Departing Employees Who "Prepare" a Little Too Well to Compete

Those of you who consider trade secret issues and the departing employee situation know that a good number of states provide departing employees with a limited privilege to make preparations to compete while they are still employed - assuming they do so on their own time and doing so does not force them to enter into actual competition with their employer while they are still working. Some common examples of the limited privilege include signing a lease agreement, setting up a corporation or partnership, arranging for phone service and business cards, etc. This privilege, though, is limited and misappropriation of confidential or trade secret information belonging to the employer is not privileged activity.

The United States District Court for the District of the District of Columbia in a case captioned PM Services Co. v. Odoi Associates, Inc., 2006 WL 20382 (D.D.C. January 4, 2006) acknowledged some of these limitations on this privilege in its decision denying summary judgment to both plaintiff and defendants. Seems there was some evidence that the departing employees may have come close to violating their duty of loyalty to PM Services in their copying and retention of information relating to their soon-to-be-former employer and this evidence was sufficient to let the case go to a jury. In an upcoming post we will identify some reported cases that address what information courts say departing employees can, and cannot, take with them on their way out the door.