We are always pleased when colleagues send us posts for our blog. This week, Emily Duke, the Co-Chair of Fredrikson’s E-Discovery Resources and Franchise Groups, wrote about the threat of corporate raiding and loss of sensitive information in the medical device industry. Thank you Emily for the following post:
It seems as though some industries are prone to non-compete and trade secrets litigation, and the medical device industry is one of them. Earlier this month, I read an article about Abbott Laboratories suing Boston Scientific in a corporate raiding case. Abbott alleged that its competitor hired away a vice president of U.S. sales and leveraged the former division VP’s relationships with other employees to try and woo them away . . . something that Abbott claims violated his contract (which, by the way, Abbott says it shared with Boston Scientific once the executive jumped companies).
Frankly, given the close relationships that medical device salespeople can develop with purchasers, doctors, and surgeons – sometimes even going into operating rooms with them – it is not surprising to me that we regularly see these cases in the medical device industry. Abbott’s complaint also claims that some of the salespeople who switched companies emailed sensitive marketing, product launch, sales revenue, and customer information to their personal email accounts (always a bad sign). That information could be impossible, or take years, for any competitor to develop on its own. No wonder the stakes are big and companies are willing to spend time/money in court to protect against these actions!
For any organization, the sales force will be a prime target for competitors. In an industry where the sales cycle is a long one and/or special expertise is needed to understand the product, much less sell it or explain to customers how to use it, there are even bigger payoffs to competitors who can hire away key salespeople. So, the next time a salesperson or employee with key strategic information leaves the job, it might be worth taking some additional steps:
- Finding out where they are going (and take note if they refuse to tell you).
- Remind them of any lasting obligations to the company – be it contractual (non-compete, non-solicit, confidentiality) or implied in law (protection of trade secrets . . . which can include customer lists or company marketing or product development strategies).
- A little dose of skepticism also helps – check out the company’s network access logs to see if the departing employee was accessing information, or volumes of information, inconsistent with their prior patterns and unnecessary to their current projects.
- Keep your ear to the ground – if the employee lied about where they were going, they probably lied about other things.
Thanks again to Emily for reminding us that gathering information before key employees leave your company may help you to keep information from walking out the door. Have you had similar experiences? What have you done to protect your employees and data?