Every day workers leave their jobs, sometimes to join competitors, oftentimes to start firms in direct competition with their former employers. In the course of doing so they are routinely tempted to save proposal documents and other firm collateral for future use. Such materials often contain information of a proprietary nature offering competitive advantages to those with access. Not surprisingly such use or disclosure is seen as harmful by the former employers, who bring lawsuits for breach of confidentiality, theft of trade secrets and unfair competition laws to protect their interests. Typically copyright law has not offered this protection. But in William A. Graham vs. Haughey the Court of Appeals 3rd Circuit affirmed a jury verdict of nearly $19 Million awarded to the William A. Graham Company on the basis of indirect copyright infringement for the copying of its proprietary materials.
In this matter, Haughey left his job as an insurance broker with Graham for a similar position at USI taking with him what the court describes as “two binders containing hundreds of pages of text describing various types of insurance coverage, exclusions, conditions and similar matter” owned by Graham. Haughey and USI copied the materials and over the next 13 years made use of these materials in preparing insurance coverage proposals to present to their clients. Although the copies were not sold directly, USI made use of the materials to secure lucrative business. In fact, Haughey was using his former employer’s materials for business know-how in that they served as a model for selling lines of insurance that allowing his new employer, USI, to compete, albeit unfairly, against Graham. The jury found evidence of USI hiring a temporary employee to type the contents of the two huge binders into an electronic word processing program so that it could be easily accessed across the firm resulting in the use of Graham’s language “in 857 firm proposals to 315 different clients over the course of 13 years” to be of heightened importance for calculation of the damages awarded.
Although intellectual property law affords many types of protection, in most instances materials of this nature are unlikely to be protected under copyright law unless shown to be original and creative works. Therefore, businesses would be prudent to take additional affirmative steps for the protection of their manuals and other proprietary materials, such as crafting employee handbooks setting forth guidelines regarding ownership and use of business property. Another caveat: Don’t allow any employee to either bring to your workplace or use materials belonging to their former employer without obtaining such employer’s express written consent.
William Tennant 