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by William J. Brutocao
When an employee decides to
quit his job and go into competition with his employer, either by setting up a
new enterprise or by working for a competitor, what part of his employer's
information can he take with him? Turning that question around, what
information can the employer protect from disclosure or use by a departing
If there is a written employment contract, that document will of course have a
substantial impact on the inquiry. Employers seek to prevent competition by
departing employees. An employment contract might restrict competition, but in
some jurisdictions, notably California, a post employment non-competition
covenant is unenforceable. Cal. Business & Professions Code §16600; Dowell
v. Biosense Webster, Inc., 179 Cal.App.4th 564 (2009). The employment
contract might, however, include a nondisclosure clause whereby the departing employee
is precluded from using or disclosing the employer's trade secrets and other
proprietary or confidential information.
When there is no written contract, the question is controlled by common law
rules. Until recently, the rules were straightforward. An employee has the
right to seek alternative employment and to make preparations while still
employed to compete with his employer after his employment terminates. The
general rule used to be, however, that a departing employee could not use or
disclose trade secrets, or other confidential information in his
The case of Bancroft-Whitney v. Glen, 64 Cal.2d 327 (1966), illustrates
the point. The President of Bancroft-Whitney decided to go to work for its
competitor Matthew Bender. The decision to leave his employment and prepare to
work for a competitor did not violate any duty to his employer. The court
noted: "The mere fact that the officer makes preparations to compete before he resigns
his office is not sufficient to constitute a breach of duty. It is the nature
of his preparations which is significant." 64 Cal.2d at 346.
subscribers can access enhanced versions of the opinions cited in this article:
Dowell v. Biosense Webster, Inc., 179
Cal.App.4th 564 (2009)
Bancroft-Whitney v. Glen, 64
Cal.2d 327 (1966)
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William J. Brutocao is a partner in the intellectual property
firm Sheldon Mak Rose & Anderson in Pasadena, California, and heads the
firm's litigation department. Mr. Brutocao is the chief consulting editor of
California Intellectual Property Laws published annually by Lexis Nexis. Mr.
Brutocao is also an adjunct professor of intellectual property law at the
University of La Verne College of Law in Ontario, California.