Last month, a federal judge in Colorado ordered Thomas Kutrubes to pay his former employer, Atlas Biologicals, Inc., $2,048,180.50.
Kutrubes had been an employee, board member, and owner of 7% of the stock in Atlas, which specializes in the production of bovine serum, a byproduct of cow blood used for cell culture and scientific research.
While still working for Atlas, Kutrubes created a company (Peak Serum) to compete with Atlas and emailed himself important Atlas documents and trade secret information such as customer contact lists, a supplier agreement, and the quality manual.
He also emailed Atlas customers soliciting business for Peak Serum. In these emails, which included Atlas’s trademarks, he falsely represented that Peak Serum and Atlas were “sister companies” and that Peak Serum would be assuming responsibility for Atlas’s international customers. He signed the messages as National Sales Manager of Atlas.
The Peak Serum Google+ page similarly used Atlas’s trademarks and trade names, even including customer reviews of Atlas products. Kutrubes also mislabeled some of its products.
Kutrubes then resigned from Atlas, and Atlas learned about Kutrube’s unethical behavior. Not surprisingly, it then sued Kutrubes and Peak Serum for trademark infringement, trade secret misappropriation, unfair competition, and a host of related claims.
After a bench trial, the judge found Kutrube liable for trademark infringement. Atlas agreed to accept a permanent injunction against Kutrube’s future use of its mark instead of a monetary award for its trademark claims.
Atlas also prevailed on its trade secret claim, and was awarded a total of $1,363.893.62 in damages for Kutrubes’s and Peak Serum’s “willful and wanton misappropriation of trade secrets,” plus reasonable attorneys’ fees.
Additional amounts were awarded Atlas for its false designation of origin and federal unfair competition claims, resulting in a total judgment against Kutrube and Peak Serum in the amount of $2,048,180.50.
As you can see from the above, Atlas was able to prove that Kutrube’s misappropriation of trade secrets had caused it more than $1.3 in damages. While Atlas won its case, it remains to be seen how much of the judgment will be collectable.
It is, therefore, important for all businesses to protect their valuable trade secrets by following these guidelines:
1. Employees, independent contractors and others with access to confidential information should be required to sign nondisclosure-nonuse agreements (often called “NDAs”) before being granted access to the trade secret information.
2. Label copies, whether tangible or digital, as “confidential” or “trade secret.”
3. Keep tangible copies of confidential information in a locked room, safe or file cabinet, accessible only to those who need access to that information to properly perform their jobs.
4. Password-protect company networks. Use separate need-to-know network areas for confidential information. You should also consider encrypting the information.
5. Teach employees how to protect trade secrets and explain why it’s necessary.
6. Prohibit employees from using flash drives, unless that use is required for the person’s job, since these portable drives make downloading confidential information quick and easy. You can also obtain software to alert you when files are copied to external devices.
7. Make sure all employees and independent contractors know who to contact if they have any questions about your trade secret policy or whether certain information is considered confidential.
8. Require visitors to sign in and out, and do not allow them to be in any areas containing confidential information without an escort.
9. Conduct exit interviews with employees, reminding them of their continuing legal obligations with respect to your company’s trade secrets and other confidential information. Also, make sure you get back all of your business’s property.
10. Scrub the drives of any electronic devices (including computers, smart phones and copiers) before disposing of them.
11. So that you can take advantage of the benefits of the federal Defend Trade Secrets Act (DTSA), make sure all agreements with employees and independent contractors that have clauses protecting confidential information include an appropriate whistleblower protection notice.
Please feel free to contact us if you’re interested in obtaining more information about how to protect your trade secrets or if you need help updating your agreements or employee handbook.
Photo by Kristina Flour on Unsplash
