August 26, 2005 12:29 PM PDT

Legal argument could hamper high-tech job-changers

(continued from previous page)

Lee disclosing trade secrets, according to an attorney who has followed the case.

There's a simple logic behind the principle of inevitable disclosure, said Lee Paterson, an attorney with the law firm Winston & Strawn: Despite promises to avoid using proprietary information from a past employer, that may be impossible in practice. "People can't do frontal lobotomies of themselves," he said. "You can't shut off part of your brain."

Companies often have invoked the doctrine in cases where the employee did not sign agreements not to compete or not to disclose confidential information, said Dick Leasia, partner in the law firm Thelen Reid & Priest. To make the case, employers have relied on the assumption that courts will protect their trade secrets. "It became a species of unfair competition or theft of trade secrets," he said.

"People can't do frontal lobotomies of themselves. You can't shut off part of your brain."
--Lee Paterson, attorney

A beverage industry brouhaha a decade ago became a landmark case in the area of inevitable disclosure. After Quaker Oats, maker of Gatorade, hired an executive away from PepsiCo, PepsiCo sued to keep him from assuming his new duties. In December 1994, a federal district court barred the executive, William Redmond, from taking his new job at Quaker through May, 1995. An appeals court upheld the decision, saying the Quaker job "would initially cause him to disclose trade secrets."

In its ruling, the appeals court suggested the concept of inevitable disclosure does not apply to all cases of employees jumping ship to a competitor. A solid case for the unavoidable misuse of secrets must be made, the court ruled. It said PepsiCo presented "substantial evidence" that William Redmond had "extensive and intimate knowledge" about PepsiCo's strategic goals for 1995.

"PepsiCo finds itself in the position of a coach, one of whose players has left, playbook in hand, to join the opposing team before the big game," the court said.

Theoretically, the inevitable disclosure doctrine could prevent someone from ever taking a new job in their chosen area of expertise. Paterson gave the hypothetical case of a person who knows the secret formula for Coca-Cola seeking to join another drink company. "You might very well get a ruling from the judge that you can't go to work for a competitor in the beverage industry," he said.

A solid case for the unavoidable misuse of secrets must be made.

In practice, though, trade secrets tend to get stale over time, and employment bans are limited, Taylor said. "I've never seen anything (lasting) past two years," he said.

To Taylor, growing numbers of inevitable disclosure suits are a response to the twin trends of workers switching employers more frequently and the shift to a more "knowledge"-based economy. He says employers increasingly are asking employees at all levels to sign noncompete and confidentiality agreements, and he links rising inevitable disclosure litigation to the growing number of patents filed. Both, he said, illustrate companies aggressively protecting their intellectual property.

Businesses that employ the inevitable disclosure doctrine aren't likely to get a friendly welcome in California courts, however. In 2002, a California appeals court explicitly rejected the concept: "We hold this doctrine is contrary to California law and policy because it creates an after-the-fact covenant not to compete, restricting employee mobility."

The ruling, in a case involving Schlage Lock Company and a former Schlage employee who joined competitor Kwikset, cited a California law that frowns on noncompete agreements, and said "California public policy strongly favors employee mobility."

Paterson, for one, predicts that courts throughout the country will follow California's lead over time when it comes to inevitable disclosure suits. As society becomes more economically mobile, judges themselves are moving from job to job in the course of their careers and will be sympathetic to workers doing the same, he argued. "The rights of the employee are going to trump the rights of the employer," he said.

Taylor isn't so sure. "The judges who understand business realities understand that inevitably there will be opportunities for information to be disclosed to competitors," he said.

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66 comments

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I have an answer to this problem.
Kai-Fu cannot be in both places at once and Microsoft is not happy about him defecting to Google but I have a perfect solution. Google can instead hire me for $500,000. If my employer does not like the idea I will have enough left over to give them $460,000 to not care.
Posted by Dachi (797 comments )
Reply Link Flag
I have an answer to this problem.
Kai-Fu cannot be in both places at once and Microsoft is not happy about him defecting to Google but I have a perfect solution. Google can instead hire me for $500,000. If my employer does not like the idea I will have enough left over to give them $460,000 to not care.
Posted by Dachi (797 comments )
Reply Link Flag
I agree
It's time to end the musical chairs shuffle. Companies should do what baseball does: sign people to a guaranteed contract (at least for managerial and science positions), with options for renewal.
Posted by R. U. Sirius (745 comments )
Reply Link Flag
You're crazy
I reserve the right to work for whomever I choose. I will fight to the end, any attempt to allow employers to dictate where I can earna living.

