112 See PepsiCo, 54 F.3d at 1266.

113 See id. at 1267.

114 Id.

115 Id. at 1269.

116 920 F. Supp. 1405 (N. D. Iowa 1996).

117 Id. at 1435.

118 See, e.g., Bridgestone/Firestone, Inc. v.Lockhart, No. IP96-1838-C H/G, 1997 U.S. Dist.LEXIS 19695 (S.D. Ind. Nov. 17, 1997); InternationalPaper Co. v. Suwyn, 966 F. Supp. 246 (S.D.N.Y 1997).

119 See, e.g., IBM Corp. v. Seagate Tech., No. 3-91-630, 1991 U.S. Dist. LEXIS 20406 (D. Minn. Dec.31, 1991), rev'd on other grounds, 962 F.2d 12 (8th Cir.1992) (unpublished disposition) (granting preliminaryinjunction and finding that "defendants would not beharmed by limiting [worker] to a different area within[new employer's] organization").

120 See CAL. Bus. & PROF. CODE § 16600 (Deering,

LEXIS through 1997 Sess.). Statutory exceptions arecreated for the sale of the good will of a business, thesale by a person of stock in a corporation, or thedissolution of or withdrawal by a person from apartnership or limited liability company of which theyare a partner or member. See CAL. Bus. & PROF. CODE

§§16601-16602.5 (Deering, LEXIS through 1997Sess.). See Swenson v. File, 475 P.2d 852 (Cal. 1970).

121 See, e.g., Metro Traffic Control, Inc. v.

Shadow Traffic Network, 22 Cal. App. 4th 853 (1994)(discussing the policy bases for the statutoryprohibition).

122 See Gordon v. Landau, 321 P.2d 456 (Cal.

1958); Matull & Assocs., Inc. v. Cloutier, 194 Cal.App. 3d 1049 (1987).

123 See Loral Corp. v. Moyes, 174 Cal. App. 3d

268, 276 (1985).

1998

124 See Eutectic Welding Alloys Corp. v. West,160 N.W.2d 566, 570 (1968).

125 UNIF. TRADE SECRETS ACT § 2(a) (1996).

126 WEBSM's NEW WORLD DICTIONARY 1482 (2dCollege ed. 1970).

127 BLACK'S LAW DICTIONARY 1651 (4th ed. 1968).

128 WEBSTER'S NEW WORLD DICTIONARY 1482 (2d

College ed. 1970).

129 BLACK'S LAW DICTIONARY 1651 (4th ed. 1968).

130 54 F.3d at 1270.

131 See PepsiCo., 54 F.3d at 1270.

132 UNIF. TRADE SECRETS ACT § 1(4) (1996).

133 Id.

134 941 F. Supp. 98 (D. Minn. 1992).

135 Id. at 101. Accord Bliss v. Struther-Dunn, Inc.,

408 F.2d 1108, 1112-13 (8th Cir. 1969).

136 941 F. Supp. 1443 (M.D.N.C. 1996).

137 Id. at 1457.

138 Id. at 1460, 1462.

139 No. C7-97-1185, 1997 Minn. App. LEXIS1286 (Nov. 25 1997).

140 See id. Accord Weed Eater, Inc. v. Dowling,

562 S.W.2d 898 (Tex. App. 1978).

141 919 F. Supp. 624 (E.D.N.Y. 1996).

142 Id. at 633-34.

143 See Modem Controls, Inc. v. Andreadakis, 578F.2d 1264, 1268-69 (8th Cir. 1978).

144 See id. at 1268. See also Minnesota Mining &

Mfg. Co. v. Kirkevold, 87 F.R.D. 324, 333 (D. Minn.1980). S

Loyola University Chicago School ofLaw •171