Pub. 9 2019 Issue 2

14 www.azbankers.org endeavors. On the other hand, an employee may be able to rely successfully on whis- tleblower immunity in the early stages of litigation if the employee has already filed a lawsuit alleging a violation of law and the disclosure is made pursuant to discovery obligations. In such a case, an employer bringing a DTSA counterclaim would be wise to plead trade secret misappropriation outside the context of sharing trade secrets with counsel and disclosing those trade secrets in the pending lawsuit. 3. Inevitable Disclosure Another weapon potentially available to em- ployers under the DTSA is the doctrine of inevitable disclosure. This permits a trade secret owner to prove a claim of trade secret misappropriation by demonstrating that the employee’s new job duties will inevitably cause the employee to rely on knowledge of the former employer’s trade secrets, despite the owner’s failure to prove the employee has taken or threatens to use trade secrets. 44 The inevitable disclosure doctrine results in an injunction prohibiting employment, not just the use of trade secrets. 45 Many scholars and practitioners presumed the inevitable disclosure doctrine was un- available under the DTSA due to its express language prohibiting courts from granting an injunction “prevent[ing] a person from entering into an employment relationship.” 46 The DTSA further requires that “conditions placed on such employment shall be based on evidence of threatened misappropria- tion and not merely on the information the person knows[.]” 47 Despite these provisions, there exists a split of authority as to whether a plaintiff may support a DTSA claim, at least at the initial stages of litigation, based on a theory of inevitable disclosure. On one side of the coin, the United States District Court for the Northern District of Illinois denied a motion to dismiss a claim under the DTSA by relying on the doctrine of inevitable disclosure. In Molon Motor & Coil Corp. v. Nidec Motor Corp ., 48 the court concluded the plaintiff had pleaded sufficient facts to trigger a circumstantial inference that the employee would inevita- bly disclose the trade secrets, and therefore denied the defendant employee’s motion to dismiss. 49 However, the court warned that the employer ultimately bore the burden of proving enough facts to demonstrate that disclosure was not premised on a “mere unsubstantiated fear.” 50 Although this gave life to the applicability of the inevitable dis- closure doctrine in the context of a motion to dismiss a claim under the DTSA, it seems unlikely that courts will extend the doctrine to enjoin employment under the DTSA, as such a ruling would controvert the DTSA’s express language. 51 In contrast to the Illinois court, the Cal- ifornia District Court for the Northern District of California expressly eliminated the availability of the inevitable disclosure doctrine under the DTSA. 52 The court held, “To the extent the complaint relies on these types of ‘inevitable disclosure’ allegations, those allegations are ordered stricken from the complaint.” 53 Interesting- ly, in doing so, the court did not rely on the DTSA’s language prohibiting enjoinment of employment. Instead, it emphasized that California courts have long rejected the inevitable disclosure doctrine as inconsis- tent with California’s strong public policy in favor of employee mobility. 54 Arizona courts have neither excepted nor rejected the inevitable disclosure doctrine. Unlike California’s policy wholly favoring employees, Arizona’s policy regarding em- ployee competition and mobility hinges on a determination of reasonableness. 55 Specifi - cally, “As a general rule, a contract restrict- ing the right of an employee to compete with an employer after termination of employment ‘which is not unreasonable in its limitations should be upheld in the absence of a showing of bad faith or of contravening public poli- cy.’” 56 As such, Arizona courts may align more closely with the Illinois District Court’s approach and analyze whether applying the doctrine of inevitable disclosure is appropri- ate under the circumstances, as opposed to flat-out rejecting the doctrine. Conclusion Internal data breaches are a real and ever-growing threat to organizations. The unique features of the DTSA make it a potentially potent weapon in combating internal breaches of protected trade secret information. However, practice has shown that judicial interpretation of these various features has not yet been consistent. For Arizona practitioners, there is even less certainty due to the lack of Arizona state or federal court opinions interpreting the DTSA. Yet by having a general familiarity with the various decisions rendered in other jurisdictions and the existing jurisdictional splits of authority, Arizona practitioners will be able to counsel clients effectively as to all available options under both the AUTSA and the DTSA. w CAMERON JOHNSON is an associate with Fennemore Craig who practices in areas of commercial litigation and labor and employment. His practice primarily consists of representing organizations and individuals in litigation matters involving business torts, trade secret and IP dis - putes, restrictive covenant enforcement, and employment discrimination. TAYLOR BURGOON is an associate with Fennemore Craig in Phoenix, where she practices in the Commercial Litigation Group. She focuses her practice in the areas of business litigation, civil appeals, and public records law. 1 Bryan Ware, Insider Attacks: 2017 Insider Threat Study, HAYSTAX, https://haystax. com/blog/whitepapers/insider-attacks-in - dustry-survey/ (last visited Dec. 6, 2018). 2 Id. 3 Symantec Study Shows Employees Steal Corporate Data and Don’t Believe It’s Wrong, Symantec (Feb. 6, 2013), https:// www.symantec.com/about/newsroom/ press-releases/2013/symantec_0206_01. 4 Marc van Zadelhoff, The Biggest Cyber - security Threats Are Inside Your Company, HARV. BUS. REV. (Sept. 19, 2016), https:// hbr.org/2016/09/the-biggest-cybersecuri - ty-threats-are-inside-your-company. 5 Sarah Miller, 2017 U.S. State of Cyber - crime Highlights, CARNEGIE MELLON U. Continued from Page 12