My job has been outsourced to India TWICE in four years - where was employer loyalty THEN ???

The only way I will have any loyalty to an employer, is if they have a proven loyalty to me - give me TENURE !!!
Posted by (409 comments )
Link Flag
After all
"Microsoft's suit against Kai-Fu Lee and Google invokes a theory that holds that in some circumstances people can't avoid sharing or relying on trade secrets from their former employer when moving to a competitor.".

This implies that the fight over the non-compete contract, is actually suggesting that Dr. Lee will break his confidentiality agreement - a whole different thing.

On the grounds that he would eventually disclose some non-public information - Then this issue should apply to ALL trades that gain any non-public information - lawyers, accountants, security guards - even priests (in the confessional). Once they know something about someone, they shouldn't be allowed to work with another client - try telling a lawyer, that he can only have 1 client, and then not work for a year after ending the association with that client - good luck !
Posted by (409 comments )
Link Flag
I agree
It's time to end the musical chairs shuffle. Companies should do what baseball does: sign people to a guaranteed contract (at least for managerial and science positions), with options for renewal.
Posted by R. U. Sirius (745 comments )
Reply Link Flag
You're crazy
I reserve the right to work for whomever I choose. I will fight to the end, any attempt to allow employers to dictate where I can earna living.

My job has been outsourced to India TWICE in four years - where was employer loyalty THEN ???

The only way I will have any loyalty to an employer, is if they have a proven loyalty to me - give me TENURE !!!
Posted by (409 comments )
Link Flag
After all
"Microsoft's suit against Kai-Fu Lee and Google invokes a theory that holds that in some circumstances people can't avoid sharing or relying on trade secrets from their former employer when moving to a competitor.".

This implies that the fight over the non-compete contract, is actually suggesting that Dr. Lee will break his confidentiality agreement - a whole different thing.

On the grounds that he would eventually disclose some non-public information - Then this issue should apply to ALL trades that gain any non-public information - lawyers, accountants, security guards - even priests (in the confessional). Once they know something about someone, they shouldn't be allowed to work with another client - try telling a lawyer, that he can only have 1 client, and then not work for a year after ending the association with that client - good luck !
Posted by (409 comments )
Link Flag
This opinion should be a blog post.
Or are editorials "news"?
Posted by M C (598 comments )
Reply Link Flag
This opinion should be a blog post.
Or are editorials "news"?
Posted by M C (598 comments )
Reply Link Flag
Insane
The way corporations want things to go is to never allow employees to leave, and be able to enforce it legally.

What is Lee supposed to do? Suffer at MS or stop working in his chosen profession. Corporations are getting too much power, and need to be curtialied against these kinds of abuses.

That a court could even entertain this lawsuit shows that our courts are equally insane and out of touch.
Posted by Bill Dautrive (1179 comments )
Reply Link Flag
Welcome back slavery!!!
Slavery is back!
I always thought the crazy hours my friends in the "industry" work (staying till midnight just because something urgent came up...) was a sort of modern slavery...
But now I see that an employer can almost OWN an employee, preventing the employee from working for anyone else...

I think that when companies allow employees access to trade secrets they are taking a risk. They risk having to rely on the worker's integrity in keeping the secret. If they are not confident in the worker's integrity they should not allow access to the trade secret in the first place. A risk is a risk. An individual should be free to leave an employer, and an individual should be free to work in her profession/field of expertise. It's the corporations that are using the individuals' knowledge and not vice versa. Corporations have no knowledge. They have no brains. They hire brains, but they should not be allowed to own them. If they have a problem with an employee working for a competitor they should spend money to avoid the problem.

