Reposted from a Litigation client alert.
A recent $44 million jury verdict in state court in Chicago serves as a stark warning to companies who hire employees that might bring trade secrets from their former employers to their new position. The lesson: take concrete steps to ensure a new employee doesn’t share or use those trade secrets, or risk being held accountable for the employee’s actions. Quite often, the new employer with a deep pocket – not the employee – becomes the target of the lawsuit, and bears the brunt of any damages.
The case, SS&C Technologies v. Bradley Rossa, involved competitors in the financial software industry. Rossa left SS&C Technologies and brought with him to his new employer, Clearwater Analytics, a host of documents SS&C claimed were confidential, including client lists, sales reports, marketing materials, proposals and client contract information. He allegedly shared the information and used it in the course of his employment, prompting SS&C to sue not only Rossa for his breach, but also Clearwater for misappropriating the trade secrets. According to media reports, the jury only awarded $1 in damages against Rossa, but awarded $16 million in compensatory damages and another $28 million in punitive damages against Clearwater for its theft and use of the trade secrets.
The verdict, though subject to appeal, demonstrates the importance of taking affirmative steps to ensure that new employees do not bring with them, use or share any confidential information or trade secrets obtained from a former employer. It is essential that a company make clear – both in initial interviews and in the hiring and onboarding process, and preferably in writing – that it does not need or want a former employer’s information, and that the sharing or use of that information is grounds for termination. It is prudent to obtain affirmative representations from the new employee that he or she is not bringing any such information with her and will not use such information. Monitoring the employee’s activities may be appropriate as well. Such steps will help shield the company from liability if a new employee decides to misuse confidential information.