Georgia Supreme Court Clarifies the Inevitable Disclosure Doctrine in Trade Secret Law

Whether you are an employer, seeking to protect business methods and plans, or an employee, looking to move from your job to a competing entity, you should know about a recent development in Georgia trade secret law that may impact your position.

First, some background:  A trade secret is information that derives its value from not being generally known or readily ascertainable and that is reasonably protected by its owner from disclosure. Under the Georgia Trade Secret Act, a trade secret owner may enjoin (i.e., prevent) actual or threatened misappropriation of a trade secret. Misappropriation includes unauthorized disclosure or use by a person who learned the trade secret while under a duty to maintain its secrecy, such as by a former employee who learned trade secret information from, and while employed by, its owner. The inevitable disclosure doctrine holds that “a plaintiff may 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.” Therefore, where the doctrine is applied, the plaintiff may enjoin a departing employee from accepting employment with a competitor.

Earlier this year, in Holton v. Physician Oncology Services, LP, the Georgia Supreme Court rejected the inevitable disclosure of trade secrets as a “stand-alone claim.” Specifically, the Court reversed in part an injunction prohibiting the defendant from working for his former employer’s competitor or disclosing trade secrets based on the trial court’s finding that the defendant was sure to rely on or reveal trade secret information at his new job.  The Court concluded that, under Georgia law, a claim of inevitable disclosure alone is not a basis for barring a former employee from joining a competitor.

This development matters for two reasons.  First, it means that a trade secret plaintiff seeking an injunction to prevent a former employee from working with the competition will have to do more than show that the new position involves making the same decisions that the former employee used trade secret information to make at her old job.  Holton did not close the door on deploying inevitable-disclosure-type arguments to support an injunction based on threatened misappropriation of trade secrets (rather than as an independent claim), but, where there is no evidence of actual disclosure, some showing of intent to use or reveal will likely be needed to prevail.

Second, because this development narrows grounds on which employers can restrict former employees, it increases the value of carefully drafted contractual non-competition and non-disclosure covenants.  Such contracts can impose the same sorts of post-term restrictions on employees without the plaintiff needing to establish threatened disclosure of a trade secret.

If you are facing or anticipating the breakdown of a business relationship where confidential and proprietary information may be involved, you need to have attorneys adept at negotiating, litigating, and resolving these disputes on your side.  For analysis of your trade secret or restrictive covenant issue, please call Cary Ichter or William Daniel Davis at (404) 869-7600.

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