Anyway, if a former employer uses a court to prevent a former employee from working, and the court rules that the employee cannot work for a competitor, the court should also make the former employer pay the former employee for not working!
Posted by hadaso (468 comments )
Reply Link Flag
Example of the USA Democracy the rest of the world does not want !
USA dares to call themselves democratic?
Is there a dictionary at all in that banana republic?
Give me a break!
You better re-write your laws or or be deleted!
Make a choice as long you can. You can not terrorize the rest of the World... it will turn against you very soon!
You are not hated because you are rich, but because you are crooks = your laws and specially your foreign policy!
It just sucks!
Your country is more hated than the nazis, because you are worst.
Just in case you do not have a mirror. This is how the rest of the World sees you.
Have a nicer day. Respect the others too, before it gets to late! That is my advise 4 U.
Before you get NUKED! My prediction is 98% good at all times!
Regards
Hungarian Freedom fighter from Canada
Posted by cyberblatt (35 comments )
Link Flag
Welcome back slavery!!!
Slavery is back!
I always thought the crazy hours my friends in the "industry" work (staying till midnight just because something urgent came up...) was a sort of modern slavery...
But now I see that an employer can almost OWN an employee, preventing the employee from working for anyone else...

I think that when companies allow employees access to trade secrets they are taking a risk. They risk having to rely on the worker's integrity in keeping the secret. If they are not confident in the worker's integrity they should not allow access to the trade secret in the first place. A risk is a risk. An individual should be free to leave an employer, and an individual should be free to work in her profession/field of expertise. It's the corporations that are using the individuals' knowledge and not vice versa. Corporations have no knowledge. They have no brains. They hire brains, but they should not be allowed to own them. If they have a problem with an employee working for a competitor they should spend money to avoid the problem.

Anyway, if a former employer uses a court to prevent a former employee from working, and the court rules that the employee cannot work for a competitor, the court should also make the former employer pay the former employee for not working!
Posted by hadaso (468 comments )
Reply Link Flag
Example of the USA Democracy the rest of the world does not want !
USA dares to call themselves democratic?
Is there a dictionary at all in that banana republic?
Give me a break!
You better re-write your laws or or be deleted!
Make a choice as long you can. You can not terrorize the rest of the World... it will turn against you very soon!
You are not hated because you are rich, but because you are crooks = your laws and specially your foreign policy!
It just sucks!
Your country is more hated than the nazis, because you are worst.
Just in case you do not have a mirror. This is how the rest of the World sees you.
Have a nicer day. Respect the others too, before it gets to late! That is my advise 4 U.
Before you get NUKED! My prediction is 98% good at all times!
Regards
Hungarian Freedom fighter from Canada
Posted by cyberblatt (35 comments )
Link Flag
Oh, well
Modern buisiness ethics of employment, or lack there of, treat all workers, like slaves(ie long long hours, low pay unsafe working conditions et al,steal, divert or subvert pension entitlements et al). And if they want to leave for better pay and conditions, terminate that right, under the banner trade secrets. For even shonkier work conditions and very bad management attitude to workers Electronic Arts, in which all but the very senior management are treated as slaves! Oh well, welcome to the new world order, in which senior management now have the unshakeable belief, that all workers should bow down before them, and worship them as gods!
Posted by heystoopid (691 comments )
Reply Link Flag
Oh, well
Modern buisiness ethics of employment, or lack there of, treat all workers, like slaves(ie long long hours, low pay unsafe working conditions et al,steal, divert or subvert pension entitlements et al). And if they want to leave for better pay and conditions, terminate that right, under the banner trade secrets. For even shonkier work conditions and very bad management attitude to workers Electronic Arts, in which all but the very senior management are treated as slaves! Oh well, welcome to the new world order, in which senior management now have the unshakeable belief, that all workers should bow down before them, and worship them as gods!
Posted by heystoopid (691 comments )
Reply Link Flag
Simple solution to the problem
There is a simple solution (in general, not necessarily this specific case) to the problem, but employers would likely balk at it.

If you think that I have important information, and you want a non-compete clause, then pay me for the duration of the non-compete clause. There could be provisions in place for terminating the contact, in which case, I'd be free to work for whomever I want, but otherwise, as an incentive not to take a job at a competitor, I'm getting getting paid.

An example to clarify: If my employer doesn't want me to work for a competitor for one year, then they should pay me one year's salary, and I won't work for a competitor for one year. I think that's fair.

