Here is a common scenario: A key employee resigns, and the former employer discovers that on the way out he emailed to a personal account sensitive business information including financial and strategic planning data. Convinced that the former employee intends to start a competing business, the company files suit and seeks a preliminary injunction intended to stop the use of the misappropriated business information. Last week, the North Carolina Business Court reminded employers that the legal test for obtaining an injunction depends on more than presumed or secondhand claims of harm to the business.

In Highlights Healthcare LLC v. Abell, three affiliated companies' dual CEOs resigned and allegedly used trade secrets obtained from their former employers to start competing ventures. The former employers sued, and sought injunctive relief, claiming that the defendants were in the process of starting competing ventures. To support these claims, the plaintiffs alleged that upon "information and belief" obtained from third parties, the defendants had used the misappropriated business information to support their new business efforts.

The Business Court denied the motion for preliminary injunction, concluding that the plaintiffs had failed to demonstrate irreparable harm, and stating that secondhand allegations of misuse of their trade secrets are insufficient to support the request for injunctive relief. The plaintiffs could not overcome affidavits and other testimony introduced by the defendants denying allegations of misuse, and the competing ventures alleged in the complaint either had not been formed or were in existence well before the alleged misappropriation took place.

Demonstrating that a former employee took trade secret materials on the way out the door is not enough by itself to qualify for injunctive relief. In order to meet this burden of proof, the former employer must show through direct evidence that the misappropriated information is being actively used for an improper purpose. Absent this showing, the former employer may have grounds for eventual legal recovery, but will not be able to obtain pre-trial relief aimed at stopping any potentially competing business venture.

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