Friday, June 5, 2009

Large Jury Verdicts Confirm Value of Protecting Trade Secrets and Associated Risk

by John L. Watkins

In the past several weeks, juries in two states have each awarded over $30 million in damages in separate trade secret cases. A California jury awarded Hansen Medical, Inc. $36.3 million in damages in a trade secret and breach of contract case against Luna Innovations, Inc. in late April. Last week, a jury in federal court in Atlanta awarded Lockheed Martin $37.3 million in a trade secret case against L-3 Communications Corp. and a subsidiary.

Each of these cases will likely be appealed and will perhaps be settled. Nevertheless, the size of the verdicts alone provides some important reminders for businesses. First, the verdicts show that trade secrets can have enormous value to businesses. Companies holding trade secrets should make sure that they are protected through non-disclosure agreements and other protections.

Conversely, companies who are hiring employees who formerly worked for competitors should take steps to make sure that those employees do not bring their former employer’s trade secrets. This can be addressed through employment agreements and other measures.

Employees considering leaving their employer and working for a competitor or starting their own business should also take steps to avoid becoming involved in trade secret litigation. This can be as simple as having a clear understanding (preferably written) with the employer regarding what the employee can take and cannot take upon leaving, and then abiding by that understanding.

More information regarding trade secrets and non-disclosure agreements can be found in our podcast series in which Tom McLain and I address these issues. Part I addresses trade secrets and non-disclosure agreements generally. Part II addresses non-disclosure agreements in considerable detail. Part III addresses trade secret litigation. The podcasts are available at the firm’s website at www.ctflegal.com/podcasts.html or at http://www.ctflegal.blip.tv/. Our attorneys have considerable experience in this area.

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