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Unraveling the Threads: Lessons in Safeguarding Trade Secrets and Contracts

Unraveling the Threads

In a recent New Jersey Appellate Division case, Supreme Elastic Corp v. Schulein, a textile manufacturer found itself entangled in a legal dispute involving a former marketing manager. The plaintiff, having employed the defendant for fourteen years, alleged a series of claims including contract violations, misappropriation of trade secrets, and unfair competition. The intricate details of this case shed light on the challenges businesses face when safeguarding their proprietary information.


The plaintiff’s marketing manager, after over a decade of service, resigned abruptly, downloading various files to a personal hard drive just days before leaving. The plaintiff promptly terminated the defendant’s employment on the same day. Subsequently, the defendant transitioned to a new position with a co-defendant, previously linked through a distributor agreement with the plaintiff.

Legal Claims

The plaintiff filed a lawsuit against both defendants, citing breaches of contract, misappropriation of trade secrets, unfair competition, and related causes of action. However, after two years of litigation, including extensive discovery, the defendants sought summary judgment, arguing that the plaintiff failed to produce crucial documents such as a non-disclosure agreement (NDA) signed by the defendant.

Trial Court’s Ruling

The trial court, in granting summary judgment, highlighted the absence of key agreements like the NDA, non-solicitation, or non-compete agreements, which significantly weakened the plaintiff’s contractual claims. Moreover, the court found no competent evidence supporting the assertion that the downloaded information constituted confidential trade secrets. The plaintiff could not demonstrate any harm, such as lost sales or customers, resulting from the transferred data.

Appellate Division Affirmation

On appeal, the appellate division affirmed the trial court’s decision. The court emphasized that the extensive discovery period provided ample opportunity for the plaintiff to produce the missing agreements. Despite the plaintiff’s claims, the court held that the material downloaded by the defendant was not proven to be confidential, and there was no evidence of its disclosure to the new employer.

Lessons Learned

This case underscores the importance of meticulous record-keeping and documentation in employment relationships. Businesses should ensure the existence and enforceability of essential agreements, such as NDAs and non-compete clauses, to protect their interests. Moreover, the case serves as a reminder that claims of misappropriation must be supported by concrete evidence of harm and the confidential nature of the information in question.

In navigating the intricate legal landscape surrounding employment disputes, businesses must prioritize thorough documentation, proactive protection measures, and timely legal action to safeguard their valuable assets. The failure to do so, as exemplified in this case, can significantly impact the success of legal claims and the protection of proprietary information. Employees, on the other hand, should realize that is they get sued for breaching non-disclosure and confidentiality agreements and these documents do not exist or are poorly drafted they may have good arguments to succeed on the merits of the case.