©2024 Seyfarth Shaw LLP www.seyfarth.com 2024 Cal-Peculiarities | 351 12.4.3 Protection of trade secrets Employers remain free, of course, to contract with their employees to protect employer trade secrets.49 It may seem superfluous for an employer to contract for protection of trade secrets, when statutory protection for those trade secrets already exists (see § 12.5). But formal employment agreements could help define trade secrets, provide additional deterrents to misappropriation of trade secrets, provide contractual remedies, and call for special procedures to seek trade secret protection, such as a provision for injunctive relief and a provision for prevailing-party attorney fees, at least for certain employees. But such agreements should be judicious. An “overly restrictive” agreement can “operate as a de facto noncompete provision.”50 In 2020, the Court of Appeal addressed a case involving a company that engaged in a highly computerized form of equities trading known as statistical arbitrage.51 It sought to protect its information by requiring employees to sign a series of agreements which defined “Confidential Information” so broadly as to prevent employees from ever working again in securities trading, much less in statistical arbitrage. The Court of Appeal held this overly-broad agreement was “void ab initio and unenforceable.”52 12.5 Protection of Trade Secrets Virtually every state, including California, has enacted the Uniform Trade Secrets Act.53 The UTSA could forbid a former employee from using the former employer’s trade secrets, such as confidential client lists, to solicit clients.54 12.5.1 Application to customer lists Some, but not all, customer lists qualify for protection as trade secrets. Important factors to consider are whether the names are generally known or readily ascertainable to others in the same business, and how much effort one would need to compile the list.55 12.5.2 Application to employee identities A 2018 Court of Appeal decision rejected an employer’s effort to sue its former employees (certain traveling nurses) for raiding the employer’s employees; the employer claimed that the traveling nurses’ names and contact information were trade secrets. This information was not a trade secret, the Court of Appeal held, because the traveling nurses at issue had applied for employment elsewhere before they were recruited by the formeremployee-defendants, and their identities were widely known within the industry.56 12.5.3 Inapplicability of “inevitable disclosure” doctrine In many jurisdictions, courts help employers victimized by disloyal departing employees by applying the “inevitable disclosure” doctrine, which holds that an employer can enjoin a former employee from working for a competitor where the employee’s duties with the competing employer are such that the employee would inevitably disclose the former employer’s trade secrets. In California it’s different. The Court of Appeal has rejected the inevitable disclosure doctrine.57 Employers concerned about theft of trade secrets can, however, use California’s version of the Uniform Trade Secrets Act, which authorizes injunctions against threatened misappropriation of trade secrets.58 12.5.4 Preemption of common law claims premised on trade secret misappropriation theory? Formerly, employers could clearly pursue tort claims for employee theft or misuse of company information, even if the misappropriated information was not a trade secret.59 But California courts have held that the California Uniform Trade Secrets Act (CUTSA) preempts tort claims—such as conversion, breach of loyalty, and tortious interference—that rely on the same nucleus of facts as a trade secret misappropriation claim.60
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