On December 2, 2016, the U.S. District Court for the District of Colorado granted a non-compete preliminary injunction under the DTSA to a government contractor who alleged its former employees, who did not have non-compete agreements, were using its misappropriated trade secret to compete against it for government contracts.
The government contractor alleged that when one of the former employees surrendered a flash drive containing its trade secret information, the contents showed a “date modified” of August 30 although the employee’s last day of work was August 29. The government contractor inferred that the flash drive contents had been copied from another copy of the documents, which had not been disclosed. The former employee initially argued that he returned the flash drive on August 30; thus, the “date modified” was not evidence that he had copied anything.
During pre-hearing discovery, however, the former employee testified that he copied the documents from his laptop to an external hard drive, then wiped his user profile from the laptop, copied the documents back onto the laptop, and then copied the laptop files to the flash drive. He then returned the laptop and flash drive to his former employer, but retained the external hard drive.
At the hearing, the former employee admitted for the first time that he did not immediately erase the files from the external hard drive. He claimed that he kept the copy because he believed that his new company would partner with his former employer on certain government contracts. When it became clear that would not happen, the former employee deleted the files from the external hard drive.
On this record, the court considered whether it could enjoin the former employees from competing for business with a particular government agency. Noting that the DTSA prohibits an injunction that “prevent[s] a person from entering into an employment relationship,” the court found the provision did not apply because an “employment relationship” did not encompass the role of an outside contractor. The court also recognized that the DTSA prohibits an injunction that would “conflict with an applicable State law prohibiting restraints on the practice of a lawful profession, trade, or business.” Turning to state law, the court found that while Colorado statutory law presumptively invalidates non-compete agreements, it excepts non-compete agreements “for the protection of trade secrets.” Although the former employees did not have non-competes, the court found this statute relevant to its analysis and supported its conclusion that it could only enjoin the former employees from competing or soliciting “if, and to the extent, necessary to protect trade secrets.”
The court found a non-compete injunction necessary. Because the former employee had “demonstrated a propensity for making surreptitious copies of relevant data,” the court did not trust the former employee’s representations that he had no further copies of the data. Accordingly, to prevent the former employees from taking advantage of the trade secrets in their possession, the court entered an injunction against the former employees and their new company from soliciting or competing for business with the government agency for one year.
The case is Engility Corporation v. Charles Aaron Daniels, Rutherford “Chip” Surber, and Deplyable Technology Solutions, LLC, Case No. 1:16-cv-02473-WJM-MEH in the United States District Court for the District of Colorado.