-- Joe
Posted by Joe Votour (8 comments )
Reply Link Flag
Not that crazy...
In fact, my previous employer did just that. My
employee agreement gave the company veto rights
on my accepting a new position with a company for
a duration of two years. If they invoked that
clause in the agreement, they were to pay me my
current salary and benefits for the duration
(even if I accepted a job elsewhere, so long as
it was acceptable).

The rationale being that they were interested in
protecting their IP more than conservation of
funds. If they tried to prevent you from taking a
job in your chosen profession without any
compensation, even if with a prior agreement,
that they would risk that a court (or worse, a
jury) would invalidate the agreement outright and
likely risk high legal fees and possibly a
finding that the restriction on disclosure might
be thrown out as well.

If you think about it, for the majority of
scientific staff and even all but the highest
echelons of management, this clearly the way to
go. Why? The legal costs and bad press alone
would far surpass the cost of simply paying the
person to bide their time.
Posted by Gleeplewinky (289 comments )
Link Flag
Simple solution to the problem
There is a simple solution (in general, not necessarily this specific case) to the problem, but employers would likely balk at it.

If you think that I have important information, and you want a non-compete clause, then pay me for the duration of the non-compete clause. There could be provisions in place for terminating the contact, in which case, I'd be free to work for whomever I want, but otherwise, as an incentive not to take a job at a competitor, I'm getting getting paid.

An example to clarify: If my employer doesn't want me to work for a competitor for one year, then they should pay me one year's salary, and I won't work for a competitor for one year. I think that's fair.

-- Joe
Posted by Joe Votour (8 comments )
Reply Link Flag
Not that crazy...
In fact, my previous employer did just that. My
employee agreement gave the company veto rights
on my accepting a new position with a company for
a duration of two years. If they invoked that
clause in the agreement, they were to pay me my
current salary and benefits for the duration
(even if I accepted a job elsewhere, so long as
it was acceptable).

The rationale being that they were interested in
protecting their IP more than conservation of
funds. If they tried to prevent you from taking a
job in your chosen profession without any
compensation, even if with a prior agreement,
that they would risk that a court (or worse, a
jury) would invalidate the agreement outright and
likely risk high legal fees and possibly a
finding that the restriction on disclosure might
be thrown out as well.

If you think about it, for the majority of
scientific staff and even all but the highest
echelons of management, this clearly the way to
go. Why? The legal costs and bad press alone
would far surpass the cost of simply paying the
person to bide their time.
Posted by Gleeplewinky (289 comments )
Link Flag
Slavery? Oh my god.
Is there anyone of color on these forums? Equating Lee, with a (no doubt) 6 figure income and perks up the wazoo to slaves is abominable.

He agreed, IN WRITING, to a package with his former employer. He's being held to account. This is not slavery, kids. Not even close.
Posted by Betty Roper (121 comments )
Reply Link Flag
Stop and think
Everything trickles down... one day you cant go from MS to Google... the next you cant go from University to University... then you cant go from MCdonalds to Burger King heaven forbig they find out the secret sauce.
Posted by volterwd (466 comments )
Link Flag
And one more thing
Why the heck do you think Blacks and slaves go hand in hand... there were slaves of every colour pick up a book
Posted by volterwd (466 comments )
Link Flag
Yes... It IS slavery.
First, YOUR ignorance is shocking. Many races, YES, including all manner of European-Caucasians have been enslaved throughout history.

Second, the definition of a "slave" is someone who is "chattel", ...unable to determine their own disposition, or, to truly own property.

Further, it is the "ruler/owner/royalty" who determines what "a slave" may possess, what "a slave" may undertake, and where "a slave" can live or work.

Often, such "slave-owners" bought, sold, and traded, "...the people in their charge", for their-own [the owners], "...benefit".

"Serfs" were slaves. "Peons" were slaves. And, now "corporate employees" are being told that this, "status", is very much what they must accept.

In fact, I recently heard a business-pundit on the radio actually bemoaning the fact that usually an employer could NOT treat their employees "...as slaves". His position was that this was causing an "undue hardship" upon businesses. And, that, until this situation was reversed, "society, in general" was going to pay the price of "...too much personal-freedom".

So, YES, we ARE talking about "...slavery".
Posted by Had_to_be_said (384 comments )
Link Flag
Slavery? Oh my god.
Is there anyone of color on these forums? Equating Lee, with a (no doubt) 6 figure income and perks up the wazoo to slaves is abominable.

