Yahoo! recently named longtime Google executive, Marissa Mayer, as its new CEO.  Since the announcement, Twitter has been aflutter with comments about how this could happen.  One Tweeter remarked: “Whoa. Either Marissa Mayer didn't have a non-compete or no one at Google thinks Yahoo qualifies as competition.”  Another tweet speculates that she must have at least signed a confidentiality agreement. 

These Tweeters are not alone in their curiosity.  Over the past twenty-four hours I have been asked many questions by friends and family alike about this move.  Here's my take.

Didn’t she have a non-compete?  Probably not.  Of course, I can’t say for sure as I am not privy to her employment arrangements with Google, but my strong guess is that she does not have a non-compete that facially forbids her from accepting employment with a competitor.  Such an agreement would be unenforceable in California where section 16600 of the Business and Professions Code prohibits non-compete agreements, except in limited circumstances that do not apply here.  That being said, she most likely executed some sort of confidentiality agreement along the way, and she has a statutory obligation not to misappropriate Google’s trade secrets.  (For more on the difference between non-competes, confidentiality agreements, and trade secrets, click here).

Can Google stop her from going to Yahoo!?  That's a tough one.  The odds makers in Vegas would surely bet against it for multiple reasons.  As noted above, Mayer likely does not have a non-compete agreement, and if she does, it likely runs afoul of California law.  Moreover, California courts have unequivocally rejected the inevitable disclosure doctrine, a judicial doctrine by which courts will stop an ex-employee from working for a competitor if the employee's new job will inevitably lead to the disclosure of the former employer's trade secrets.  See Whyte v. Schlage Lock Company, 101 Cal.App.4th 1443 (2002).  If you ask Google, I am sure they believe that Mayer cannot possibly assume her new role at Yahoo! without inevitably drawing upon her knowledge of Google's trade secrets.  Hewlett-Packard surely felt this way when its former CEO Mark Hurd left to assume control at Oracle. 

Despite California's rejection of the inevitable disclosure doctrine, a careful read of California case law suggests the issue may not be as clear cut as it seems.  In Whyte v. Schlage, the court emphasized that it was considering (and rejecting) the inevitable disclosure doctrine “as an alternative to proof of actual or threatened misappropriation [pursuant to the California Uniform Trade Secrets Act]….”  Implicit in the appellate court’s opinion is that under California law, there is a difference between “threatened misappropriation” under the CUTSA, on the one hand, and inevitable disclosure, on the other hand.  The lower court could have found a threatened misappropriation and issued relief pursuant to the CUTSA.  So there seems to be a legitimate question as to what remedy a California court can employ to enjoin threatened misappropriation.  Safe money bets that Google's lawyers have already analyzed this issue and identified it as a possible grounds for future litigation if they uncover any conduct suggesting that Mayer intends to utilize her knowledge of Google's trade secrets. 

Should Google be concerned?  Absolutely.  On the outside, Google has been calm and collected (at least, so far).  Google's CEO graciously commented that Mayer made many contributions to Google and that her talents will be missed.  Of course, this statement is not at all inconsistent with future litigation.  But, yes, Google should be concerned.  In addition to losing an extremely talented and long tenured employee, that same employee has walked straight across the proverbial street to the top of one of Google's fiercist competitors, and she has done so with a head full of knowledge about the secrets to Google's success.  To make matters worse, Mayer is widely regarded as charismatic and inspiring.  Surely, numerous Google employees will be reaching out to see if she has any interest in hiring them.

If Google can’t stop her from going to Yahoo!, what can Google do?  For starters, Google will take a long hard look at the California Uniform Trade Secrets Act and the numerous cases interpreting and applying the statute.  Any legal action by Google is certain to include a claim for threatened misappropriation described above.  Next, Google will have to consider claims for unfair competition, breach of duty of loyalty, civil conspiracy, and possibly a claim under the Computer Fraud & Abuse Act (although a CFAA claim seems unlikely unless Mayer did something unbefitting the level of intellect widely attributed to her).  (For a melange of posts discussing the CFAA, click here.)

Did her looks play a role in her career success? (Yes, someone actually asked me this ridiculous question!)  Gimme a break!  Despite the litany of idiotic articles denominating Mayer as a "sexy geek," the reality is that she is an incredibly intelligent and talented woman.  If you doubt it, listen to her talk about her work and her career.  She graduated with honors from Stanford University with a B.S. in symbolic systems and an M.S. in computer science.  She joined Google as its twentieth employee in 1999, turning down more than a dozen offers from other companies.  In my humble opinion, her meteoric rise is attributable to her passion for her work.  Of equal importance is her vision.  Like other successful executives, Mayer believes that her work can change the world.  She may be right.  I wrote this article with the assistance of products from Google that Mayer helped to design.  Surely, she can thank Google for her success, but Google owes her a measure of gratitude as well.  That gratitude may not be readily apparent, however, in court papers should Google decide to file suit.  Stayed tuned.  We haven't heard the last of Marissa Mayer. 

