An Emerging Split On The Applicability Of The Inevitable Disclosure Doctrine Under The DTSA

• Published date: 11 October 2022
• Subject Matter: Intellectual Property, Trade Secrets
• Law Firm: Mintz
• Author: Mr Oliver Ennis, Nicholas Armington and Adam Samansky

Federal courts remain split on whether the Defend Trade Secrets Act (DTSA) allows for trade secret misappropriation claims brought under a theory of inevitable disclosure. Given this current patchwork of treatment of inevitable disclosure claims across the nation, owners of trade secrets and litigators of trade secret claims should continue to stay up to date on the treatment of this issue in the jurisdictions in which they practice.

Background

The inevitable disclosure doctrine allows a plaintiff to "prove a claim of trade secret misappropriation by demonstrating that defendant's new employment will inevitably lead him to rely on the plaintiff's trade secrets." PepsiCo, Inc. v. Redmond, 54 F.3d 1262, 1269 (7th Cir. 1995). The doctrine is not predicated on the former employee physically taking anything when leaving an employer, e.g. stealing a customer list or proprietary formula; rather, it relies on the notion that the former employee's knowledge of trade secret gained over the course of his or her employment will inevitably lead to improper disclosure or use when later employed by a competitor or other entity in a position to exploit the trade secrets. Id. at 1270. While several states, such as Illinois, Pennsylvania, and New York, appear to recognize the theory under their respective state trade secrets laws, others, such as California, do not. See Phoseon Tech., Inc. v. Heathcote, 2019 WL 72497, *11 (D. Or. Dec. 27, 2019) ("Seventeen states appear to have adopted the inevitable disclosure doctrine in one form or another... Five states appear to have rejected the doctrine.")

Several federal courts have also allowed inevitable disclosure claims under the DTSA. In Packaging Corp. of Am., Inc. v. Croner, a court in Illinois found that "[t]he DTSA allows courts to grant injunctions in certain circumstances for 'threatened' misappropriation. 18 U.S.C. ' 1836(b)(3). Illinois courts have found that plaintiffs can state a claim for threatened misappropriation by demonstrating the inevitability of trade secret disclosure." 419 F. Supp. 3d 1059, 1069 (N.D. Ill. 2020). The 3rd Circuit has similarly allowed DTSA claims brought under the inevitable disclosure doctrine, highlighting the "threatened" misappropriation language in the DTSA. Fres-co Sys. USA, Inc. v. Hawkins, 690 F. App'x 72, 76 (3rd Cir. 2017).

Recent Developments

A common argument against the application of the inevitable disclosure doctrine under the DTSA relies on the prohibition in the statute...