Massachusetts Supreme Judicial Court lowers bar for trade secret injunctions

Massachusetts companies seeking to stop trade secret theft can no longer rely solely on proving misappropriation to secure a court injunction. A recent ruling by the Massachusetts Supreme Judicial Court has raised the evidentiary bar, requiring plaintiffs to separately demonstrate “irreparable harm” to win early relief.

The decision, in Daikin Applied Americas Inc. v. Russo, rejected a long-standing assumption in the state that a likelihood of success on a trade secret claim automatically established irreparable harm. The court, in an October 14 ruling, aligned Massachusetts with a more stringent approach seen in patent and copyright cases, stating that “presuming, rather than demonstrating, irreparable harm” departs from traditional principles of equity.

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The Ruling’s Core Change

The case involved Daikin, a commercial HVAC company that sued two former employees for allegedly taking confidential information to start a competing business. Daikin requested a preliminary injunction, including a one-year non-solicitation restriction. The lower court denied the request, and the SJC affirmed, finding that Daikin had failed to show that the resulting harm could not be fixed with money damages. The court made a clear distinction between economic losses, which are generally remediable, and non-monetary injuries that justify an injunction.

Strategic Implications for Businesses

Principal Adam Kessel of Fish & Richardson emphasized the decision’s impact on corporate strategy. “You need to get your house in order,” he said. “And, if you do have valuable information, whether it’s commercial trade secrets like customer lists or a chemical formula or source code, it’s now even more important to protect them before there is any misappropriation and to have a really good paper trail about the steps you’re taking to keep your trade secrets secret.”

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Key Actions for Employers

Legal experts outline several practical steps for employers following the ruling. First, companies must now establish the specific threatened harm, not just the act of misappropriation, and work with counsel to document why monetary relief is inadequate. Second, requested injunctions should be tailored narrowly to the specific risk, as broad non-solicitation requests are less likely to be granted. Third, employers should review restrictive covenants to ensure they are protective and consider tailored agreements. Finally, a quick response to investigate suspected misappropriation and preserve evidence is critical for protecting a company’s data.

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