Trade Secret and Confidential Information Litigation:  It’s All About the Facts

  • Most companies require employment agreements for important executives, high-level management and key personnel to protect trade secrets and confidential information.
  • Employment Agreements which prohibit disclosure of trade secrets and confidential information are legal in NJ and will be enforced, if not unreasonable.
  • New Jersey law allows for issuance of an injunction by the courts to protect a company’s trade secrets even without a post-employment agreement.

trade secretsState and Federal Trade Secret Laws

The New Jersey Trade Secrets Act and the Federal Defend Trade Secrets Act of 2016, provide New Jersey businesses with some powerful laws protecting trade secrets.   The New Jersey Trade Secrets Act offers strong remedies to businesses in the event an employee sets up to leave with confidential information to use in his/her new position.  The remedies available under the New Jersey Law include injunctive relief, damages, and, if the misappropriation is particularly malicious, punitive damages and attorneys’ fees.   Most trade secret litigation begins with an immediate application for injunctive relief.

Without an injunction, the former employee can continue to use confidential information prior to the entry of a restraining order.  Acting quickly to obtain restraints is critical.

How to Get an Injunction to Prevent Trade Secret Disclosure

To get an injunction, an employer must show that the misappropriated information constitutes a “trade secret”.

Customer lists, for example, have been found to be a trade secret where they contain private information that is not open to and ascertainable by everyone.

To obtain a preliminary injunction in trade secret litigation, our courts have ruled that a plaintiff need not prove at the preliminary stage that misappropriation has already occurred, but only that “it is sufficient that the circumstances give rise to an inference that substantial threat of disclosure exists”.

This means the former employee has accumulated a level of intimate knowledge of the business that he or she will be able to replicate the confidential information from memory, and that it is inevitable that he or she will disclose trade secrets in his or her new venture.   This requires a thorough discussion of the facts of the case, highlighting the former employee’s intimate knowledge of and experience with the confidential information.

Critical questions to ask in connection with litigation are:

1) the extent to which the former employee has already misappropriated the confidential information;

2) extent of the access the former employee had to the confidential information throughout his or her employment; and 3) all communications the former employee had with third parties that reflect, relate to, or otherwise concern the confidential information.

If an employee is able to obtain temporary and/or preliminary restraint, the case gets much simpler, focusing on the economic damages suffered by the employer.

To discuss your NJ business, commercial or restrictive covenant matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing consultations if you are unable to come to our office.

By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, NJ Business Law Attorney

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