A New Byte of the "Inevitable Disclosure" Apple

A recent decision of the United States District Court, Southern District of New York, entitled International Business Machines Corporation v. Papermaster, No. 08-CV-9078 (KMK), 2008 WL 4974508, 2008 U.S. Dist. LEXIS 95516 (S.D.N.Y. Nov. 21, 2008), appears to have breathed new life into the “inevitable disclosure” doctrine, apparently easing the burden of proof that an employer must satisfy in order to show the irreparable harm necessary for a court to grant an injunction preventing the former employee from working for a competitor.

Under the inevitable disclosure doctrine, certain employees cannot “wipe clean” their knowledge of their former employers’ trade secrets. Despite such employee’s best efforts to avoid disclosing any trade secrets to the new employer, the employee will inevitably disclose trade secrets to the new employer simply by virtue of the employment, and therefore should be enjoined from working for the new employer for some period of time, even in the absence of any non-compete agreement. The inevitable disclosure doctrine may provide a source of relief against improper competition by former employees even where the employer cannot show actual misuse, or intent to misuse, confidential or trade secret information. PepsiCo, Inc. v. Redmond, 54 F.3d 1262 (7th Cir. 1995).

The recent IBM v. Papermaster decision not only grants injunctive relief to IBM preventing Papermaster’s employment with competitor Apple, Inc. without IBM presenting evidence of actual misappropriation, but bases its finding of irreparable harm largely upon the probability of “inadvertent” disclosure by Papermaster and Papermaster’s acknowledgement in his employment agreement with IBM that IBM would suffer irreparable harm were he to breach the agreement’s non-competition provision. This seems a surprisingly low threshold for applying the inevitable disclosure doctrine to find irreparable harm in the absence of any evidence of misuse or even misappropriation of confidential information and/or trade secrets.

Mark D. Papermaster worked at IBM for 26 years in various product design and development roles, and in 2006 joined an elite group of about 300 top executives that develops IBM’s corporate strategy. Papermaster’s last day of employment with IBM was October 24, 2008, and he began working at Apple on November 3, 2008. IBM sought a preliminary injunction and in its November 21, 2008 decision, the District Court enjoined Papermaster from working for or with Apple until further order of the Court.

The Court held that IBM faced irreparable harm, even though there was no reason to ascribe ill-will to Papermaster or to doubt that he would abide by Apple’s Intellectual Property Agreement, in which he agreed not to use or disclose to Apple any confidential, proprietary or secret information of his previous employers, or otherwise to think that he would misuse or disclose IBM’s trade secrets. The Court’s holding that such disclosure was nonetheless inevitable rested in large part on its conclusion that inadvertent disclosure would probably occur, on the boilerplate provision in Papermaster’s IBM Noncompetition Agreement stating that he agreed that IBM would suffer “irreparable harm” if he worked for a competitor, and on what the Court termed “common sense.”

Having relied on these factors, which may not previously have been sufficient, to find irreparable harm, the Papermaster decision could have the effect of further expanding the application of the inevitable disclosure doctrine. The Papermaster matter was set to go to trial in late February 2009, but the parties reached a settlement by consent order on January 27, 2009 which will allow Papermaster to begin working for Apple on April 24, 2009. Time will tell if other courts follow the lead of the Papermaster decision in applying the inevitable disclosure doctrine.

For a recent New York Law Journal column discussing further the inevitable disclosure doctrine and the IBM v. Papermaster decision, click here.