Using Zoom improperly can destroy trade secret protections

With many employees working from home during the COVID-19 pandemic, employers have depended on Zoom or other web-based video conferencing tools to conduct meetings online. Users can choose to record sessions, collaborate on projects, and share or annotate on one another’s screens. Unfortunately, the process also can open the possibility of trade secret theft if employers fail to use the platform’s privacy and security features, as a recent Delaware case demonstrated.

Facts

Smash Franchise Partners is a franchisor of mobile trash compactors, which allow customers to save on waste management and disposal by compacting trash onsite. The company sells its compactors and business model to franchisees. Before being introduced to the product and business model, however, prospective franchisees are required to sign a nondisclosure agreement (NDA).

In December 2019, officials with Kanda Holdings signed an NDA and participated in several open Zoom calls with Smash about the cost of doing business, business strategies, and targeted customers. Kanda subsequently decided to open its own mobile trash compacting business in direct competition with Smash.

Smash immediately filed suit against Kanda, claiming the new competitor misappropriated its trade secrets, and sought an injunction to prohibit it from operating the business. To obtain a preliminary injunction, Smash was required to show a reasonable likelihood of success on its trade secret claim.

Court’s decision