January 2012

Risking Liability When a New Hire Brings Trade Secrets from a Former Employer

Steven D. Gordon
A recent decision by the Virginia Supreme Court highlights the exposure a company faces when a new employee discloses a former employer's trade secret information. The court ruled that a new employer can be liable for misappropriation of trade secrets even if it does not use the trade secrets to compete with the former employer. Under the Uniform Trade Secrets Act, there are two alternative definitions of "misappropriation". One requires "disclosure or use" of the trade secret by the defendant, but the other requires only that the defendant have "acquired" the trade secret with knowledge or reason to know that the trade secret had been acquired by improper means. So a company is liable for misappropriation if it receives information from a new employee which it knew or had reason to know that the employee was not entitled to disclose -- even if the company, itself, does not go on to use or disclose this information.

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