UNITED STATES DISTRICT COURT FOR THE Cabletron Systems

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Protection Act and Count IV seeks damages under a common law. unjust enrichment theory, This litigation has been more than sufficiently papered. both before and after trial which was to the court Having. reviewed the pleadings documents and hundreds of competing. requests for findings and rulings filed by both parties the. court as explained below finds in favor of and enters judgment. for the defendant Allied Telesis Inc,I CABLETRON S TRADE SECRETS CLAIM. New Hampshire s Trade Secret Act N H Rev Stat Ann Ch. RSA 350 B proscribes the unauthorized disclosure and. acquisition of trade secrets The Act essentially adopts the. definition of trade secret set forth in the Restatement of Torts. 7 5 7 and provides,A trade secret means information including a. formula pattern compilation program,device method technique or process that. 1 derives independent economic value,actual or potential from not being generally.
known t o and not being readily ascertainable,by proper means by other persons who can. obtain economic value from its disclosure or,use and b is the subject of efforts that. are reasonable under the circumstances to,maintain its secrecy. RSA 350 B 1 IV emphasis added The Restatement further. explains that i t may be a pattern for a machine or other. device or a list of customers The subject matter of a. trade secret must be secret Restatement of Torts 757. emphasis added, A plaintiff may assert a proprietary interest in customer. lists marketing information even employees if a former. employee learned of their value while working for plaintiff See. e g Technical Aid Corp v Allen 134 N H 1 9 10 13 1991. Accordingly courts will generally enforce covenants restricting. a former employee from exploiting to his benefit and to the. detriment of the former employer the goodwill emanating from. client contact See id see also Ferrofluidics Corp v. Advanced Vacuum Components Inc 789 F Supp 1201 1210 12. D N H aff d 968 F 2d 1463 1st Cir 1992 Before a, customer list is deemed entitled to trade secret protection.
however the plaintiff must prove that the list is truly secret. and that defendant s discovery of it was not accidental Fisher. Stoves Inc v All Nighter Stove Works Inc 626 F 2d 193 196. 1st Cir 1980 citing 2 Callman The Law of Unfair Competition. Trademarks and Monopolies 53 3 at 387 1969, Cabletron asserts that it is entitled to trade secret. protection for the following general classes of business. information it s business methods for generating customer. leads lists of customers including contact persons pricing. structures likely customer product requirements sales. methodology and procedure business operating procedures and the. identities o f and quality of job performance by its current. The court is persuaded by the evidence that Cabletron took. reasonable steps to protect the confidentiality of its. operations methods of operation customers lists pricing. structures and in general its business practices as a whole. Cabletron is a highly successful player in the marketplace. partly because it maintains a highly competitive approach and is. particularly guarded about its successful business practices. However most of the information which Cabletron alleges Allied. misappropriated through its former employees does not warrant. trade secret protection because it is unspecific and can. generally be described as routine business practices training. sales skill and know how Business experience and know how as. reflected in the information which an employee acquired during. the course of his or her employment is not something. that the law protects from the rigors of the marketplace AMP. Inc v Fleischhacker 823 F 2d 1199 1207 08 7th Cir 1987. citing Fleming Sales Co Inc v Bailey 611 F Supp 5 0 7 516. N D Ill 1985, Like Fleischhacker this is not a case where the plaintiff. has proven by a preponderance of the evidence that any tangible. work product such as blueprints designs plans processes or. other technical specifications were at risk of, misappropriation Id at 1205 Nor is this a case involving. former employees who held technical or engineering positions and. who were responsible for distinct areas of technology and. research Id Rather the former Cabletron and later Allied. employees at issue here were basically sales and marketing. professionals To the extent Cabletron s suit seeks to restrain. defendant Allied from making use of or relying upon the. independent recollections of those employees relative to. generalized business sales or marketing practices in which they. were trained while employed at Cabletron relief must be denied. Those attributes are not protected by New Hampshire s Trade. Secrets Act As the Seventh Circuit cogently observed in. Fleischhacker any other result would severely impede employee. mobility and undermine the competitive bases of our free. economy Id The Seventh Circuit aptly recalled Judge Learned. Hand s observation on the point,I t has never been thought actionable to. take away another s employee when the,defendant wants to use him in his own.
business however much the plaintiff may,suffer It is difficult to see how servants. could get the full value of their services on,any other terms time creates no prescriptive. right in other men s labor If an employer,expects so much he must secure it by. contract Harley Lund Corp v Murray,Rubber Co 31 F 2d 9 3 2 934 2nd Cir 1929. Fleischhacker 823 F 2d at 1205 n 3 The Fleischhacker court. also approved of Judge Shadur s eloquent explanation in Fleming. Sales 611 F Supp at 514,That is not to say that a former employee.
may not have derived some benefit from his,access to the collective experience of his. employer experience to which the employee,himself doubtless contributed significantly. during the course of his employment It is,rather to say such information comprises. general skills and knowledge acquired in the,course of employment Those are things an. employee is free to take and to use in later,pursuits especially if they do not take the.
form of written records compilations or,analyses See MBL USA Corp v Diekman. 112 Ill App 3d 229 236 237 67 Ill Dec,938 9 4 4 445 N E 2d 4 1 8 424 1st. Any other rule would force a departing,employee to perform a prefrontal lobotomy on. himself or herself It would disserve the,free market goal of maximizing available. resources to foster competition I t,would not strike a proper balance between the.
