6th Circuit rules on stolen trade secrets, noncompetes

The U.S. 6th Circuit Court of Appeals (whose rulings apply to all Ohio employers) barred two former employees from using stolen trade secrets for their new business but vacated the lower court’s judgment enforcing a three-year noncompete agreement because the employer hadn’t proven the restriction was reasonable.

Facts

Jeffrey Wilson and Joseph Russo formerly worked at RECO Equipment Inc., an Ohio company that sells, leases, repairs, and rebuilds heavy construction equipment in numerous states. Wilson signed an employment contract in which he agreed to:

• Never use or disclose RECO’s confidential information;
• Return all of the employer's tangible and intellectual property (including his cell phone) if he were ever to leave the company; and
• Comply with a noncompete provision that prohibited him from competing with RECO within 50 miles of its territory for a three-year period if he were ever to leave.

Russo didn’t sign an employment contract.

Wilson subsequently left and started his own competing company within 50 miles of RECO’s territory. He didn’t return his cell phone. He also retained confidential and proprietary information about the accounts he had managed at RECO.

Around the same time, Russo left RECO and joined Wilson’s new company. Before he left, an IT technician discovered he had downloaded hundreds of files, copied them into Dropbox, and transferred them to his personal e-mail address.