In a recent “not for publication” Memorandum Opinion and Order relating to Reckitt Benckiser’s (“RB”) over-the-counter cough syrup, Delsym® (dextromethorphan polistirex), United States Magistrate Judge Douglas E. Arpert of the District of New Jersey found that RB failed to establish trade secret misappropriation, unfair competition, and tortious interference with business expectations claimed against Tris Pharma, following a four-day bench trial.
The case stemmed from RB’s allegations of patent infringement based on Tris’ Abbreviated New Drug Application with the FDA for a generic version of dextromethorphan polistirex. RB later amended its complaint to add counts relating to allegations that a former employee of a RB predecessor had access to and improperly used trade secrets relating to the Delsym® manufacturing process, formulations, and other private R&D information. Years after working for the RB predecessor, this employee was responsible for the development of Tris’ generic version of Delsym®. (In earlier rulings, the Court dismissed a breach of contract count and granted Tris’ motion for summary judgment of non-infringement.)
Regarding RB’s claim for trade secret misappropriation, the Court determined that RB failed to establish that it had an ownership interest in an alleged trade secret; that the purported critical elements of the purported trade secret were not known to the public; and that the Tris employee disclosed any trade secret or confidential information in the course of his employment at Tris. (See slip op. at 70-73.) Regarding the former employee’s obligations, the Court noted that “absent a covenant not to compete, an employee may freely use the experience gained on one job for a subsequent company” (id. at 72), and that “an employee cannot be prohibited from using general knowledge and expertise for a future employer.” (Id.) The Court likewise ruled that RB’s unfair competition claim failed for similar reasons as the trade secret misappropriation count, and added that RB failed to establish that defendants acted in bad faith. (Id. at 73-74.) Finally, the Court determined that RB failed to establish the elements of their tortious interference claim, including any malicious intent by Tris. (Id. at 74-75.)
While this case is far from concluded, the Magistrate Judge’s decision raises key considerations for businesses, such as the need for internal policies and protections that both identify and safeguard the trade secrets and confidential/proprietary information a company provides to its employees. The ruling also highlights the convergence of trade secrets law with employment law and, in particular, the importance of confidentiality agreements and covenants not to compete. In these respects, companies not only need to have policies and protections in place, they need to ensure these policies and protections are being enforced consistently.
As practitioners are aware, early this year, the New Jersey Trade Secrets Act became law, which we reported here and here. The new trade secrets law may well have resulted in a different outcome for the parties in this case. But the important takeaway from the case is that businesses are well advised to consider their current practices and policies with respect to trade secrets and proprietary information, confidentiality agreements, and covenants not to compete. Stay tuned for an upcoming Gibbon program on these critical areas of law.