One hundred and sixty-five years ago in New York, Albert Bagley filed one of the first trade secret cases in modern times (if Lexis is to be believed) against his former employee Charles Peddie. In Bagley v. Peddie, 16 N.Y. 469 (1857), Bagley claimed that Peddie had breached an agreement not to disclose Bagley’s secrets for making gold pens.
The trial court dismissed Bagley’s case for failing to prove special damages, but New York’s high court reversed. The court held that Bagley’s failure to prove damages wasn’t the end of the story, because Peddie had agreed to pay $3,000 in liquidated damages if he breached the agreement. The court found the provision enforceable because it was otherwise impossible to determine what damages Bagley sustained from entrusting his trade secrets to an employee who subsequently leaves, reveals the secrets to others, or embezzles his materials. READ MORE
A New Jersey appellate court’s decision last week in UCB Mfg., Inc. v. Tris Pharma, Inc., serves as a cautionary tale for employers when drafting confidentiality agreements to protect their trade secrets and confidential information. In UCB, the court found that the confidentiality provision in a pharmaceutical company’s employment agreement with one of its former employees was unenforceable because it was overly broad in time and scope, did not further a legitimate business interest, was contrary to public policy, and was unduly burdensome on the employee.
The case emerged when plaintiff pharmaceutical company UCB alleged that its former lead cough syrup formulator, Yu-Hsing Tu, disclosed confidential information about one of its cough syrup formulas after leaving UCB and joining the company’s competitor, Tris. After Tu’s arrival, Tris became the first company to produce a generic form of one of UCB’s profitable cough syrups. UCB sued Tu and Tris for misappropriation of trade secrets, breach of Tu’s confidentiality agreement with UCB, and unfair competition. UCB later dropped its trade secrets claim after failing to secure a preliminary injunction.
While working for UCB, Tu had signed a confidentiality agreement which stated Tu would not disclose “secret or confidential information” without UCB’s consent. The agreement specified that “secret or confidential information” included READ MORE