In another high profile trade secret case, water treatment giant Ecolab, Inc. sued one of its former marketing managers, Preston Alexander, and his new company, One Degree Medical, alleging they stole trade secrets to set up a competing business in violation of both the employees’ employment agreement, and state and federal trade secrets laws.
EcoLab’s Case Against One Degree Medical
In this case, both Ecolab and One Degree Medical sell systems for managing the temperature of patients and body tissue during surgery. In other words, they were direct competitors. Ecolab claimed that the day before Mr. Alexander’s last day of employment with Ecolab he e-mailed to his personal g-mail account confidential files that contained detailed product sales information. The files also contained highly-confidential and proprietary spreadsheets consisting of detailed data and compilations of data containing Ecolab’s sales histories, including detailed pricing information, customer information, customer purchase histories, and servicing information for Ecolab’s patient temperature management products.
Shortly after the alleged theft, one of Ecolab’s former customers began purchasing patient temperature products from One Degree Medical. Notably, some of the information Mr. Alexander forwarded to his personal Gmail account from his prior Ecolab email account contained detailed account information for Ecolab’s former customers’, including (1) sales history with Ecolab, (2) the products it purchased from Ecolab, (3) the number and types of products purchased, (4) the price paid for those products, and (5) when the purchases were made. In other words, all the information Mr. Alexander would need to know about the customer’s product needs and preferences and how to undercut Ecolab on pricing the products he planned to sell them.
Based on the evidence, Ecolab filed suit in Federal District Court in Atlanta, Georgia seeking an injunction for the immediate return of its confidential business and customer information, and requesting damages for breach of contract and misappropriation of trade secrets. Like any well managed company operating in certain states like Georgia, Ecolab had tried to prevent its former employee from starting a competing business and protect its trade secrets through an employment agreement it entered into with Mr. Alexander when he became an employee. When Ecolab discovered that Mr. Alexander had violated the agreement it filed suit, and swiftly filed a motion for preliminary injunction to enjoin Mr. Alexander’s further illegal behavior. In the face of the evidence Ecolab was poised to present to the court, the parties quickly agreed to a consent order under which Mr. Alexander and his company One Degree Medical would cease using, accessing, or disclosing Ecolab’s confidential, proprietary and trade secret information for any purposes whatsoever. One Degree Medical also agreed to allow Ecolab to conduct a forensic examination of its electronic networks and cloud-based accounts to ensure all proprietary information owned by Ecolab was removed from those electronic storage sources.
The Takeaways from the Trade Secret Case
The Ecolab lawsuit against One Degree Medical provides significant lessons for companies on the importance of protecting their valuable intellectual property rights under both contract law and trade secret law. The case highlights the types of legal claims and factual issues trade secret owners face when employees leave a company for a competitor or to start their own competing business venture. It also highlights some of the reasons why it’s important for your company to take all appropriate steps to identify your intellectual property – including your trade secrets – consistently implement policies to prevent the disclosure, dissemination and use of that property, and prepare and implement contracts with an eye toward protecting your intellectual property against unauthorized disclosure and use by competitors, including people that once worked for you.
Some important steps your company can take to protect its intellectual property – including its trade secrets – include the following:
- Identify and define all of your company’s intellectual property, including trade secrets, copyrights, patents and trademarks;
- Include a detailed description of your company’s intellectual property in all offer letters, employment agreements, and non-disclosure and invention assignment agreements it provides to employees.
- Include a detailed description of your company’s intellectual property in all agreements it enters into with third-party contractors who need access to that information to do their work, regardless of where those contractors reside. This is particularly important for contractors who access your intellectual property from remote locations as more and more contractors will in the future.
- If your state allows it, include a non-compete provision in your offer letters and employment agreements, and ensure they’re compliant with the law of the state in which your employees reside and conduct business so you can enforce them.
- Include appropriate contract provisions strictly limiting your employees’ use of company information and their solicitation of your company’s customers in employment agreements;
- Conduct exit interviews with all departing employees to ensure they are aware of their continuing contractual obligations to your company;
- Prepare written reminders to all departing employees regarding their continuing contractual obligations to your company;
- Include lawful non-compete and intellectual property restrictions in any separation or severance agreement your company enters into with its employees.
- Provide clear notices in your company’s employee handbook about the importance of protecting your company’s intellectual property, and monitor your employees’ company e-mail accounts and mobile devices because they are the two most common methods employees use to misappropriate intellectual property and communicate with your competitors.
- In the event of the strong likelihood of a lawsuit involving the misappropriation or infringement of your company’s intellectual property, investigate and preserve all digital evidence immediately because your employees’ digital fingerprints may well make or break your misappropriation or infringement case against them.