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Fuji Hunt Photographic Chemicals, Inc. v. Kelstar International Enterprises, Inc.

BER-C-304-02 (N.J. Super. Ch. Div. 2004) (Unpublished)

EMPLOYER-EMPLOYEE; CONFIDENTIALITY—A Court considers the law governing improper disclosure of trade secrets in the context of a particular set of facts and determines that preliminary restraints were inappropriate under the circumstances presented.

Two employees left a company to work for a competitor. The employer then sued the competitor, claiming that the two were spies who had stolen proprietary information. It sought to enjoin its competitor from using the confidential information.

In determining whether preliminary injunctive relief should be granted, a movant must demonstrate that irreparable harm is likely unless relief is granted; that the applicable underlying law is well settled; that the material facts are not substantially disputed; that there exists a reasonable probability of ultimate success on the merits; and that balancing of the relative hardship to parties favors the issuance of the requested relief.

As irreparable harm, the employer cited the potential destruction of its business and its loss of competitive advantage. The Court disagreed, holding that the employer’s concern was primarily pecuniary and could be adequately redressed by monetary damages.

The Court also found that the employer could not meet its burden to show a reasonable probability of ultimate success on the merits. The law is settled that the disclosure of a trade secret, in certain instances, may constitute irreparable harm, but the employer still needed to prove that the purloined information was, in fact, a trade secret. There is no exact definition of a trade secret. The Restatement of Torts lists six factors used to determine whether a given idea is a trade secret: “(1) the extent to which the information is known outside of the business; (2) the extent to which it is known by employees and other involved in the business; (3) the extent of measures taken by the owner to guard the secrecy of the information; (4) the value of the information to the business and to its competitors; (5) the amount of effort or money expended in developing the information; and (6) the ease or difficulty with which the information could be properly acquired or duplicated by others.” Further, “[i]nformation that is generally known throughout the industry or a matter of public knowledge or general knowledge cannot be deemed a trade secret.”

Even if the employer could successfully prove that its designs were entitled to trade secret protection, it would still have had to demonstrate that it was improperly used by the employees, and tortiously utilized by the competitor. Here, the employees certified that they did not disclose the employer’s manufacturing trade secrets. Most of the employer’s allegations were expressly controverted. These material controverted facts favored a denial of preliminary restraints.

Finally, the balance of the equities and relative hardship on the parties favored the denial of preliminary restraints. The competitor claimed it was utilizing a new manufacturing process for the production of the products in question. To grant the requested restraints, would have prevented the competitor from engaging in its business of producing those products and would have resulted in dramatic financial dislocation and harm. On the contrary, if the employer succeeded in the matter, its damages could be adequately redressed by monetary damages. For those reasons, the Court denied the employers application for preliminary restraints.

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