Personal Relationship Between Executives Affects Trade Secrets Dispute Between Competing Businesses

secretInformation is a critical asset for any New Jersey business, and the value of many types of information is based, in whole or in part, on its secrecy. State and federal laws protect businesses’ rights to keep certain information, known as “trade secrets,” from becoming known to competitors or the general public. The federal Defend Trade Secrets Act (DTSA) establishes criminal and civil penalties for misappropriation of trade secrets and other acts. Businesses must make affirmative efforts to preserve the secrecy of information in order to enjoy the protection of laws like the DTSA. A currently pending federal lawsuit involving trade secrets asserts multiple statutory and common-law causes of action, including a DTSA claim. The lawsuit specifically alleges that the breach of trade secrets resulted from a romantic relationship between a now-former executive of the plaintiff and an executive employed by the defendant. Teva Pharmaceuticals USA, Inc. v. Sandhu, et al., No. 2:17-cv-03031, complaint (E.D. Pa., Jul. 7, 2017).

Almost any kind of information used in business can constitute a trade secret. Common examples include designs or processes used by the business, client lists, and lists of sales leads. The DTSA defines a trade secret by two criteria:  the owner has made an effort to maintain the information’s secrecy or confidentiality, and the information has “independent economic value” specifically because it is not widely known or easily discoverable. 18 U.S.C. § 1839(3).

A person can violate the DTSA through a variety of acts undertaken “with intent to convert a trade secret,” for the “benefit of anyone other than the owner,” and with either the intent to injure the owner or the knowledge that an injury is likely to result. Id. at § 1832(a). Violations may include stealing or otherwise misappropriating trade secrets, copying or altering trade secrets without permission, and receiving information known to be a misappropriated trade secret. The DTSA allows the government to file a civil lawsuit seeking injunctive relief against further violations. The plaintiff in the Teva case is also asserting a claim under this statute.

According to the complaint, an individual formerly employed by the plaintiff as an executive in charge of regulatory matters was involved in a romantic relationship with the president and CEO of a rival company. The former executive allegedly turned over trade secrets to this person and therefore allegedly turned the information over to the competing company. The complaint claims that the information included documents owned by the plaintiff, some of which were marked “confidential,” which the former executive sent via email to the CEO at his work address. The former executive had reportedly signed a confidentiality agreement as part of her employment contract with the plaintiff.

Both executives and the rival business are named as defendants in the lawsuit. The complaint asserts causes of action for violations of the DTSA and state trade secrets laws, as well as the Computer Fraud and Abuse Act, 18 U.S.C. § 1030. It also asserts claims for breach of contract and breach of fiduciary duty, as well as common-law claims like tortious interference with a contractual relationship and conversion.

Business litigation lawyer Samuel C. Berger represents businesses, business owners, and entrepreneurs in the New York and Northern New Jersey areas. We offer a series of fixed-fee legal-service packages that cover a wide range of legal needs for our clients. Contact us online, at (201) 587-1500, or at (212) 380-8117 today to schedule a confidential consultation to see how our knowledgeable and experienced team can help you and your business.

More Blog Posts:

Intellectual Property for New Jersey Small Businesses, Part 2: Trade Secrets and More, New York & New Jersey Business Lawyer Blog, June 1, 2017

Protecting a Business Idea with New Jersey’s Trade Secrets Law, New York & New Jersey Business Lawyer Blog, May 21, 2015

Trade Secrets are Protected Under New Jersey Law, Offering Security for Small Businesses, New York & New Jersey Business Lawyer Blog, August 28, 2013

Photo credit: Alias 0591 from the Netherlands (Psst, let me tell you a secret.) [CC BY 2.0], via Wikimedia Commons.