The Doctrine Of Inevitable Disclosure Of Trade Secrets

Threatened misappropriation of trade secrets usually occurs after thetermination of the employment relationship when the departing employeewith knowledge of the former employer’s trade secrets is going to workfor the competitor of the former employer, and that will make the formeremployer’s trade secrets in danger of misappropriation for theexemployee may most likely misappropriate the former employer’s tradesecrets in fulfilment of the duties required by his new position. Forprevention of threatened misappropriation the doctrine of inevitabledisclosure, as well as the non-compete clauses in employment contracts,are normally used by the owner of trade secret in practice. The doctrine ofinevitable disclosure generalized from American Case Law is one ofdoctrines applied by American courts in granting injunctive relief, andpractically develops in parallel with American legal system for protectionof trade secret. The doctrine of inevitable disclosure, in its early stages ofdevelopment, was often considered when courts deciding the applicability of a covenant not to compete, and thus has not attracted attention widelyuntil the Seventh Circuit Court’s decision in PepsiCo.,Inc. v. Redmondwas made. There have been an increasing number of cases involving thedoctrine of inevitable disclosure in the United States after the PepsiCo.However, there is considerable disagreement over the doctrine among thecourts in different states in the U.S.A. Some of states have recognized thedoctrine; some have rejected it; Some have admitted it but strictly appliedit,and also some states have acknowledged it first then rejected it later. Itis because the application of the doctrine involves the conflict betweenemployer’s right to trade secret and employee’s freedom to pursue anoccupation. When courts plan to apply the doctrine of inevitabledisclosure, they have to weigh these two conflicting interests and decidewhich one is more important. Since the courts take different stand onthese conflicting interests, their attitudes towards the doctrine are alsodifferent. As a typical precedent of applying the doctrine in contemporaryAmerican trade secret laws, PepsiCo not only has constructed a basicframework for application of the doctrine of inevitable disclosure, butalso has proposed elements that should be considered when the doctrineis applied. Some of these elements are indispensable; Some of theseelements are just persuasive rather then essential in application of thedoctrine. The emergence of inevitable disclosure doctrine reflects theessential characters of trade secrets protection, stems from evolution of theories about trade secrets and development of trade secret legislationand conforms to the expanding range of trade secrets and theenhancement of trade secrets protection in the United States.In China the legislation on trade secrets protection is constantlyimproving, but there is lack of clearly defined rules on preventingthreatened misappropriation. Although the system of covenant not tocompete introduced by 《Labor Contract Law》 aims at preventingthreatened misappropriation, it actually impairs employee’s freedom topursue an occupation instead of balancing employer’s interests againstemployee’s interests under the specific national conditions in China. So inorder to improve the system of trade secrets protection in China, aproposal to introduce the doctrine of inevitable disclosure practised in theUnited States to China is made by this thesis. The doctrine of inevitabledisclosure can be used to interpret the reasonableness and validity ofnon-compete clauses when there are non-compete clauses in employmentcontracts. It can be applied directly to prevent an departing employeefrom accepting similar employment in the new employer when there areabsent of non-compete clauses in employment contracts. When thedoctrine of inevitable disclosure is applied, several elements should beconsidered: Does the former employer have trade secrets which are at risk?Does the departing employee know about exemployer’s trade secrets? Isthe new employer in competition with the former employer? Does there have similarity between the new employer and the former one,and whatare the intentions of the departing employee and the new employer?...