He agreed, IN WRITING, to a package with his former employer. He's being held to account. This is not slavery, kids. Not even close.
Posted by Betty Roper (121 comments )
Reply Link Flag
Stop and think
Everything trickles down... one day you cant go from MS to Google... the next you cant go from University to University... then you cant go from MCdonalds to Burger King heaven forbig they find out the secret sauce.
Posted by volterwd (466 comments )
Link Flag
And one more thing
Why the heck do you think Blacks and slaves go hand in hand... there were slaves of every colour pick up a book
Posted by volterwd (466 comments )
Link Flag
Yes... It IS slavery.
First, YOUR ignorance is shocking. Many races, YES, including all manner of European-Caucasians have been enslaved throughout history.

Second, the definition of a "slave" is someone who is "chattel", ...unable to determine their own disposition, or, to truly own property.

Further, it is the "ruler/owner/royalty" who determines what "a slave" may possess, what "a slave" may undertake, and where "a slave" can live or work.

Often, such "slave-owners" bought, sold, and traded, "...the people in their charge", for their-own [the owners], "...benefit".

"Serfs" were slaves. "Peons" were slaves. And, now "corporate employees" are being told that this, "status", is very much what they must accept.

In fact, I recently heard a business-pundit on the radio actually bemoaning the fact that usually an employer could NOT treat their employees "...as slaves". His position was that this was causing an "undue hardship" upon businesses. And, that, until this situation was reversed, "society, in general" was going to pay the price of "...too much personal-freedom".

So, YES, we ARE talking about "...slavery".
Posted by Had_to_be_said (384 comments )
Link Flag
cough cough... pass the cough drops..
yah.. I need some more cough drops.. just leave
them on the floor on the way the mens locker room
at my health club... you know what? people are
starting to take me seriously now. I look forward
to having a deep sencere non-verbal conversation
with all of you..
Posted by (187 comments )
Reply Link Flag
cough cough... pass the cough drops..
yah.. I need some more cough drops.. just leave
them on the floor on the way the mens locker room
at my health club... you know what? people are
starting to take me seriously now. I look forward
to having a deep sencere non-verbal conversation
with all of you..
Posted by (187 comments )
Reply Link Flag
Rights
I am apalled at this story. The fact that companies can bar you from completely exercising your profession is incredible. I can't believe how low the courts have sunk. A person studies hard for years at a university to earn a degree, spends thousands of dollars on their education, and some company can tell them that all their efforts are worthless. Is not a constitutional right to be able to work, to pursure happiness? Their is only one word to describe this: SLAVERY.

I can't believe the US is still talking about democracy in Iraq and the rights of the people. The US people no longer have any rights, they just haven't realized yet. Perhaps in a few years there will be a new revolution, the people rising against the abusive courts and politicians...
Posted by Sentinel (199 comments )
Reply Link Flag
Rights
I am apalled at this story. The fact that companies can bar you from completely exercising your profession is incredible. I can't believe how low the courts have sunk. A person studies hard for years at a university to earn a degree, spends thousands of dollars on their education, and some company can tell them that all their efforts are worthless. Is not a constitutional right to be able to work, to pursure happiness? Their is only one word to describe this: SLAVERY.

I can't believe the US is still talking about democracy in Iraq and the rights of the people. The US people no longer have any rights, they just haven't realized yet. Perhaps in a few years there will be a new revolution, the people rising against the abusive courts and politicians...
Posted by Sentinel (199 comments )
Reply Link Flag
Humorous since MSFT has done this many times
For example, remember Anders Hejlsberg? He was lead architect of Turbo/Borland Pascal, then Delphi. Microsoft then aggressively recruited him away, sending limos to pick him up at lunch, offers of being paid far more than he was at Borland (far more than $500,000 than guy in this article.)

So now he's one of the lead people on Microsoft Visual Studio.NET

I agree with earlier poster however, if companies want to retain someone so badly, then have them sign a long term guaranteed contract that both parties agree too, otherwise person should be free to leave.

