Summary
In this episode Tim and Chris unpack the Inevitable Disclosure Doctrine, a century old trade secret rule that began in 1902 when a sugar refinery worker was blocked from joining a competitor. They explain how the doctrine works, the three factors courts consider, and how it is used to prevent potential misuse of trade secrets before any misappropriation occurs. The conversation explores how different states treat the doctrine, reviews the landmark PepsiCo v Redmond case, and looks at how its use has shifted from senior executives to highly skilled engineers, especially in the AI industry. As noncompete agreements face bans and tighter restrictions across the United States, the doctrine is becoming a more important tool for protecting valuable trade secrets.
Takeaways
- The Inevitable Disclosure Doctrine can prevent an employee from joining a competitor if using trade secrets in the new role is unavoidable
- Courts consider three factors: whether the companies are direct competitors, whether the roles are identical or nearly identical, and whether the trade secrets are valuable to both companies
- States vary in their acceptance of the doctrine, with California rejecting it and states like Illinois, Pennsylvania, and New York allowing it
- The PepsiCo v Redmond case is a leading example, where a senior executive was blocked from joining a rival due to inevitable disclosure concerns
The doctrine’s application is expanding beyond executives to include skilled engineers in competitive industries like AI
Transcript
Tim Londergan (00:15)
Hey Chris.
Chris Buntel (00:17)
Hey Tim, it’s good to be back on the podcast.
Tim Londergan (00:20)
We’ve had a bit of a hiatus, haven’t we?
Chris Buntel (00:23)
We have, but we’re back and fully fueled.
Tim Londergan (00:26)
Back in action, tan, rested, and ready. That’s maybe true in your case since you live in the tropics or near the equator. Do you consider Singapore the tropics?
Chris Buntel (00:37)
It’s tropical. There’s not much jungle. We are near the equator, so you have to watch out for sunburn.
Tim Londergan (00:38)
I guess so. Not much jungle left.
All right, so today we’re going to talk about a topic that comes and goes in the trade secret world, but it’s a really fun and fascinating topic — inevitable disclosure. So the inevitable disclosure doctrine — tell us about it, and maybe take us back to 1902 to get started.
Chris Buntel (01:12)
Yeah, definitely. We always talk about trade secrets as being a fairly new thing. DTSA is recent, and even UTSA wasn’t that far behind. A lot of people feel like trade secrets have really come to light in the last five years or so, coincidentally when we founded Tangibly.
The reality is trade secrets have been around for a long time. When I looked for the oldest case of inevitable disclosure, I was shocked to find it all the way back in 1902. It’s the dinosaur era of trade secret law. In that case, a man was switching jobs from one sugar refinery to another competing sugar refinery and was blocked because the ex-employer said it was inevitable that he would disclose what we now call trade secrets.
Tim Londergan (01:49)
Amazing.
Chris Buntel (02:13)
So this goes way back. Even though industry and the world have changed dramatically since 1902, the fundamental principles were still in play.
Tim Londergan (02:30)
So it’s like the original non-compete agreement. I love it. That’s awesome.
Chris Buntel (02:34)
Yeah, this is the OG of non-competes back in 1902.
Tim Londergan (02:52)
I was looking at litigation literature, and over the past five years inevitable disclosure has been pretty consistently applied. But it’s interesting to see what’s going on in relation to DTSA, how it’s applied, and whether it’s successful. Talk to us about the factors involved.
Chris Buntel (03:18)
Sure. This concept essentially transforms a trade secret into a non-compete. What happens is you look at three factors when an employee leaves Company One to join Company Two:
- Are the two companies direct competitors?
- Are the roles identical or nearly identical?
- Are the trade secrets valuable to both companies?
If the answer is yes to all three, the argument is that it’s inevitable the employee will use or disclose the trade secrets in the new job.
Tim Londergan (04:14)
It’s going to happen.
Chris Buntel (04:16)
Exactly. DTSA is meant to cover actual misappropriation or threatened misappropriation. Inevitable disclosure is an attempt to expand “threatened” to cover situations where nothing bad has happened yet — other than an employee leaving.
Tim Londergan (04:46)
Right.
Chris Buntel (05:14)
So it becomes a thought exercise: is this doctrine good or not? It varies by state. California rejects it outright, as do Oregon, Maine, and a few others. But Illinois, Pennsylvania, and New York allow it because they believe you shouldn’t have to wait for damage to occur before acting.
Tim Londergan (06:00)
Interesting. With all the movement in tech and AI, these situations fit the test — direct competitors, similar jobs, valuable trade secrets.
Chris Buntel (06:10)
Absolutely.
Tim Londergan (06:26)
The hurdle is proving the threat. That’s a high bar, right? Don’t you need something in writing?
Chris Buntel (07:19)
That’s the rub. People rarely threaten — they either do it or they don’t. This doctrine is especially relevant in states without non-competes. As non-competes are restricted or banned, companies look to inevitable disclosure as a substitute.
Tim Londergan (08:35)
So if you’re making this argument, having your trade secrets well documented would help.
Chris Buntel (08:57)
Totally. Many companies either don’t have non-competes or have unenforceable ones. You have to proactively identify and manage your trade secrets before there’s a problem.
Tim Londergan (09:42)
So to file a DTSA claim, you need solid evidence of the threat, and that only works in certain states.
Chris Buntel (10:01)
Correct. If you have an enforceable non-compete, life is easy. If not, and there’s no evidence of actual misappropriation, you might try inevitable disclosure — but it depends on your state.
Tim Londergan (10:35)
And in California, no luck at all.
Chris Buntel (10:47)
Exactly.
Tim Londergan (10:49)
So what about the PepsiCo case?
Chris Buntel (11:04)
In 1995, a senior Pepsi executive moved to Quaker Oats in a nearly identical role. Quaker and Pepsi are arch competitors. The court agreed that it was inevitable he would use Pepsi’s trade secrets, so he was barred from taking the job. Historically, these cases targeted high-level executives. Now we see it applied to highly skilled engineers in areas like AI.
Tim Londergan (13:06)
And non-competes are going away.
Chris Buntel (13:19)
Yes, they’re being tightened or banned. The goal is to allow mobility while protecting trade secrets.
Tim Londergan (14:10)
So if the circumstances align and you’re in the right venue, you might succeed. Otherwise, probably no luck.
Chris Buntel (14:28)
Right. And if you have a non-compete, you don’t need this doctrine at all.
Tim Londergan (14:57)
Super interesting. All right, Chris, let’s tie this off.
Chris Buntel (15:08)
It was inevitable.
Tim Londergan
We’ll see you on the next one.
