Litigation: Employee Lawsuits -- the Flip Side
It cost Miller Oil, in Norfolk, Va., about $20,000 in legal fees to sue a former employee for misappropriation of trade secrets, conspiracy, and a host of other equally odious charges. But to vice-president Jeff Miller, who led the battle, it was money well spent. Here's what happened:
Four years ago a salesperson who had been working on a new marketing plan for the company left to work for a competitor. "In the exit interview, I told him we considered that marketing information to be proprietary and that if I found out that our competitor was using it, I'd pursue him any way I could," recalls Miller. Shortly after the employee left, Miller began hearing that his competitor was exploring the same new business that the former employee had researched in the automobile-motor-oil market. Miller also suspected the employee of taking a customer list and of using his knowledge of Miller Oil's pricing strategy to undercut his old employer.
Enraged, Miller made good on his warning to "pursue" the employee and contacted his lawyer, who promptly invoked Virginia's Uniform Trade Secrets Act, filed a bill of complaint against the defector, and demanded $225,000 in damages. (The competitor was not named in the suit.) Based on evidence presented to a judge, an injunction was issued, preventing the employee from calling on certain customers while the suit was in progress. "That allowed us to calm our customers down and strengthen our relationships with them," says Miller.
A year later the suit was settled. Miller Oil dismissed its claims after the former employee and the competitor pledged not to call on certain Miller Oil customers for six months and, in addition, not to solicit Miller Oil's employees. The defendant and the competitor also acknowledged that Miller Oil's customer lists, marketing plans, and pricing information were indeed "trade secrets" and agreed not to use such information. And what about damages? Miller Oil received $228.55 -- reimbursement for a month of insurance premiums. Such a pittance is not atypical. More important, says Jeff Miller, was that "we took a stand and let people know we're going to protect what we've worked so hard to build. Now we have an understanding in the marketplace that we won't tolerate competitors raiding our employees." And they haven't. Since the suit was settled, none of Miller's 300 employees has gone to work for a competitor. "From that perspective, the suit has paid us dividends," says Miller.* * *
What's a trade secret? David Rose, trade-secrets committee chairman of the intellectual-property section of the American Bar Association, says it's "any information that can be used in the operation of a business and that is sufficiently valuable and secret to afford an economic advantage over others."
DONNA FENN | Inc.com Contributing Editor
Donna Fenn is the author of Upstarts! How GenY Entrepreneurs Are Rocking the World of Business and 8 Ways You Can Profit From Their Success, an exploration of the ways Gen Y is changing the entrepreneurial landscape.