We previously reported on the filing of a trade secret misappropriation case, Banc of America Securities, LLC, et al. v. Chalasani, in federal court in New York, Index No. 10 cv 7681, in which B of A sought injunctive relief against a former employee who downloaded and transferred electronically without permission proprietary trading strategies and other non-public information. B of A had announced reductions-in-force on September 21, 2010. Apparently having prior notice of that expected action, Chalasani emailed 21 large business files containing sensitive business information to a personal email account after 9:00 p.m. on the night before the announcement. In an effort to avoid detection, the subject line of his unauthorized email transmittal was “new home info.”

B of A detected the unauthorized file transmittal in a regular sweep of unusual electronic file activity ten days later and filed suit for breach of fiduciary duty, misappropriation of confidential and proprietary information and conversion. B of A also sought temporary and permanent injunctive relief emphasizing the employer’s strict policies regarding confidentiality and efforts to disseminate the policies to employees. For example, B of A cites it corporate Code of Ethics which required, among other things, that all employees “keep confidential and secure any non-public information” and that such information should only be shared within the company on a need-to-know basis.

B of A also cited to the Information Protection and Business Continuity Policy in its company handbook which required employees to complete “information protection and privacy compliance training” on an annual basis and to “protect and secure” company confidential information at all times. As evidence of emphasizing the importance of compliance with these policies about confidentiality, B of A referred to its policy concerning electronic communications which stated that transmitting proprietary or confidential information “without an appropriate level of encryption or other approved security measures” or downloading and transmitting it “to a personal web page or any other non-bank issued device or media” was a violation of the policy that could result in disciplinary action including termination. B of A also demonstrated that employees were required to participate in annual compliance training about trade secrets.

A temporary restraining order was issued and Chalasani was ordered to turn over all flash drives and data storage devices of any kind and to appear for a deposition. After a series of consented to delays of the preliminary injunction hearing, Chalasani consented to final judgment and the entry of a permanent injunction concerning the use or disclosure of specific files and any other B of A confidential information.

As noted in our earlier posting, the case appeared unlikely to last long given the information alleged in the complaint. The subsequent filings and result in the case emphasized how crucial it can be in litigation to have strong and clear policies in place concerning the misuse of confidential information and to conduct regular training and education to reinforce the importance of the policies.

In order to establish that your company information will be treated as a trade secret, courts will review the measures undertaken to protect the confidentiality of information, among other factors. Here, B of A had clear procedures in place, conducted regular training about them and monitored unusual email activity as part of its compliance program. These and other steps were be essential to its obtaining prompt, effective judicial relief.