The inevitable disclosure doctrine is a common law doctrine that has been used by some courts to prevent a former employee from working for a competitor, even in the absence of a non-compete, because the former employee’s new job duties would inevitably require him to rely upon, use or disclose his former employer’s trade secrets.  This doctrine, however, remains the subject of considerable debate. Recently, the Georgia Supreme Court joined the debate in Holton v. Physician Oncology Services, LP, 2013 Ga. LEXIS 414 (May 6, 2013) and rejected the doctrine.

Background

Michael Holton was the vice president and chief operating officer of Physician Oncology Services, LP.  In that position and later as president, he was responsible for overseeing the operations of seven facilities. Physician Oncology eventually merged with Vantage Oncology, LLC (“Vantage”) and Holton was terminated several months later. He accepted employment with a competitor, Ambulatory Services of America, Inc. (“Ambulatory”).

Vantage immediately sought a temporary restraining order and then an interlocutory injunction, claiming that Holton was violating his non-compete agreement and, independent of that agreement, claiming that Holton would inevitably disclose and use trade secrets in his new position. The company sought an injunction to prohibit Holton from serving in an executive capacity for Ambulatory for at least twelve months.

There was no evidence that Holton had shared any of Vantage Oncology’s trade secrets or had shown an intent to do so. There was also no evidence that Holton had any documents in his possession related to the company’s trade secrets. Moreover, Holton’s attorney stated at oral argument that all company electronic documents had been permanently deleted from Holton’s computer.

Nonetheless, the trial court held that the likelihood of disclosure of information in Holton’s memory was a sufficient basis for finding of inevitable disclosure. As a result, the trial court enjoined Holton from working for Ambulatory in any executive capacity for twelve months. Holton appealed the trial court’s ruling, arguing that Georgia had not adopted the inevitable disclosure doctrine.

Supreme Court Ruling

The Georgia Supreme Court agreed with Holton and reversed.  The Court surveyed case law in other states and noted that the states were ”inconsistent about whether the doctrine is recognized in their particular state and if [so], whether it is a separate claim, as Vantage alleged in this case, or instead evidence to support an element of a claim of threatened misappropriation.” Without explaining the rationale for its holding, the Court held that, “the inevitable disclosure doctrine is not an independent claim under which a trial court may enjoin an employee for working for an employer or disclosing trade secrets.”

Lessons Learned

Two lessons can be learned from Holton. First, if an employer wants to prevent an employee in Georgia from potentially working for a competitor, it should implement a non-compete.

Second, it remains unclear whether the inevitable disclosure doctrine – though not an independent claim under Georgia law - could still serve as the basis for the remedy of an injunction in the case of threatened misappropriation of a trade secret, considering that the Georgia Uniform Trade Secrets Act expressly provides that a court may enjoin the threatened misappropriation of a trade secret. The Court in Holton stated that it “decline[d] to address today whether the inevitable disclosure doctrine may be applied to support a claim for the threatened misappropriation of trade secrets.”