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Confidentiality agreement warrants return of passwords but not laptop

October 24, 2011 0 Comments

The Southern District of New York has ruled that, on a preliminary injunction motion, a company would suffer irreparable harm if an ex-employee did not return passwords to social media accounts (e.g., Twitter, Facebook, etc…) pursuant to a standard employee confidentiality agreement but, with regard to returning the company laptop, irreparable harm is not found merely because the confidentiality agreement recited that such harm would result. Ardis Health, LLC et al v. Nankivell, 11-cv-5013 (SDNY, Oct. 19, 2011).

The Confidentiality Agreement / Non Disclosure Agreement

The standard confidentiality agreement (or non disclosure agreement) signed by employees recites that (1) employees will be given access to certain information which constitutes trade secret or valuable intellectual property of the company; (2) employee agrees to non disclosure of the trade secret or intellectual property; (3) employee agrees to return the trade secret info and not keep any copies for themselves upon termination; and (4) employee agrees that a breach of the above would cause irreparable harm to the employer (so that the employer could successfully move for a preliminary injunction which requires a showing of irreparable harm).

When it comes to enforcing a confidentiality agreement case law shows us that courts do not like to go by mere contractual recitations. For example, courts will not call information a protectable trade secret unless it does, indeed, fall into the definition of trade secrets under the law (e.g., not publicly available, etc…). Additionally, as this case illustrated, courts will not find a likelihood of irreparable harm merely because the confidentiality agreement said so:

A conclusory contract provision alone cannot establish irreparable harm. The provision “might aruably be viewed as an admission by [defendant] that plaintiff will suffer irreparable harm… but contractual language declaring money damages inadequate in the event of a breach does not control the question whether preliminary injunctive relief is appropriate.”

In the internet context, this case tells us that passwords to company social media accounts would constitute valid trade secret or confidential information, the misappropriation of which would cause irreparable harm (harm that is not easily quantified in terms of money at the end of a trial and therefor warrants early prevention via preliminary injunction).

On the other hand, the employee in this case was not forced to relinquish the company laptop which allegedly held plaintiff’s trade secrets and other intellectual property because the court did not see how this information, of which the employer had copies anyway, could cause damage to employer which could not otherwise be fixed with a money award at the end of the case.

The takeaway here is that even a well-drafted confidentiality or non disclosure agreement can only go so far to protect information which, upon legal analysis, may or may not constitute valid trade secrets or important intellectual property.

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