Its supposed to be a free country? Correct?
Posted by bp2004 (26 comments )
Reply Link Flag
Humorous since MSFT has done this many times
For example, remember Anders Hejlsberg? He was lead architect of Turbo/Borland Pascal, then Delphi. Microsoft then aggressively recruited him away, sending limos to pick him up at lunch, offers of being paid far more than he was at Borland (far more than $500,000 than guy in this article.)

So now he's one of the lead people on Microsoft Visual Studio.NET

I agree with earlier poster however, if companies want to retain someone so badly, then have them sign a long term guaranteed contract that both parties agree too, otherwise person should be free to leave.

Its supposed to be a free country? Correct?
Posted by bp2004 (26 comments )
Reply Link Flag
"At Will" Employment
I had to comment one more time, on a different line of reasoning.

I live in a state (Michigan) where employment is "at will" (not the only state either). What does this mean? Well for all practical purposes it means my employer can fire me at any time for any reason, barring a few circumstances where legal protections apply (race, religion, disability etc)

Earlier this year a Michigan employer fired employees who smoked. Granted he gave them time to quit and if they refused they were termed. The reasoning was the company would be able to lower health insurance costs with no smokers.

Now you must understand, if I know my employer can fire me at any time for any reason and I accept that, why the hell should I be prevented from leaving my job on my own terms and time of my choosing?
Posted by bp2004 (26 comments )
Reply Link Flag
"At Will" Employment
I had to comment one more time, on a different line of reasoning.

I live in a state (Michigan) where employment is "at will" (not the only state either). What does this mean? Well for all practical purposes it means my employer can fire me at any time for any reason, barring a few circumstances where legal protections apply (race, religion, disability etc)

Earlier this year a Michigan employer fired employees who smoked. Granted he gave them time to quit and if they refused they were termed. The reasoning was the company would be able to lower health insurance costs with no smokers.

Now you must understand, if I know my employer can fire me at any time for any reason and I accept that, why the hell should I be prevented from leaving my job on my own terms and time of my choosing?
Posted by bp2004 (26 comments )
Reply Link Flag
the 2 sides of the coin
It's clear legalese could be used to chain employees at the mercy of corporations. Also clear however, subversive hiring and unloyal employees could harm very hard corporate assets.

Another problem is, the globalization of workforce and the fierce competition with the slimming down of profits in many industries are reinforcing the predator nature of any corporation when fighting to survive. In such form of capitalism, most corporations alienate from a social-aware mission for the benefit of their constituents and society in general, but enforce their nature as a scheme to suck up by an elite the added-value created by the rest.

Regretfully, all these are simply reflections of a too self-absorbed and greed-driven society. A solution? Well, IMO, subversive hiring is the most predatory component in this picture and companies using this approach should be kept accountable and pay the extra price of making waters turbier.

Probably a good deal for all here is, the non-compete agreement sounds not too bad to me, but the price of jumping to another boat should be paid by all interested parties in some fair degree. The employee should get paid, but a comparatively less beneficial wage, while embracing some community-friendly activity during this time. If fighting employers, they shall pay both the costs of the career change (one because wants to keep the employee out of business and the other because finds a benefit hiring them by all means).
Posted by alx359 (40 comments )
Reply Link Flag
the 2 sides of the coin
It's clear legalese could be used to chain employees at the mercy of corporations. Also clear however, subversive hiring and unloyal employees could harm very hard corporate assets.

Another problem is, the globalization of workforce and the fierce competition with the slimming down of profits in many industries are reinforcing the predator nature of any corporation when fighting to survive. In such form of capitalism, most corporations alienate from a social-aware mission for the benefit of their constituents and society in general, but enforce their nature as a scheme to suck up by an elite the added-value created by the rest.

Regretfully, all these are simply reflections of a too self-absorbed and greed-driven society. A solution? Well, IMO, subversive hiring is the most predatory component in this picture and companies using this approach should be kept accountable and pay the extra price of making waters turbier.

Probably a good deal for all here is, the non-compete agreement sounds not too bad to me, but the price of jumping to another boat should be paid by all interested parties in some fair degree. The employee should get paid, but a comparatively less beneficial wage, while embracing some community-friendly activity during this time. If fighting employers, they shall pay both the costs of the career change (one because wants to keep the employee out of business and the other because finds a benefit hiring them by all means).
Posted by alx359 (40 comments )
Reply Link Flag
 

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