purposes of trade secrets law and the strong,policy in favor of fair and vigorous business. competition, Fleischhacker 823 F 2d at 1205 quoting Fleming Sales supra. The effect of granting an injunction in this case, prohibiting Allied from hiring Cabletron employees based simply. on the fact that those employees have acquired sales experience. business acumen and industry expertise from Cabletron would be. particularly detrimental to current Cabletron employees. limiting as a practical matter their ability to work in the. computer parts sales industry for anyone other than Cabletron. And it would be detrimental to the public interest to the extent. market competition would be suppressed Cabletron may have. protectable interests in hard information but absent. enforceable contractual restrictions not in the training. experience abilities or general business knowledge acquired by. employees during their terms of employment,Misappropriation. The New Hampshire Trade Secrets Act defines, misappropriation as the acquisition of a trade secret of.
another by a person who knows or has reason to know that the. trade secret was acquired by improper means or the disclosure of. the secret by a person without express or implied authority to do. so See RSA ch 350 B 1 I I The improper means of conveying. or obtaining the trade secret include theft, misrepresentation breach or inducement of a breach of a duty to. maintain secrecy See RSA ch 350 B 1 I, Misappropriation of confidential information has been found. when a defendant former employee voluntarily begins working for a. competitor and uses the identities of plaintiff s customers and. the association that defendant had established with the. customers while employed by plaintiff to establish an instant. customer base for defendant See Amerigas Propane Inc v. Crook 844 F Supp 379 389 M D Tenn 1993 citation, omitted see also Mai Systems Corp v Peak Computer Inc 991. F 2d 5 1 1 521 9th Cir 1993 misappropriation occurs if. information from a customer database is used to solicit. customers Misappropriation has also been found where a. defendant improperly used past present or prospective customer. lists pricing policies and practices marketing strategies and. market demand analyses See e g Amerigas 844 F Supp at. 382 This case presents somewhat different facts however. Unlike in Amerigas here plaintiff does not claim that a. generally limited and defined instant customer base has been. appropriated and solicited by a newly formed direct competitor in. a limited market Here the potential customer base for each. party is roughly the same and it is very broad being both. national and international in scope It is also an expanding. Cabletron s Burden of Proof, In order to prevail in its claim under the Trade Secrets. Act Cabletron must prove four things, 1 that a confidential relationship existed between it and.
the departing employees,2 that Cabletron possessed a trade secret. 3 which it disclosed to its former employees subsequently. hired by Allied and, 4 that defendant Allied induced those employees to. disclose trade secrets and made use of the disclosure. to Cabletron s disadvantage, Cabletron s evidence is weak with respect to the second third. and fourth required elements Even assuming that Cabletron s. customer lists and pricing structures qualified for trade secret. protection and were disclosed to Cabletron employees later hired. by Allied Cabletron failed to prove by a preponderance of the. evidence that its former employees in turn disclosed that. information to Allied or that Allied used the information. Parenthetically the court would also note that it has some doubt. about the extent of any actual retainable disclosure by. Cabletron to its own employees since none had access to hard. copies of what must have been comparatively large computer. printout lists Moreover the evidence does not show that any. former employee removed such a list from Cabletron or divulged. it to Allied The pricing structures of both companies was. flexibly competitive and changed often at least quarterly. making retention of the information difficult and of only. transitory value, The evidence is equally unpersuasive in establishing that. Allied benefitted from any alleged disclosure to the plaintiff s. detriment See Greenberg v Croydon Plastics Co 378 F Supp. 806 814 E D P a 1974 before plaintiff gets relief he must. prove not only that a trade secret was disclosed to defendant in. confidence but that the defendant relayed it to another to use. in its business, On these points Claire Burns testimony was both credible.
and persuasive and the court accepts i t Burns testified and. the court finds as a factual matter that she did not remove any. confidential business information from Cabletron when she left to. join Allied did not remove existing customer lists did not. memorize lists of Cabletron prospects or customers did not. subsequently sell any product for Allied to buyers who were about. to buy from Cabletron through her before she left did not. transfer any prospective sales from Cabletron to Allied in. conjunction with her leaving did not use any Cabletron pricing. guidelines or pricing structures in quoting Allied prices to. Allied customers and did not improperly exploit any unique. continuous buy sell relationships with Cabletron customers. developed during her employment at Cabletron Finally she did. not add to Allied s own customer database or other marketing. resources from her memory of Cabletron information i e there. was no brain dump of confidential Cabletron business. information into Allied s own customer databases See also. Plaintiff s Exhibit 5 9 Question 5 Plaintiff s Exhibit 60 A. Question 6 Para 3, Similarly the court finds that plaintiff failed to prove by. a preponderance of the evidence that any other former employees. later hired by Allied disclosed confidential customer or pricing. information to Allied or that Allied used such information See. e g Deposition Designations Daniels doc n o 7 4 p 2 2 8. Plaintiff also failed to prove by a preponderance of the. evidence that Allied intended t o or engaged in a plan t o or in. fact hired Cabletron employees in order to obtain and use. Cabletron s confidential business information to gain a. competitive advantage While Allied hired nearly 20 former. Cabletron sales employees between 1988 and 1992 out of well over. a thousand Cabletron employees it is clear from the evidence. and the court finds that Cabletron failed to prove otherwise by. a preponderance that no such employees took any hard copies of. confidential data did not memorize any such data and did not. use such information for Allied s benefit It is not. particularly surprising that some potential customers approac. UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE Cabletron Systems Inc Plaintiff v Civil No 92 544 M Allied Telesis Inc Defendant O R D E R This is a diversity action brought by Cabletron Systems Inc Cabletron against a marketplace competitor Allied Telesis Inc Allied In general Cabletron seeks injunctive relief and damages based upon Allied s hiring of

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