Labor & Employment — Cybersecurity Exec Did Not Take Trade Secrets

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RLM Communications Inc. v. Tuschen (Lawyers Weekly No. 001-134-16, 28 pp.) (Diaz, J.) No. 14-2351, July 28, 2016; USDC at Raleigh, N.C. (Flanagan, J.) 4^th Cir.

Holding: The 4^th Circuit affirms summary judgment for a former executive of a cybersecurity government contractor who accused her of taking confidential information and violating a non-compete agreement when she left to work for a competitor; the non-compete was not enforceable, and defendant’s former employer failed to show that she took or shared its confidential information.

No Blue Pencil

In North Carolina, restrictive covenants are unenforceable where they prohibit the employee from engaging in future work that is distinct from the duties actually performed by the employee. The non-compete here restricted defendant from “directly or indirectly” participating in a “business that is similar to a business now or later operated by Employer in the same geographical area,” including participation as a co-owner, director, officer, consultant, independent contractor, employee or agent of another business.

The restriction on defendant’s future employment is largely unmoored from plaintiff’s legitimate business interests. We cannot rewrite the non-compete to save it from its fatal flaws. Even if we assume blue-pencilling were appropriate in this case, we do not see how it would help plaintiff to strike the term “indirectly,” as we have already explained that a prohibition limited to direct participation in a similar business is overbroad.

The non-compete is unenforceable, and the district court properly dismissed the associated claim for breach of contract.

We assume without deciding that the Confidentiality Agreement was valid and affirm on the alternative ground that employer has failed to put forth sufficient evidence of breach.

Defendant readily admits that, before she left her former employer, she copied confidential information regarding the contract from her employer-issued laptop onto a CD without written permission, she claimed, to provide her successor with a “single, one-stop source of information” he would not otherwise have. She knew plaintiff would retain the laptop and all information on it, but she believed copying the disc would ease the transition for her successor. She testified she gave the only copy to him, and plaintiff concedes it has no evidence to the contrary. We affirm summary judgment for defendant on this count.

Trade Secrets

In the employment context, if knowledge and opportunity suffice for a prima facie case of misappropriation under N.C. Gen. Stat. § 66-152, then an employer can state a prima facie case against its employee merely by showing that it gave the employee access to its trade secrets. The statute does not clearly address rebuttal in a case such as this one, where the employee claims she never acquired or used trade secrets at all.

The Supreme Court of North Carolina has not had occasion to consider the meaning of the statute. We conclude that court would adopt one of two possible interpretations of § 66-155. Both produce a rule sufficient to resolve this case: When an employer brings a misappropriation claim against an employee, admitting the employee had authorized access to its trade secrets at all relevant times, the employer must raise an inference of actual acquisition or use of trade secrets to survive summary judgment.

Plaintiff employer admits it gave defendant access to its trade secrets, and it does not claim she ever accessed them without authorization. These facts would prevent an inference of misappropriation from defendant’s access alone.

Plaintiff claims that, after the competitor hired defendant, it underwent an “unexplained leap in technical capacity” that permits an inference of misappropriation. Its sole evidence is that the competitor had never bid on the contract at issue before defendant joined the company, but afterward it was able to bid on a follow-on contract. We do not think submitting a bid, particularly an unsuccessful one, represents a “leap in technical capacity.”

The court properly awarded defendant summary judgment on plaintiff’s trade-secrets claim, as well as its claims for conversion and for tortious interference with contractual relations.

Judgment affirmed.