Trade Secrets and Employee Misappropriation

Employers overwhelmingly experience theft of trade secrets and employee misappropriation of employer intellectual property.  Employees transferring company confidential communications, business information, and items normally considered trade secret to a thumb drive or personal drives and accounts, could face being sued for a sundry of claims, including misappropriating trade secrets (violating the Uniform Trade Secrets Act), breach of fiduciary duty to the employer, and breach of non-disclosure agreement.

The Utah Supreme Court in InnoSys, Inc. v. Mercer, 2015 UT 80, over turned the state district court which had held in favor of the employee stating that “there was no objectively reasonable basis to believe that Mercer [employee] had harmed InnoSys or was threatening to do so.”

On appeal, the issue hinged on whether, as the lower district court determined, if the employer provided sufficient evidence of experiencing harm or the threat of it from the employees misappropriation of company trade secrets. The higher court determined differently, in that the element of the existence of harm was not important.

The Utah Supreme Court stated that when an employer demonstrates a prima facie case of misappropriation of trade secrets under the UTSA, there is a presumption of irreparable harm.  Based on this analysis, employers are not required to demonstrate damages and there is the presence of threatened harm of disclosure that supports injunctive relief.  On many levels, theft of trade secrets and employee misappropriation is irreparable to a business. 

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