In DeVere Co., Inc. v. McColley, et al, 2014 WL 6473513 (W.D. Wis.), an opinion that could have implications for Wisconsin employers, a District Court from Wisconsin's Western District denied a request to enjoin a former employee from misappropriating an employer’s alleged trade secrets because the employee’s one-year non-disclosure agreement had expired.
In DeVere, Defendant McColley signed an employment agreement containing various restrictive covenants. Those covenants included a one-year customer non-solicitation provision and a one-year non-disclosure provision.
The non-disclosure provision specifically defined “Confidential Information” to include “trade secrets” and noted that:
the parties agree[d] that nothing in th[e] Agreement [should] be construed to limit or negate the common law of torts or trade secrets or Wisconsin’s Uniform Trade Secrets Act, § 134.90, Wis. Stats., which provide[d] Company with broader protection than that provided [by the Agreement].
McColley eventually resigned from DeVere and joined a competitor. Towards the end of the one-year restriction, DeVere learned that McColley was violating the customer non-solicitation clause. After the one-year period had expired, DeVere sued McColley and immediately sought an injunction prohibiting McColley and his new employer from misappropriating its trade secrets pursuant to the Wisconsin Trade Secrets Act (“WTSA”).
The court denied the request. The court noted that DeVere’s claim required DeVere to establish that McColley had a “duty to maintain [the] secrecy” of the items in question. In this respect, DeVere had pointed only to the non-disclosure clause and McColley’s duty under that clause had expired at the one-year anniversary of his departure from DeVere.
While the court noted that the employment agreement included language stating that the agreement did not “limit or negate” DeVere’s rights under the WTSA, such language did not change the fact that the WTSA required DeVere to establish that McColley had a “duty to maintain the confidentiality” of the information in question. In that regard, DeVere relied only upon the expired non-disclosure clause.
Finally, the court noted that it was unlikely that the “trade secrets” in question—strategy and marketing plans, pricing, and customer information—had value beyond the one-year period anyway, since such items had a tendency to “grow stale.”
Impact of the Decision
The DeVere Co., Inc. v. McColley decision is not precedential and was entered at the preliminary injunction phase. Further, its conclusion that trade secret protection ends upon the cessation of a non-disclosure clause is at odds with other caselaw. Accordingly, it is not clear whether other Wisconsin courts will follow its direction.
If followed, however, the DeVere decision indicates that trade secrets should be expressly exempted from the temporal limit typically required in non-disclosure agreements and that the agreement should expressly state that the company’s trade secrets must be maintained in confidence for so long as the item otherwise qualifies for trade secret protection under applicable law. This is in addition to the other sorts of steps that should be taken to indicate both a duty to maintain secrecy and that reasonable measures have been taken to safeguard information, such as confidentiality designations on documents, employment directives by way of policies and manuals and restricted access to sensitive information.