The case that I selected was in the area of law concerning employee confidentiality agreements and trade secrets. My employer, Eaton Corporation, is the plaintiff in this case and was the second reason for its selection. I personally have been involved in trade secret discussions with colleagues regarding information that was deemed “trade secret” and I wanted to find out more about it which is the third reason for this topic to be selected. Facts of the case: David Giere (Giere) was an employee of Eaton Corporation (Eaton) starting on January 2, 1980 where he worked as a mechanical engineer.
Giere held a couple of roles in the design f transmissions that primarily focused on the lawnmower and snow blower markets. Giere resigned on June 20, 1990 after becoming professionally dissatisfied with his role and announced that he would be developing a competing business to “develop and market his own competitive device”. (Law, Eaton Corporation, Appellee, v. David W. Giere; Dikon Manufacturing Company, Appellants, 971 F. 2d 136, 1992) Eaton employees are required to sign a confidentiality agreement which would prevent the release of confidential information outside of Eaton.
This document was first signed by Giere on the date of hire on January 2, 1980 and again a very imilar document on April 21, 1987. The agreements indicate that items created by the employee which are related to Eaton’s business belong to Eaton and further indicated that the employee would not “use or reveal” any such work outside of Eaton. Giere started his career out of college with Eaton and this was his first professional role. Nearly all of his practical experience was created while he was an employee of Eaton.
Complicating matters for Giere is the consideration that he did not invest significant monies into research and development of the transmissions he was attempting to sell to Toro. This would mply that the majority of the research and development was performed by Eaton. Giere reached out to Toro Corporation (Toro) in 1990 to discuss his own design for a transmission and entered into a mutual NDA with Toro just prior to his resignation from Eaton. Giere then created Dikon Manufacturing Company (Dikon) and started to manufacture and sell the competing products to Toro.
Background: Businesses need to be able to share information with employees as a normal course of business, in many cases the information may be proprietary or considered to be that of a trade secret. This type of information would be potentially amaging to the business if it were to become public information or if it were to be used outside of the business. AS such, confidentiality agreements are often required to be signed to ensure that the information is kept within the business. In this case, the breach of duty for confidentiality is clear.
A trade secret is defined in the text as “any secret formula, pattern, process, program, device, method, technique or compilation of information used in the owners business if it gives its owner an advantage over competitors who do not know it or use it. ” (Mallor, 2016, p. 296) Firms claiming trade ecrets must show due diligence to protect it, employee confidentiality agreements is one example of this. Eaton clearly maintained control over the information in that it was not available to all employees only those with a need to know.
Eaton also had the employee sign the employee agreement which was clear in alerting the employee of their duty to Eaton. The legal issue of the case: The legal issue in this case concerns contracts, trade secrets and that of intellectual property protection. Rule of law: Breach of duty (fiduciary), breach of contract (confidentiality agreement), and trade secret disclosure. Eaton brought five counts into their claim against Giere; 1. Misappropriation of trade secrets, 2. Breach of employee agreement, 3. Breach of fiduciary duties, 4. Tortious interference with prospective economic advantage and 5. Unfair competition.
Analysis: My analysis is that Giere breached the duty that he had to not compete with his employer in attempting to create a business and then to develop and sell competing products to Eaton’s customer. In addition, the confidentiality agreement was very clear in that the employee should not use or reveal the confidential information. Giere did both of these things in haring the information (under NDA with Toro) and doing so while working for Eaton. The case of Modern Controls Incorporated (Modern) v. Nicholas C. Andreadakis (Andreadakis) is a supporting case for Eaton where the employee breached a confidentiality agreement.
Andreadakis was hired at Modern in January of 1976 and on his first day of employment was also asked to sign a confidentiality agreement. The agreement was to establish confidentiality in his role as well as a non-compete clause for a period of two years after leaving the company. In June of 1977, Andreadakis left Modern and accepted a similar role at Burroughs, a ompetitor of Modern. In that the Modern confidential information was used at Burroughs, Andreadakis is not able to use this information while working in this role at Burroughs. The case of Medtronic, Inc. (Medtronic) v. Gibbons (Gibbons) is also a supporting case for Eaton.
Gibbons was hired by Medtronic in August of 1974, at the time of hire, Gibbons was asked to sign an agreement regarding inventions, proprietary information and unfair competition. Similar to Giere, Gibbons acquired significant knowledge while at Medtronic and its subsidiary Kastec. In September of 1981, Gibbons accepted a ole at Pacesetter Systems Incorporated (Pacesetter) and resigned from Medtronic. Gibbons was reaching out to customers of Medtronic after his departure. The case of Spencer Savings Bank SLA (Spencer) v. Michael J. McGrover (McGrover) is a supporting case for Giere.
In this case the employee McGrover was employed by Spencer from March of 2003 through early 2012 where he was the Vice President of the Commercial and Industrial Lending department. McGrover left Spencer for a similar role at Union which I assume to be another bank. While employed at Spencer there was an employee handbook which referred to a confidentiality clause. This clause was not formal in that it was not considered to be a legal document as there was no signature and the like. The confidential information that was allegedly taken from Spencer was simple documents which included some forms.
These to be proprietary and/or controlled and therefore the confidentiality agreement was informational only. The case of Hauck Mfg. Co. (Hauck) v. Astec Industries forms were not considere Incorporated (Astec) is also a case that would support Giere. This case focuses on supposed confidential information that was exchanged for the development of burners used specifically for these businesses. The problem with this case is that all of the plaintiff’s assertions for the use of confidential information is assumed and was not proven.
In that it was only alleged and not enough factual information was provided to prove that a breach of confidential information occurred. This case was found in favor of the defendant. Conclusion: The employee had a duty to protect Eaton’s trade secrets and the work product. While working for Eaton, Giere sought to take away a customer of Eaton and in doing so used the knowledge and designs he had developed while working for Eaton to start a new business. This is a breach of duty to the employee onfidentiality agreement.
The employee also had a duty of loyalty and this was breached in that Giere went to Eaton’s customer and attempted to establish an agreement for a competing product. This was not only a breach of duty for loyalty but also a breach in fiduciary duty. Fiduciary duty was breached in that the employee was supposed to act in Eaton’s best interest and instead Giere sought to establish the business relationship with Dikon. Eaton could also seek compensation through unjust enrichment for the funds that the former employee may have been paid for the competing (if not identical) products.