Trade Secrets Part II: Does “Non-Disclosure” Ever Mean “Non-Compete”?

Assuming that an employer has taken reasonable security measures to protect its bona fide trade secrets, what can be done after a former employee breaches the parties’ confidential relationship and begins working for a competitor? In Boston Scientific Corp. v. Lee, the United States District Court in Massachusetts provided several considerations that weigh against restricting an employee’s right to work for competitors solely because the terms of a confidentiality or “non-disclosure” agreement have been breached.  Boston Scientific, a medical device manufacturer, had filed suit and moved for a preliminary injunction ordering the immediate return of all confidential information that its former scientist, Dr. Lee, had transferred to his personal e-mail account and external hard drive prior to resigning from the company.   Boston Scientific also requested that the Court prohibit Dr. Lee from working for “Nevro,” a competitor that hired Dr. Lee following his resignation, arguing that Dr. Lee would inevitably disclose the trade secrets in his possession to Nevro.  As part of the Court’s decision, Dr. Lee was ordered to return all confidential information obtained from Boston Scientific, the transfer of which had clearly violated the parties’ non-disclosure agreement.   However, the Court refused to block Dr. Lee’s continuing employment with Nevro, finding it unlikely that any “irreparable harm” to Boston Scientific would occur.   The Court first noted that Dr. Lee’s employment contract with Nevro contained an explicit non-disclosure clause with respect to any confidential information of Boston Scientific in Dr. Lee’s possession.   Second, the Court pointed out that Dr. Lee was hired to perform scientific research at Nevro, which differed from his product development responsibilities at Boston Scientific.

Even if Boston Scientific had demonstrated that the disclosure of its confidential information was more likely than not, its request to block Dr. Lee’s continuing employment with Nevro seemed to be a Hail Mary throw.   That’s because Dr. Lee had never agreed to any future restrictions on his options for employment following separation from Boston Scientific.   In Massachusetts, agreements to restrict an employee’s future employment (“non-competes”) must be (1) necessary to protect the legitimate business interests of the employer, (2) reasonable in time and scope (3) bargained for between the parties and (4) consistent with the public interest. But Boston Scientific’s request had no geographic or temporal limitations, nor had the company ever requested Dr. Lee to sign off on any restrictions regarding his future employment, meaning that elements No. 2 and No. 3 above were not satisfied.

In conclusion, employers who would seek to restrict the future employment of individuals who are found to be in breach of company policy regarding confidential information should notify and obtain the agreement of employees to such restrictions at the outset of their employment.