A new Supreme Court, New York County case highlights the challenges companies face regarding intellectual property protection, Quest Partners LLC sued former member and director of research Brian Brugman. Quest alleged Brugman misappropriated and misused trade secrets and confidential information.
The court’s decision by Justice Lebovits (65514/2023), offers insights into how organizations can safeguard against similar scenarios.
Case Summary
- Brugman was accused of using Quest’s proprietary trading strategies after leaving the company to create his own hedge fund.
- The court dismissed several of Quest’s legal claims, including misappropriation of trade secrets, breach of fiduciary duty, unfair competition, and conversion. These were deemed duplicative of the breach of contract claim.
- The court did, however, uphold Quest’s breach of contract claim.
Key Takeaways
- Detailed Agreements are Essential: Organizations must have well-defined contracts that clearly stipulate obligations regarding trade secrets, confidential information, and non-compete clauses.
- Specificity Matters in Trade Secret Protection: It’s not enough to generally label information as proprietary. Organizations need to precisely outline the specific trade secrets being protected. This helps strengthen legal cases.
- Actions Outside of Contracts: Even with contracts, former employees might use acquired knowledge in ways that don’t directly violate agreements. Organizations should be aware of this risk and proactively monitor for potential misuse.
What Organizations Can Do
- Robust Non-Disclosure Agreements (NDAs): NDAs with departing employees should specifically address trade secret usage and non-competition periods.
- Trade Secret Inventories: Maintain detailed records of trade secrets, including their nature, how they’re used, and access control.
- Monitoring and Surveillance: Be vigilant in tracking the activities of former employees and competitors. Watch for any suspicious resemblance to company strategies or product developments.
The case underscores the importance for companies to prioritize protecting trade secrets and confidential information. Strong contracts, clear definitions of proprietary data, and proactive monitoring strategies are crucial for minimizing the risks posed by departing employees.
