Recently, popular Southern California juice and aguas frescas chain Green Crush filed suit against up-and-coming rival juice bar Paradise Splash and several individuals. The lawsuit, filed in the U.S. District Court for the Central District of California, alleges 16 claims including misappropriation of trade secrets, trademark infringement, and breach of contract.
Green Crush alleges that one of its former managers, Adrian Duran, engaged in corporate espionage to steal its confidential and proprietary information including Green Crush’s business model and business plan, recipes, processes and systems, point of sale (“POS”) system, customer and market information, and vendor information. Green Crush believes that even before Duran was hired by Green Crush, he intended to use its information to benefit himself and Paradise Splash. Specifically, Green Crush alleges that while working as a manager for Green Crush, Duran allowed co-defendants John Rozenberg and Claudio Mileo to access Green Crush after hours for the purpose of stealing its trade secret information for the benefit of Paradise Splash, their new juice company.
Mileo and co-defendant Scanning L.A., Inc. had previously been hired by Green Crush to develop a proprietary POS system. Green Crush alleges that upon Duran’s request, Mileo and Scanning disclosed this proprietary system and began using it to benefit Paradise Splash.
None of the defendants have yet responded to these allegations.
Green Crush raises many claims in their complaint against many parties, however, they can largely be grouped as either intellectual property or breach of contract claims. Particularly in light of the grand scheme that Green Crush alleges the individual defendants engaged in to benefit Paradise Splash, it is worth taking another look at the ways in which a business can protect itself and its trade secrets when employees move on to work for a competitor.
- Always use confidentiality agreements. Confidentiality agreements are a straightforward way to ensure employees understand their duties and obligations with respect to confidential and trade secret information. Such agreements also provide for a breach of contract claim should the employee misappropriate information. Ensure that your company’s confidentiality agreements describe that confidentiality is a continuing obligation, even after employment ends.
- Limit access to confidential and proprietary information to “need to know” employees. This includes both electronic and physical access to information. When possible, prevent any one individual from having access to all of a company’s trade secret information.
- Review and maintain electronic use policies to ensure they account for modern technology. Technology is constantly changing. Electronic use policies should undergo regular review and updates to ensure that the policy is current and accounts for all applicable avenues – from USB drives to cloud storage services.
- Conduct exit interviews. Exit interviews may allow you to learn information about where an employee is going or what their new position is. This information can help assess risk of misappropriation. Investigating early, when there is significant risk involved, minimizes risk, allows for early intervention, and reduces heartburn if no evidence of misappropriation is found.
Even following all of these best practices will not necessarily prevent employees from misappropriating information when they are determined to do so. However, it will put your company in the best position possible to protect its trade secrets.