Articles on Law, Science, and Engineering

PART II: Duties of an Ex-employee

What Information is Protected?

In the engineering professions, employees frequently work with their employer's trade secrets. Trade secrets need not be patentable nor even technological. For example, during employment, an employee may acquire information concerning his employer's methods of doing business and become acquainted with his employer's customers and their habits. In a 1974 Pennsylvania case, the court prohibited a former employee from using customer lists and other records. These were found to be trade secrets which were protected from disclosure to competitors.

Trade secrets need not take a substantial period of time, money or effort to develop. A 1946 Massachusetts case prohibited several ex-employees from using their ex-employer's simple combining process. Even though a process is easy to duplicate, the courts may prohibit former employees from using it to their ex-employer's disadvantage.

The misuse or disclosure of trade secrets, whose value depends on their secrecy, can also constitute criminal fraud. In the recent case of Carpenter v. U.S., 484 U.S. 19 (1987), the United States Supreme Court upheld a criminal prosecution based on the violation of an employee's common law fiduciary duty to his employer. A Wall Street Journal reporter involved in an insider-trading scheme was found to have violated his fiduciary obligation to protect his employer's proprietary information. This violation constituted criminal fraud, independent of the insider-trading allegations. Such a finding would subject the ex-employees to civil and criminal penalties, including prosecution under the federal racketeering laws.

The courts will be particularly hostile to employees who are seen as securing employment primarily to gain access to confidential information for later competition. Similarly, using information acquired by eavesdropping or the unauthorized examination of records belonging to an employer would be considered unfair conduct.

Since the purpose of the law is to protect the ex-employer from harm, ex-employees will be prohibited from disclosing proprietary information, irrespective of their personal gain. Thus, an ex-employee can not sell such information to a third party or give it general circulation, even if the ex-employee does not profit from the distribution of the information.

Employers are also prohibited from hiring an employee to gain access to his ex-employer's proprietary information. Both the new business and the ex-employee who violates this rule may be sued by the original owner of the information. In a 1955 case in Maryland, Colgate-Palmolive employed an inventor of a competitor's (Carter Products) product knowing of his contractual obligation not to disclose information contained in a pending patent application. Carter was awarded all profits earned prior to the issuance of its patent.

Next - What Information Can You Use?
Previous - Competing Interests of Employer, Employee, and the Public