Liebert Corp. v. Mazur
293 Ill. Dec. 28, 827 N.E.2d 909, 357 Ill. App. 3d 265 (2005)
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Rule of Law:
Under the Illinois Trade Secrets Act, information is only protected as a trade secret if the owner takes reasonable measures to maintain its secrecy. Misappropriation of a trade secret can be established by improper acquisition alone, without proof of subsequent use, and a party's spoliation of evidence can create a presumption of both misappropriation and the threat of future use.
Facts:
- Liebert Corporation manufactured computer network equipment, which Zonatherm Products, Inc. sold as its exclusive representative in the Chicago area.
- Defendants John Mazur, Gregory Schwabe, Jerome Mazur, and Mario Belluomini were all sales employees at Zonatherm.
- While still employed by Zonatherm, Mazur and Schwabe incorporated a competing business, Aerico, Inc., in November 2003 to sell products for Liebert's direct competitor, American Power Conversion Corporation (APC).
- On January 19, 2004, Mazur and Schwabe signed a representative agreement with APC.
- On January 19 and 20, 2004, just hours before he resigned, Mazur downloaded confidential information from Zonatherm's servers, including customer lists, sales quotations, and password-protected price books that contained a confidentiality notice.
- Zonatherm had developed its customer list over 35 years, but it did not require employees to sign confidentiality agreements or label the lists as confidential.
- Between January 20 and 30, 2004, Mazur and the other defendant employees resigned from Zonatherm and began working at Aerico.
- After being sued, Mazur deleted approximately 12,000 files from his laptop, including a computer application log that would have shown whether he had successfully copied the downloaded information onto a CD.
Procedural Posture:
- Liebert Corporation and Zonatherm Products, Inc. (Plaintiffs) sued their former employees and their new company, Aerico, Inc. (Defendants), in an Illinois trial court.
- Plaintiffs filed a motion for a preliminary injunction to prevent the defendants from using the alleged trade secrets.
- The trial court conducted a hearing and denied the plaintiffs' motion for a preliminary injunction.
- Plaintiffs, as appellants, appealed the trial court's denial to the Illinois Appellate Court.
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Issue:
Under the Illinois Trade Secrets Act, does a former employee misappropriate a trade secret justifying a preliminary injunction by improperly acquiring confidential price books just before resigning to work for a competitor, even if there is no direct evidence of use and the employee attempts to destroy all evidence of the acquisition?
Opinions:
Majority - Justice Wolfson
Yes, a former employee misappropriates a trade secret by improperly acquiring confidential information, and the subsequent spoliation of evidence supports granting a preliminary injunction. Misappropriation under the Illinois Trade Secrets Act can be shown by improper acquisition, unauthorized disclosure, or unauthorized use; proof of use is not required if improper acquisition is established. Mazur's downloading of the price books hours before resigning to work for a competitor, for a purpose other than serving his employer, constituted improper acquisition. While the customer lists and quotations did not qualify as trade secrets because Zonatherm failed to take reasonable steps to protect them (such as using confidentiality agreements), the price books did qualify. Mazur’s deliberate deletion of thousands of files and the computer log after being sued amounts to spoliation of evidence, which creates a presumption that the destroyed evidence would have been unfavorable to him. This presumption, combined with his lack of candor and new role at a direct competitor, supports the 'inevitable disclosure' doctrine, establishing a threat of irreparable harm that justifies a preliminary injunction against him.
Dissenting - Justice Hall
No, the trial court did not abuse its discretion, and its finding that the plaintiffs' allegations of irreparable harm were too speculative to support an injunction should be upheld. The majority improperly substitutes its own judgment regarding witness credibility for that of the trial court, which was in the best position to observe Mazur's demeanor and testimony. A preliminary injunction is an extraordinary remedy that requires a clear showing of irreparable harm, not just speculative possibilities or unfounded fears. There was no direct evidence that Mazur disclosed or used any information, that his new role required him to do so, or that the plaintiffs had suffered any lost sales. The theory of 'inevitable disclosure' is purely speculative on these facts and is insufficient to justify an injunction.
Analysis:
This case clarifies the 'reasonable efforts' prong of the trade secret test under the Illinois Trade Secrets Act, emphasizing that technical safeguards like passwords may be insufficient without accompanying administrative policies like confidentiality agreements. It strongly affirms that misappropriation can occur at the moment of 'improper acquisition,' relieving plaintiffs of the often-difficult burden of proving subsequent use. Furthermore, the decision provides a powerful example of the doctrine of spoliation, demonstrating how a defendant's destruction of evidence can create a presumption that helps the plaintiff establish key elements of their claim, such as the threat of future harm required for an injunction.
