Former employees and trade secrets

Workforce, July, 2002 by D. Diane Hatch, James E. Hall

In 1991, 10 Omega Optical employees left the company to start another business, Chroma Technology Corporation, which began making a product that Omega had developed and produced. Omega sued Chroma and its former employees for misappropriation of its trade secrets, as well as other tort and contract violations.

Following a 22-day trial, a Vermont trial court ruled that Omega had failed to prove that its former employees had misappropriated trade secrets or had engaged in other wrongdoing. While the trial court agreed that Omega had protectable trade secrets, it found that Omega had failed to protect the information, and therefore the former employees owed no duty of confidentiality regarding the information.

On appeal, the Vermont Supreme Court, affirming the decision, noted that while the individual defendants worked for Omega, the company had no internal policies concerning confidentiality, nondisclosure, or noncompetition. Importantly, Omega had "failed to take steps to put its employees on explicit or implicit notice that certain information conveyed to them during their employment was to be kept confidential." Omega Optical, Inc. v. Chroma Tech. Corp., Vt., No. 1999-566 (4/12/02).

Impact: An employer can protect its trade secrets only if it both advises its employees that its product or processes are protectable and documents its efforts to protect such.