It is often concerning when an employee is discharged or quits her job and goes to work for a competitor. In the absence of a non-competition agreement, the former employer may claim that the employee has stolen trade secrets and used them in her new job.
Idaho has adopted the Uniform Trade Secrets Act, codified under Idaho Code § 48-801, et seq. The Act prohibits the misappropriation of “trade secrets,” defined as:
[I]nformation, including a formula, pattern, compilation, program, computer program, device, method, technique, or process, that:
(a) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and
(b) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy… .
If an employer claims a former employee has violated the Trade Secrets Act, is the claim likely to succeed?
Maybe. It is important for employers to recognize that there are significant limitations on the protections against former employers under the Trade Secrets Act. In a very recent case, Wesco Autobody Supply, Inc. v Ernest, the Idaho Supreme Court recited this language from a prior decision:
[T]he legislature did not intend the [Idaho Trade Secrets Act] to be read so broadly as to preclude the hiring of an employee from a competitor; the legislature also did not intend that merely hiring a competitor's employee constitutes acquiring a trade secret.” Instead, “[a]n employee will naturally take with her to a new company the skills, training, and knowledge she has acquired from her time with her previous employer. This basic transfer of information cannot be stopped, unless an employee is not allowed to pursue her livelihood by changing employers.
In the Wesco case, the Court found it was possible that one employee violated the Trade Secrets Act when the employee took and used the former employee’s customer lists, lists showing customer buying preferences, history of customer purchases, and custom paint formulas. The Court, however, was unwilling to say that other employees had violated the Trade Secrets Act based merely on the fact that their customer relationships caused the customers to follow the former employees to a new employer.
In sum, if a company’s leadership is worried about the risk of employees working for a competitor and using the knowledge and relationships they built for a competitor’s advantage, then reliance on the Idaho Trade Secrets Act may be inadequate. In such cases, it is important to utilize carefully-crafted noncompetition agreements.
