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By Stephen Hodzic, Blog Editor
On January 27th, 2020, the Hershey Company of Hershey, Pennsylvania, filed a breach of contract suit against a former executive who had recently left the company. [1] The executive, Doug Behrens, is now employed with KIND LLC as a chief customer officer. [2] KIND creates snack foods and is considered a rival of Hershey. [3] Amongst other things, the suit alleges that Behrens left the company 16 months after being hired. [4] Hershey claims Behren signed a contract that agrees to pay back his $250,000 signing bonus if he left within 24 months of his start date, which was reportedly May of 2018. [5]
Hershey also alleges Behren engaged in corporate espionage, claiming he sent more than 100 company documents through his work email to his personal email after he submitted his resignation in August of 2019. [6] Hershey claims this violates a confidentiality agreement and wants Behren to reimburse the company for the equivalent value of 2,392 shares of Hershey stock, which in January of 2020 was valued at $152 per share.
The federal government instituted the Industrial Espionage Act in 1996, in part to help economic development in the United States and to help protect an inventor’s rights to their discoveries and creations. [7] While many may be aware of the federal statutes specifically targeting economic espionage that benefits foreign entities, [8] it is interesting to note that Pennsylvania specifically addresses corporate espionage under the Trade Secret statutes.
To understand how corporate espionage is identified in Pennsylvania, several statute definitions provide clarity. “Trade secrets” are defined as any information, list, program, etc. that has provided some kind of economic benefit due to the fact that it is not well known, and that reasonable efforts have been made to maintain its secrecy. [9] “Misappropriation” is defined as an acquisition of a trade secret by another who knows or reasonably should know that the trade secret was acquired improperly, or, disclosure of a trade secret without express or implied consent by a person who used improper means, knew they were disclosing a trade secret, and or knew or had reason to know that their knowledge of the secret has been acquired through accident or mistake. [10] Finally, “improper means” can be defined as bribery, theft, misrepresentation, breach of duty to maintain secrecy, espionage through electronic or other means, and other similar actions. [11] More information on these definitions can be found under Title 12, Chapter 53 of the Pennsylvania Consolidated Statutes. [12]
During a cause of action involving misappropriation of trade secrets, courts have wide latitude as well as obligations under this statute. A court is required to preserve the secrecy of any alleged trade secret by reasonable means. [13] A court may issue an injunction if there is even a threat of misappropriation, and can continue even past the time the trade secret exists, if keeping it in place may help eliminate a “commercial advantage” that may be derived from a misappropriation. [14] There are also many options for awarding damages. Damages may include the actual loss caused by misappropriation as well as unjust enrichment. [15] If the court finds the misappropriation was malicious and willful, it may award attorney’s fees, and may also award exemplary damages that can up to double the initial award. [16]
[1] https://dockets.justia.com/docket/pennsylvania/pamdce/1:2020cv00140/123637
[2] https://www.pennlive.com/news/2020/01/was-the-executive-a-spy-the-hershey-co-sues-former-top-official-it-accuses-of-corporate-espionage.html
[3] Id.
[4] Id.
[5] Id.
[6] https://www.fox43.com/article/news/hershey-sues-former-executive-claims-he-stole-company-secrets/521-dd50824b-3cae-45bc-b0fb-d9afe8eb7449
[7] https://fas.org/irp/congress/1996_rpt/s104359.htm
[8] https://www.law.cornell.edu/uscode/text/18/1831
[9] https://www.legis.state.pa.us/cfdocs/legis/LI/consCheck.cfm?txtType=HTM&ttl=12&div=0&chpt=53
[10] Id.
[11] Id.
[12] https://www.legis.state.pa.us/cfdocs/legis/LI/consCheck.cfm?txtType=HTM&ttl=12&div=0&chpt=53
[13] Id.
[14] Id.
[15] https://www.legis.state.pa.us/cfdocs/legis/LI/consCheck.cfm?txtType=HTM&ttl=12&div=0&chpt=53
[16] Id.
