Intellectual property disputes often involve outside parties. A competitor manufacturing knockoff products might infringe on a trademark. Another company might reverse-engineer a patented product and then try to manufacture it without securing a licensing agreement from the patent holder.
Other times, infringement comes from within the organization. A former business partner could very well use what they know about a company’s operations to compete unfairly against the organization later. Trade secrets can include any non-public information that gives an organization a competitive advantage.
What options do business leaders have when a former partner misuses trade secrets to poach clients or replicate a company’s offerings?
Litigation may be necessary
Trade secret misappropriation often constitutes a breach of contract. Frequently, initial partnership agreements and the contracts negotiated at the end of a partnership include clear protections for trade secrets.
The partner exiting the organization may need to sign a nondisclosure agreement, a noncompete agreement or a non-solicitation agreement. Any of those could prevent the partner from starting a competing business, trying to recreate the company’s client list or sharing non-public information about the organization.
Even without restrictive covenants in place, trade secret misappropriation can provide grounds for litigation. The organization harmed by the misuse of trade secrets can request injunctions to prevent future misconduct. The courts might also consider an award of damages to compensate for the negative impact the infringement caused.
Filing a lawsuit in response to a trade secret infringement scenario can help business leaders hold former partners accountable. A successful lawsuit can diminish the harm caused by a former partner after they exit the company accordingly.