A lawsuit involving trade secret misappropriation recently brought to mind the definition of a “knee-jerk reaction;” an “automatic and unthinking” response.
Specifically, our law firm filed a lawsuit for breach of contract involving unpaid commissions and other claims on behalf of a former executive. In response, the former employer
manufactured filed a counter-claim for trade secret misappropriation and violation of a non-compete agreement.
After being sued, the defendant employer filed a motion for “expedited discovery,” which included a demand for forensic imaging of the plaintiff’s computers. This motion was based in large part on “information and belief,” with no supporting affidavits from the employer that any “trade secrets” had actually been misappropriated, or that there had been any unusual or unauthorized computer access before the plaintiff had departed.
On June 8, 29016, the Judge opted to order the parties to do what they and their counsel already were obligated to do (preserve evidence). Further, both sides – even though the plaintiff had not requested the relief – were to make available their respective computers and related devices for imaging.
Both parties have an obligation to preserve the evidence and shall comply with that obligation. The parties shall mutually identify what will be imaged and who will do the imaging by 4:30 p.m. on June 9, 2016 and the imaging shall be completed by June 16, 2016.
Noticeably absent in the order are any limitations as to the scope of inspections or post-imaging protocols for reviewing the data and no or very little time to meaningfully agree to such terms (the order was entered on 6/8/16 and the imaging was to be completed on 6/16/16).
Making matters worse and returning to the definition of “knee-jerk,” Defendant’s counsel filed its disclosure demanding the following devices to be imaged:
… all computers, desktop computers, servers, laptop computers, network storage devices, cellular telephones, tablets, electronic storage devices, hard drives, thumb drives and mobile devices owned or used by [Plaintiff], his immediate family members and [Plaintiff’s new employer] from January 1, 2015, through present …
A copy of the redacted request for inspection is here (PDF)). The Defendant’s disclosure failed to identify any date for the requested inspection, and it did not identify an actual person having experience or qualifications to do the imaging (only a company with a wonderful website about its services). Also, there was no indication as to who is considered who is an “immediate family” member or what information was being sought. In other words, the inspection demanded by the defendant was the equivalent of casting a digital fishing net.
Furthermore, the requested examination extended to the plaintiff’s new employer. However, there was no indication that the new employer had accessed or otherwise acquired any trade secrets or other confidential information. Further, there was no indication as to what the lay of the computer land looked like for the new employer, e.g., number of computers, network infrastructure, etc.
Three Considerations in Trade Secret Computer Forensic Inspections
This example illustrates the sorry state of affairs when it comes to managing electronic discovery and computer forensics. Further, rulings like this are troublesome on numerous fronts for businesses that become involved in such litigation.
- First, computer inspections should be the exception when it comes to discovery and only upon a showing of exceptional circumstances. However, judges are quick to allow such inspections and – as this case illustrates – computer forensics inspections may be allowed upon a minimal showing. Again, no affidavits were provided setting forth facts that any information was in danger of being lost. Also, no facts were provided showing that any misappropriation of trade secrets had occurred to warrant the imaging of the plaintiff and the plaintiff’s new employer’s computers.
- Second, computer inspections are extremely invasive and often result in a sort of litigation karma – what comes around, goes around. Case in point, only the defendant petitioned the court for the inspection. Even so, the court ordered that both parties were to make available their respective computers and related devices to be imaged and to do so and in short order.
- Third, this case illustrates how companies may often become embroiled in litigation or become collateral damage when trade secret litigation against a former employee is pursued. Here the order extended to the plaintiff’s new employer who was later added as a party to the suit by way of an amended counter-claim. No company expects a new hire will also result in a lawsuit. But it happens. To minimize this risk, we recommend our business clients to take certain steps as part of a solid pre-employment screening procedure. One such step is to identify whether a new hire is a party to any non-compete restrictions or other post-employment restrictions that require further evaluation.
For more information about trade secret and non-compete law, as well as how both may affect you or your business, contact Michigan attorney Jason Shinn. Since 2001, Mr. Shinn has worked with companies and individuals to address non-compete litigation and trade secret misappropriation claims.