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In Harlan Laboratories Case, MA Court States the Obvious: Leave the Customer Files Behind

Yesterday evening, at a cigar bar in Fort Lauderdale (shout out to the Florida Cigar Company), I had a discussion with a few gentlemen that touched upon the issues of confidential information, non-compete agreements and computer forensics.  One of these gentlemen was in the process of separating from his current employer and starting his own company in the same industry.  In a rather nonchalant manner, he mentioned that he felt he could “get a good head start” based on some of the materials he planned to take with him when he left.   To some people, this sounds reasonable—taking a few files and getting a head start.  But to those of us who litigate non-compete cases, this is obviously a very bad idea.   A recent case out of Massachusetts illustrates the point nicely.

In the Harlan Labs case, the defendant Gerald Campbell was a former regional sales manager for a company – Harlan Labs – which is engaged in the business of providing products and services related to laboratory test animals that are used in medical and scientific research.   As one would expect, Campbell left Harlan Labs to work for a competition, Charles River.  Harlan sued, alleging that Campbell had violated his non-compete agreement.   In the end, Harlan prevailed and won their preliminary injunction.  The fact that Harlan won is unremarkable.  Instead, the important point is how and why Campbell lost.

As expected, Harlan Labs argued that Campbell had access to its confidential information, including information on customer accounts, inventory reports, pricing data, revenue data, strategic planning, marketing strategies and more.   This is par for the course.  Nearly every non-compete plaintiff alleges that the former employee had access to a litany of allegedly valuable, confidential materials.  Nonetheless, it is possible to beat these types of allegations.   It is possible to show that the defendant never had access to all of the materials in question, that the materials are of no value to a competitor, or that the materials are simply not confidential.   Unfortunately, Campbell sabotaged his case from the outset.  Before leaving Harlan Labs, he downloaded thousands of pages worth of company documents onto a flash drive.

A few weeks later, after leaving Harlan, Campbell was at Charles River working on a project.   He pulled out his trusty flashdrive and accessed a variety of files containing Harlan’s information, including client information, various reports and powerpoint presentations for select customers.  Then, once litigation between Campbell became imminent, he somehow lost that flashdrive.

This is simply bad strategy.  If an employee takes company information, that gives the employer a huge strategic advantage in litigating the non-compete case.  First, there will be a record of the information being taken or downloaded.   Whether the documents are printed, emailed or saved to a flashdrive, there will be a record of all this.  Folks who work in computer forensics can easily testify to what documents were taken, when and by which user.  With a clear record that such documents were taken, it is impossible for the defendant to argue that he did not have access to such materials.  At the same time, theft of the documents lends credence to the argument that the allegedly confidential information has value.  In Campbell’s case, it’s even worse:  He took the documents and they clearly have value to him (and his new company) because he used those documents while working in his new position.   This factor played prominently in the court’s decision to grant the plaintiff’s injunction.  The moral of the story is a simple one: You can’t take it with you.

The case is Harlan Laboratories, Inc. v. Campbell, CIV.A. 12-10995-PBS, 2012 WL 5285127 (D. Mass. Oct. 25, 2012)

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