Many companies require employees to sign agreements promising not to misuse their confidential business information. When an employee subject to such an agreement departs for a competitor, how can the former employer demonstrate that the agreement has been violated? A new decision from the North Carolina Business Court serves as a roadmap for companies seeking to prevent the misappropriation of their confidential information.
In CPI Security Systems, Inc. v. Chapman, the defendant was a manager for the plaintiff, who resigned to accept employment with a direct competitor. Although the manager was not subject to a non-compete agreement, the plaintiff reviewed his computer use prior to his departure. This review discovered that the defendant had (1) downloaded years’ worth of customer and vendor pricing information; (2) renamed those files and forwarded them to his new employer; and (3) even searched for how to erase emails from the plaintiff’s system.
The business court had little problem issuing a temporary restraining order prohibiting disclosure or use of the confidential information, soliciting any of the plaintiff’s customers, and requiring the defendant to immediately return any such information in his possession. The court declined to prohibit the defendant from working in any capacity for the competitor, although that company had already agreed not to allow him to work while the initial stages of the litigation were pending.
This decision demonstrates the benefits of a prompt and thorough review of a former employee’s computer use when the former employer suspects misappropriation of trade secrets or other confidential information. A professional forensic analysis of such use may uncover legal violations by the former employee despite attempts to conceal such actions. Companies hiring a competitor’s employee should include language in the offer letter or employment agreement that specifically advises that person not to use confidential information belonging to any third party in their work for the new employer.