Chroma Technology Corp. Wins Trade Secret Case

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Chroma Technology Corp. Wins Trade Secret Case

Thu, 04/18/2002 - 8:00pm -- tim

Brattleboro, VT, April 18, 2002 -- The Vermont Supreme Court recently affirmed the judgement entered in favor of Chroma Technology Corp. that the Chroma defendants did not violate any legal obligation to their former employee when they founded a competing business in 1991. In so doing, the Court clarified the law in the State of Vermont on the important issue of when and how employees may go into direct competition with their employers. Prior to this decision, no case in Vermont had squarely addressed the issue since the early years of the 20th century.
Heidi Harvey, of the firm of Fish & Richardson P.C., Boston, MA, was lead
counsel for the Chroma defendants at trial and on appeal. She observed, "This decision is an extremely important statement of the modern law in
Vermont on one of the most difficult issues that faces employees and employers - who has the burden of drawing the line between the employees'
general, knowledge, skills, and abilities and the employer's proprietary information. The Vermont Supreme Court's places the burden squarely on the
employer to take reasonable steps to protect its information and point out to its employees that it considers the information confidential. The fact that information is valuable does not, by itself, make an employee strictly liable never to use it."
In the action, the former employer, Omega Optical, of Brattleboro, VT, alleged that former employees misappropriated Omega's confidential information and breached their duties of employment to Omega when they founded Chroma Technology Corp, also in Brattleboro, VT, in 1991 to make optical filters for fluorescence microscopy in competition with Omega and others. Omega sought a permanent injunction and $20 million in damages from Chroma. After a 22-day bench trial in 1999, the Superior Court found
in favor of the Chroma defendants.
On appeal to the Vermont Supreme Court, Omega asked the Court to hold that employees who acquire valuable information in the course of their employment "owe a duty of confidentiality to the employer merely by virtue of their status as employees, regardless of whether the employer has done anything either to protect the information or to communicate to the employees the confidential and proprietary nature of the information." Omega also asked the Court to hold that former employees "continue to owe a duty of loyalty, including refraining from competition with their former employer, after they leave employment."
The Vermont Supreme Court rejected both arguments, noting that "[Plaintiff's argument] is simply at odds with the case law, which requires
something more than the mere employer-employee relationship to establish a duty of confidentiality." The Court also noted that "[Plaintiff] cites no authority for the proposition that at-will employees continue to owe a duty of loyalty to a former employer, even after they have left that employment, that constrains them from ever acting to the detriment of that employer. Such a common law duty would prevent an employee from ever going to work for a competitor even in the absence of an agreement not to do so, an anomalous result."