Michael R. Greco is a partner in the Employee Defection & Trade Secrets Practice Group at Fisher & Phillips LLP.  To receive notice of future blog posts either follow Michael R. Greco on Twitter or on LinkedIn or subscribe to this blog's RSS feed

Much has been written about Hewlett-Packard’s recently filed case against its former CEO Mark Hurd following his acceptance of a job as president of Oracle.  At first blush, observers seem quick to assume that HP is dead in the water because California has unequivocally rejected the inevitable disclosure doctrine.  See Whyte v. Schlage Lock Company, 101 Cal.App.4th 1443 (2002).  And if you read HP’s complaint, it sounds an awfully lot like an inevitable disclosure case: “[Hurd] cannot perform his job at Oracle without disclosing or utilizing HP’s trade secrets and confidential information.”  Complaint ¶ 46. (For a copy of the Complaint click on the pdf at the bottom of this post.)

But a careful read of the California Court of Appeal decision in Whyte v. Schlage, which is where California first rejected the inevitable disclosure doctrine, suggests the case may not be as clear cut as it seems.  In Schlage, the court made clear that it was considering (and rejecting) the inevitable disclosure doctrine “as an alternative to proof of actual or threatened misappropriation [pursuant to the California Uniform Trade Secrets Act]….”  Schlage first argued that it had presented enough evidence from which the court could infer “actual or threatened misappropriation,” but the appellate court heavily emphasized that it was constrained by an appellate standard of review to view the facts favorably in support of the lower court’s decision denying an injunction.  The court next turned to and rejected Schlage’s inevitable disclosure argument.  Implicit in the appellate court’s opinion is that under California law, there is a difference between “threatened misappropriation” under the CUTSA, on the one hand, and inevitable disclosure, on the other hand.  The lower court could have found a threatened misappropriation and issued relief pursuant to the CUTSA.  So the question becomes, what remedy can a California court employ to enjoin threatened misappropriation? 

A close review of the prayer for relief in HP’s complaint indicates that HP did not ask the court for an injunction precluding Hurd from accepting any employment at Oracle.  Rather, HP asked for an injunction to preclude Hurd from “holding a position with a competitor in which he will utilize or disclose HP’s trade secrets and confidential information.”  In this case, that may be a distinction without a difference, but the choice of words does not appear to be unintentional. 

HP’s objective at this point has to be getting to discovery.  In California, a trade secret plaintiff must identify its trade secrets with “reasonable particularity” before it can commence discovery on a trade secret misappropriation claim.  (See Section 2019.210 of the Code of Civil Procedure) If HP survives a motion to dismiss and gets an opportunity to conduct discovery, they’ll need to look for conduct indicating untrustworthiness – so far they have simply alleged that Hurd failed to comply with his agreement to notify HP if he accepts employment with a competitor.  According to HP, “Hurd’s failure to provide such notice before it was publicly announced by Oracle, gives rise to a reasonable inference that he is violating his trade secret protection agreements with HP….”  – and that may be enough to survive a motion to dismiss and get to discovery.

HP v Hurd.pdf (3.05 mb)

You are the Assistant General Counsel for Employment with a national company and just learned that the Branch Manager and the entire sales team from your Kansas City branch office have jumped ship and joined your largest competitor.  The Branch Manager attended all of your strategic planning meetings in late 2009, which led to the roll-out of your company’s 2010 marketing plan.  The sales reps control four of the company’s ten biggest accounts, and already you have heard that they are calling your customers.  Your Regional Vice President’s first reaction:  "let’s go after them."  But HR reminds you that all these employees were from the company that you acquired a few years back – the one that didn’t have any of its employees sign non-competes.  So now you are asked, “what can we do when we don’t have a contract?” 

Well … you are not necessarily out of luck.  Here are some of the key claims to consider:

Misappropriation of trade secrets.  For sales employees, the key question is whether your customer list can qualify as a trade secret.  It may qualify if it is a “retail” list of individuals.  Their names may be in the phone book, but of course the phone book doesn't have any cross reference that identifies names might be your customers.  But if your customer base is “institutional” -- well-known companies that obviously would need your product, such as if you sell windshield glass auto manufacturers – your list is easy to figure out and probably isn’t secret enough to qualify.  Compare, for example, Merrill Lynch v. Zimmerman, 1996 WL 707107 (D. Kan. 1996) (retail stockbrokerage customer list is a trade secret) with Reed, Roberts Assocs. v. Strauman, 353 N.E.2d 590 (N.Y. 1976) (customer list not a trade secret; plaintiff’s consulting business advised companies on unemployment compensation and workers compensation issues).  Even if your customer list is not a secret by itself, additional data about customers, such as sales history, preferences, and the like, may qualify, if you can prove it meets the common law or statutory standards.  See, e.g., Zoecon Corp. v. American Stockman Tag Co., 713 F.2d 1174 (5^th Cir. 1983) (in this case, trade secret customer information included “type and color” of items purchased, “date of purchase,” “amount purchased,” as well as names and addresses of otherwise obvious purchasers of livestock ear tags).

