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Understanding Trade Secrets

Falmouth Massachusetts Protecting Trade Secrets
The case of Governo Law Firm, LLC v. Bergeron * (Massachusetts Supreme Judicial Court SJC-12948, April 9, 2021), discusses an employee’s obligations with respect to an employer’s trade secret information.

Over a period of twenty years the Governo Law Firm LLC (GLF) became well versed in asbestos litigation. In performing this work, GLF developed an extensive and searchable digital library of useful information, and this library provided it with a competitive advantage in attracting clients and advancing their causes.

In October 2016 a group of GLF attorney employees began secretly copying the library in anticipation of forming their own law firm. The group also copied an employee handbook and client lists.

In Hollywood fashion, the group hijacked a partners’ meeting, offered the GLF owner $1 million to purchase the firm, and threatened to resign if the offer was not accepted that day. The owner rejected the offer and the group opened a competing firm the next day, using the absconded library and other materials and eventually generating profits therefrom.

GLF sued the group for misappropriation of GLF proprietary material (trade secrets), seeking to recover the profit the group realized from the use of the material. A jury awarded GLF $900,000 ** but not punitive damages or attorneys’ fees because the trial judge determined that punitive damages and attorneys’ fees are unavailable in claims of misappropriation of a employer’s property.

The issue before the Supreme Judicial Court was whether the trial court correctly concluded that punitive damages and attorneys’ fees were unavailable to GLF.

The court recognized the ordinary rule that disputes between employees and employers are not subject to awards of punitive damages and attorneys’ fees. In this case, however, the employees’ wrongdoing extended beyond the employment relationship--to the employees’ use of the employer’s proprietary material after the employment relationship and in a competing business. In this instance, essentially, a competing business--controlled by the former employees--misappropriated the employer’s property and that circumstance warrants the imposition of punitive damages and an award of attorneys fees.

The court was careful to note that employees may--during employment--take steps to form a completing business. What the employees did in this case, however, went beyond preliminary (or even more definitive) planning: it involved usurping the employer’s property and using that property to compete against the employer, subjecting the employees to significant liability.

* Jennifer A.P. Carson, Bryna Rosen Misiura, Kendra Ann Bergeron, David A. Goldman, Brendan J. Gaughan, and John P. Gardella

** The judge prohibited the group’s further use of the materials and ordered removal of the materials from the group’s computers.