Press Release March 09, 2020

Goodwin Defeats Employee Mobility Trade Secrets TRO and Preliminary Injunction

The Trade Secrets + Restrictive Covenants practice won an early victory in an employee mobility trade secrets dispute on behalf of the defendant employee hired by a Goodwin client. The defendant employee is a former employee of plaintiff Virtual Radiologic Corporation ("vRad"). In August 2019, the employee left vRad to join Nines, Inc., a startup company based in Palo Alto, California. In February 2020, vRad sued the employee, alleging he had violated several restrictive covenants in his vRad employment agreement and that he had misappropriated confidential information and trade secrets

vRad sought entry of a Temporary Restraining Order (TRO) to prevent the employee from (1) working for any other company in the teleradiology industry for a period of a year; (2) using or disclosing vRad's confidential information and trade secrets; and (3) soliciting current vRad employees. The Court held an evidentiary hearing on February 25 and heard arguments on the motion the following day. Because the defendant received notice of the motion, both sides had full opportunity to brief the motion, and the Court held an evidentiary hearing, the motion was treated as one for a preliminary injunction.

The Court denied vRad's motion in all respects. Prior to leaving vRad, the employee sought an amendment of vRad's standard non-compete provision that narrowed the scope of its restrictions. The Court found that the amendment was "poorly drafted," and that "vRad has had a particularly difficult time explaining the meaning of the amendment, even though vRad drafted it." In particular, vRad in its complaint and briefs repeatedly asserted that the effect of the amendment was to narrow the enforceability of its original non-compete and non-solicitation provisions to specific states. At the evidentiary hearing, however, vRad president Shannon Werb testified the amendment broadened the restrictions on the employee. When the Court pointed out that vRad had said the opposite in its complaint and briefs, vRad's attorney pivoted back to its original interpretation, and conceded that Werb's interpretation was not correct. The Court went on to state, "Non-compete provisions are disfavored under Minnesota law.... " The Court went on to state that even if the original non-compete provision controlled instead of the amendment, "the Court still would not find that vRad is likely to succeed on its breach-of-contract claim because the Court has serious concerns about the enforceability of the original non-compete provision." The Court wrote that "the non-compete is drafted very broadly, and almost certainly is more expansive than necessary."

As to vRad's claim for alleged misappropriation of confidential information and trade secrets, the only materials that vRad specifically cited as constituting confidential information or trade secrets were: (1) 11 screenshots of a vRad PowerPoint presentation that the employee sent to his personal email address; and (2) a PowerPoint presentation that the employee prepared for his interview. After receiving evidence from both sides, including cross-examination of witnesses, the Court denied vRad any relief because the Court "doubts that any of the information contained in either the screenshots or the PowerPoint constitutes confidential information or trade secrets" under the employment agreement or federal or state law. In particular, the defendant "introduced evidence showing that virtually every item of information contained in the screenshots is either freely available on the Internet or available for purchase." Having "reviewed the screenshots and listened to Werb struggle while testifying at the hearing to identify what about the screenshots was confidential, the Court concludes that it is unlikely that vRad will be able to convince a jury that the screenshots qualify as confidential information or trade secrets." As to the PowerPoint, vRad did not seriously contend that it included confidential information or trade secrets.

Darryl M. Woo, a partner in the Intellectual Property litigation group at Goodwin, led the case along with David L. Hashmall, a partner at Felhaber Larson in Minneapolis. Said Woo, "The Court's ruling is vindication for our client, who faced the immediate potential loss of his ability to work in radiology, a field in which he has engaged for over 30 years."

Goodwin has one of the most comprehensive, technology-focused trade secrets and employee mobility practices in the nation. The team is comprised of intellectual property, employment law, privacy and cybersecurity, and business litigation specialists. Goodwin has advised and represented hundreds of cutting-edge companies, entrepreneurs, investors and startup founders facing these critical issues and disputes in innovation hubs around the world. As a result, the firm has extensive experience representing former employers, current employers and individual employees in trade secret and employee mobility matters.