The Branch Manager has knowledge of marketing and business information.  You may be able to argue that the information he learned during your strategic planning qualifies as a trade secret.  See, e.g., PepsiCo, Inc. v. Redmond, 54 F.3d 1262 (7^th Cir. 1995).  The question is whether it has been kept secret, or is it now obvious because you rolled out the plan?

What kind of relief can you get on a trade secrets claim?  Listed from easiest to obtain, to hardest, you may be able to get:  (1) non-disclosure – an order prohibiting the employees from disclosing information; (2) return of information – requiring them to return it; (3) non-use -- an order prohibiting the competitive use of the information; (4) non-solicit – prohibiting them from soliciting trade secret customers; and (5) non-compete – prohibiting them from working for your competitor.  The non-compete order relies on a theory of "inevitable disclosure" of the trade secrets.  Such relief is hard to get, and in some states is completely unavailable.  Where available, it usually requires evidence that the employee cannot be trusted, and that lesser relief is inadequate. 

Breach of duty of loyalty:  This focuses on pre-resignation conduct.  Before they resigned, did they:  (a) solicit customers; (b) recruit employees; or (c) divert business opportunities?  Soliciting customers and putting a business opportunity in the “back pocket” to pursue at their new place are both out of bounds.  Some discussions with employees may be okay, but in certain jurisdictions managers may not solicit underlings to follow them to their new company.  This sometimes boils down to a question of whether communication about the new jobs constituted "solicitation" or something less. 

Unfair competition / raiding:  Unfair competition or “raiding” tends to be an “I know it when I see it” type of claim.  This vagueness is both an asset and impediment.  The claim is elastic enough to use it in unusual situations, but its vagueness also makes it difficult to assess its chances of success.  In most instances, you'll have to prove “malice”:  an intent by the hiring firm to harm your business, rather than just an intent to help their own business by adding talent. 

Computer Fraud & Abuse Act, 18 U.S.C. § 1030:  Under the CFAA, you must prove (a) the employees either fraudulently or "intentionally" accessed your computers; (b) they did so without authorization or exceeding the scope of their authorized access; and (c) that they caused damage.  Did they go into your computer and take information, such as customer lists or business data?  If so, you may have a claim, although the decisions are far from unanimous in applying the CFAA to departing employee cases (including differing interpretations of what constitutes "damage").  Advantages of a CFAA claim:  (a) no need to prove the information was secret; and (b) no need to prove “malice.”  See, e.g., Shurgard Storage Centers, Inc. v. Safeguard Self-Storage, Inc., 119 F.Supp.2d 1121 (W.D. Wash. 2000).  But see Condux Int'l Inc. v. Hangum, 2008 US Dist. LEXIS 100949 (D. Minn 2008).  There also are special provisions in the Act that apply in a medical or financial business context.  For further discussion, see Heather Steele's blog entry: "Establishing the 'Without Authorization' Element under the Computer Fraud & Abuse Act".  

Civil conspiracy:  This is an option for multiple employee departures.  Generally, co-conspirators may be held liable for all violations of each conspirator, but there must be an underlying and independelty actionable improper act by one of the conspirators.  This works well with tort claims such as trade secrets or duty of loyalty, and may apply with statutory claims such as the CFAA.  In certain states, it may even work where some employees have contracts and others don’t – you may be able to bind them all to the contracts if they all are conspiring to violate.  See, e.g., Catercorp, Inc. v. Catering Concepts, Inc., 431 S.E.2d 277, 282 (Va. 1993).  Other states don't recognize claims for conspiracy to breach a contract.     

So, there may be some things you can do, even without a contract.  To enhance your position, consider taking these steps now:

• Get contracts:  sign employees up if you acquire a company that did not use them.  Consider whether you should roll out contracts if your company is not using them yet. 
• Protect your information:  to help establish trade secret status you can use non-disclosure agreements; build computer system firewalls; remind employees of confidentiality (in manuals, log-in screens, memos, bulletin board postings); and limit access to files, lead lists, and other sensitive data. 
• Monitor computer activity:  make sure you can determine -- quickly -- if someone accessed or removed information via computer prior to their departure.