Thursday, December 29, 2005, 12/29/2005 09:35:00 AM

Sticky-Handed Former Employees: What is Missing?

By Todd
We are forced to focus a good bit of our time in trade secrets matters answering questions from employers who tell about their mangerial employees who resign and fill their bags (or laptops) on the way out the door with just about every piece of company-related information possible - customer lists, company marketing plans, product development information, employee compensation information, and customer-based analytical data revealing profitability of certain customer relationships and even plans for improving those numbers. We are ultimately asked - "what can we do to stop this?" The answer, of course, is to file a court action and ask the court for (a) injunctive relief and (b) damages to the company resulting from the alleged theft. Before this occurs, though, there needs to be a focused effort to determine EXACTLY what is missing or was copied. The recent treatment of this issue by a federal court in Illinois shows why.

In Exhibit Works, Inc. v. Inspired Exhibits, Inc., 2005 WL 3527254 (N.D. Ill., December 21, 2005), the court was asked by Exhibit Works to issue a preliminary injunction against Inspired Exhibits due to the latter having allegedly misappropriated trade secret information of the former. The defendant, an Illinois-based company, was a company created by the plaintiff's, a Michigan-based company, former employees of its tiny office in Illinois. Seems the former employees were convinced that their former employer was screwing up its handling of the single biggest account they serviced out of Illinois and thought to themselves - "hey, let's jump ship before it sinks but let's not lose this opportunity to service this valuable customer ourselves." They allegedly departed taking what the plaintiff alleged consisted of "corporate information." The court refused to grant an injunction against the former employees, noting "Exhibit Works has not established, as it has the burden to do, what exactly was taken by the defendants which leaves the court to question whether the information taken by the defendants was confidential trade secret information sufficient to support the injunctive relief Exhibit Works seeks."

What is a former employer to do? The answer, clearly, is catalogue the misappropriated information. We advise employers that they should be performing audits of their trade secrets and confidential information in the normal course of their business. If they do so, and the audit is accurate, it forms a starting point for the analysis of what has been misappropriated. The next step is to have forensic computer experts or, if that is not an available option, the IT professionals at the company review and document computer access to the audit list's information sets in the last sixty (60) days of employment. Scouring e-mails and data back-ups is also key. You would be amazed at what you'll find in these situations if you do the right search. Cases are won and lost in these matters due to the proof - and so it is to proof that the former employer and its attorney must turn their attention and focus before they can get the court to do anything for them.

You might wonder: why was the former employer in this Illinois case so mad? The answer might lie in the court's recitation of the facts. Seems the former employer's single account in Illinois knew early on a little more about the former employees' plans than the former employer. While the former employees were still employed with the plaintiff the large customer indicated in an e-mail that they knew about the planned new company. This irritated the former employer to no end and they terminated the group of employees immediately. On the same day and probably as a response in this competitive chess match, the largest customer utilized its right to terminate the services agreement in its entirety - AND THAT IS THE REST OF THE STORY. We're sure that this is not the end of this skirmish and will report back what happens next as it is published. We'll also provide some links to some computer forensic specialists in upcoming posts.

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