Protecting Confidential Information with the Doctrine of “Inevitable Disclosure”

A recent case from Texas demonstrates how the doctrine of “inevitable disclosure” can prevent departing employees from misappropriating an employer’s trade secrets and other valuable confidential information. In Brink’s Inc. v. Patrick, Case No. 3:14-cv-775-B (N.D. Tex., 6/24/14), the Court prohibited a departing employee from taking a job with his employer’s direct competitor on the grounds that, if he did so, he would inevitably disclose his employer’s proprietary confidential information.

The doctrine is well established south of the border, but it has yet to catch on in Canada. Given the current status of “non-competes” in Canada (they are generally unenforceable), Canadian employers should be aware of this doctrine as a potential litigation or contract drafting tool for keeping confidential information out of competitors’ hands.

The doctrine of inevitable disclosure applies where an employee takes a job with a competitor, or starts his or her own competing business, and where it would be practically impossible for him or her not to misappropriate the employer’s confidential information. The doctrine says that the Court can prohibit the employee from taking the job in those circumstances, even in the absence of a non-competition agreement. In other words, if the job is going to put you in a position where you can’t help but misappropriate confidential information, then the doctrine of inevitable disclosure says you can’t take the job.

Canadian courts will generally recognize the value of proprietary confidential information and often grant injunctions to protect it, even in the absence of an expressed non-disclosure agreement. But they are almost always reluctant to grant injunctions that restrict competition or an individual’s ability to pursue his or her livelihood, even where he or she has agreed not to compete.

The doctrine of inevitable disclosure recognizes that placing some restrictions on competition and the ability to pursue a livelihood are sometimes necessary in order to protect a right. Put simply, if there is a proprietary right in confidential information, then the Court ought to protect it like any other intellectual property right. Enforcing patent rights, trademark rights and copyright all require such restrictions, so why not proprietary rights in confidential information?

While Canadian Courts have refused to apply the doctrine of inevitable disclosure in the past (see, e.g. Longyear Canada, ULC v. 891173 Ontario Inc., 2007 CarswellOnt. 7958) they will likely be asked to apply it in the future given its inherent appeal and logic.

In the meantime, the “spirit” of the doctrine can be incorporated into employment and even contractor agreements in place of or in addition to a straight covenant not to compete. One way to do this would be to include with the usual obligations concerning confidential information an expressed acknowledgement from the employee or contractor that going to work for a direct competitor would inevitably result in a breach of those obligations. The effect could be the same as a “non-compete” clause. But it might be easier to have it enforced by a Court that is keen on protecting confidential information but wary of restricting competition per se.