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July 15, 2010

The Inevitable Disclosure Doctrine in Delaware

Thumbnail image for topsecret_br69.jpgThe doctrine of inevitable disclosure protects confidential information and trade secrets in situations where a former employee will inevitably disclose or use the information in his or her new employment, even absent bad faith. The principle behind this doctrine is that an employee who has knowledge of his former employer's trade secrets will inevitably disclose this information to his new employer resulting in an unfair business advantage. In asserting a claim under this doctrine, companies may seek to enjoin a former employee from working for a competitor, even if the employee had no existing covenant not to compete.

The inevitable disclosure doctrine has been applied on a number of occasions by the Delaware Court of Chancery. The applicability of the doctrine was first acknowledged in E.I. DuPont de Nemours & Co. v. American Potash & Chem. Corp., 200 A.2d 428 (Del. Ch. 1964). In E.I. DuPont, the Chancery Court considered whether a defendant could be enjoined from working on the development of a chloride process related to the manufacture of TiO2 pigments. In Chancellor Seitz's words, "I have no doubt but that the court is entitled to consider, in judging whether an abuse of confidence is involved, the degree to which disclosure of plaintiff's trade secrets is likely to result from the circumstances surrounding Hirsch's employment by Potash. The defendants say that a finding of 'inevitability' would be no more than a 'prophecy' here. Nonetheless, in the context of determining whether a threat disclosure exists, it is but a finding as to the probable future consequences of a course of voluntary action undertaken by the defendants. Courts are frequently called upon to draw such conclusions based on a weighing of the probabilities, and while a conclusion that a certain result will probably follow may not ultimately be vindicated, courts are nonetheless entitled to decide or 'predict' the likely consequences arising from a given set of facts and to grant legal remedies on that basis. I am satisfied that the degree of probability of disclosure, whether amounting to an inevitability or not, is a relevant factor to be considered in determining whether a 'threat' of disclosure exists."

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