Not all Competition is Lawful in California

By March 12, 2018 August 3rd, 2018 Litigation Tips

While California law promotes lawful competition, individuals cannot violate agreements with their former employer with impunity.  This was illustrated last week when a California jury awarded AeroVironment, Inc. $2.4 million after finding three former employees of the drone technology company engaged in fraud and breached patent and confidentiality agreements with their prior employer.  See Aerovironment, Inc. v. Gabriel Torres, et al., County of Ventura Superior Court Case No. 56-2015-00465460.

AeroVironment hired the three defendants to work in its engineering department where the company was developing drone technology for military use.  All three defendants signed agreements to keep AeroVironment’s proprietary information confidential and not to engage in any competing activities during their employment.  Notwithstanding these agreements, and while still employed by AeroVironment, defendants began planning a competing business and went so far as to found the drone sensor company for which they would all eventually work after their resignations.  AeroVironment filed suit soon after discovering such conduct.

The verdict in AeroVironment’s favor demonstrates that even in California, juries will hold former employees accountable for misusing protected information and actively competing with their current employers.  In general, California employees may prepare to compete as long as they are not actually pursuing competitive enterprises while employed, or using their employer’s resources to do so.  However, these defendants went too far in the jury’s view.  The case is a reminder that employers should ensure that their employees sign basic confidentiality agreements as well as agreements that they will not compete during employment.  Such agreements can be complemented with strong written policies, including handbooks that prohibit conflicts of interest and describe the employer’s expectations for maintaining confidences.

As with most things, an ounce of prevention is worth a pound of cure.  California employers who wish to remain competitive should take these simple steps, as AeroVironment had done, to protect their technologies.  The existence of standard agreements was key to AeroVironment prevailing at trial.

Lewis & Llewellyn has extensive experience litigating and advising clients on the myriad issues that can arise when an employee transitions from one company to another.  Click here to read more about our practice areas in the field of employee mobility.