Athletic shoe manufacturer Nike filed suit on December 8, 2014 in Multnomah County Circuit Court in Oregon against three of its former designers alleging that the designers misappropriated Nike’s trade secrets and conspired with Adidas to start a new, competing business venture.
The three former designers, Denis Dekovic, Marc Dolce and Mark Miner, all resigned from Nike in September 2014, telling Nike that they decided to pursue their own design studio. Two weeks after the three designers resigned, Adidas announced that it would fund the designed studio managed by Dekovic, Dolce and Miner.
The lawsuit, which alleges $10 million in damages, claims that while the three designers were employed with Nike, they “conspired to and developed for themselves, and then for Adidas, a strategic blueprint for a creative design studio to compete against Nike, began consulting with Adidas and misappropriated Nike trade secrets for use in their new business venture.”
In the Complaint, Nike alleges that Defendants knowingly violated several agreements signed with Nike at the outset of their employment. All three Defendants signed non-competition agreements pursuant to which they agreed to: (1) not to compete with Nike during and for a period of one year following their employment; (2) not to use or disclose any of Nike’s confidential information and to return all copies of such information upon leaving Nike’s employment; and (3) not to solicit other Nike employees away from Nike to a competitor.
In addition, the Defendants also signed Employee Invention and Secrecy Agreements, by which each of them “assign[ed] to Nike all…inventions…conceived” during his employment term with Nike relating “in any way” to Nike’s “business…or products.” Defendants further agreed to “disclose promptly and in writing to Nike all [such] inventions…conceived or made by me during the term of my employment with Nike whether or not such inventions are assignable under this Agreement.”
Nike’s Complaint describes the extensive, company-wide efforts taken to protect its confidential information. Since 2012, Nike has invested more than $1.5 million in a company-wide security initiative known as “Keep it Tight” or “KIT.” As described in the Complaint, KIT is a program designed to educate employees regarding the protection of Nike’s proprietary and confidential information, including its product design information. The KIT initiative provides employees with on-line training on social media, information security, device (laptop/mobile) security, and workplace and situational awareness security. Nike asserts that there has been, and continues to be, significant publicity of the KIT principles on postings throughout the Nike campus and on Nike’s internal employee website and social media platforms. Nike has apparently gone to great lengths to prevent leaks of proprietary, confidential and trade secret information and reinforces the company-wide culture of locking down such information.
Nevertheless, Nike claims the three designers stole a “treasure trove of Nike products designs, research information and business plans” in an effort to market themselves to Adidas. Dekovic in particular, had the contents of his laptop copied, which gave him access to “thousands of proprietary documents relating to Nike’s global football (soccer) product lines.”
In addition, just three days before leaving Nike, Dolce sent an email to his personal email account with highly confidential design drawings related to an as-yet unreleased shoe designed for one of Nike’s sponsored athletes. On their final day at Nike, the Defendants allegedly took to social media to announce joining Adidas and to promote the Adidas brand in further violation of their non-compete agreements with Nike.
As a result of Defendants’ actions, Nike claims that it will suffer irreparable harm in the form of lost market share, lost sales, and lost goodwill if Defendants are not enjoined from this continued and ongoing wrongdoing, including from consulting for or launching a creative design studio with Adidas, connecting themselves to Adidas through social and traditional media, and continued use of Nike’s Confidential Information still in their possession in operating the design studio or otherwise.
The lawsuit identifies that the information taken by the Defendants is among the most important and highly confidential information in Nike’s athletic footwear business, particularly its global football business. Disclosure of any of this information, it claims, “would irreparably harm Nike, by, among other things, enabling a competitor to effectively undermine and counter Nike’s performance in the athletic markets for the next three to four years.”
Nike also brings claims of breach of contract, breach of duty of loyalty, and “civil conspiracy,” among other charges.
The lawsuit, involving one of Oregon’s most famous companies, will be an interesting test of its KIT initiative to protect proprietary information and could provide a road map for other employers.
On December 9, 2014, the day after filing its lawsuit against three former designers, Nike filed a Motion for temporary restraining order and preliminary injunction with the Multnomah County Circuit Court in Oregon. On December 11, 2014, the Court ruled on the motion, issuing a temporary restraining Order on behalf of Nike. The Court ordered a hearing to be held on February 11-12, 2015 during which defendants would have an opportunity to show cause why a preliminary injunction should not issue pending a final judgment on Nike’s claims.
However, on December 24, 2014 both parties agreed to vacate the Court’s temporary restraining order (and the scheduled February 2015 hearing) and instead, stipulated to a preliminary injunction enjoining defendants from the following:
• Working for or consulting with Adidas or any other company in any industry in which Nike participates. This prohibition includes issuing any public statements, including via social media or traditional media, and in any way referring to any association between themselves, Adidas or any Nike competitor.
• Using and or disclosing any Nike trade secrets and other confidential or proprietary information;
• Directly or indirectly soliciting, diverting or hiring away Nike employees or Nike sponsored athletes
Both parties agreed that the above injunction would remain in place until July 6, 2015, ten days after the anticipated conclusion of trial on injunctive and equitable claims. Furthermore, both parties also agreed to incorporate the following provisions from the Court’s December 11, 2014 temporary restraining order, requiring the defendants to do the following:
• Promptly return to Nike all electronic and hard copies of Nike’s trade secrets and other confidential and proprietary information in their possession, custody or control;
• Disclose in writing to Nike the identity of any person, persons or business entity to whom defendants disclosed Nike’s trade secrets and other confidential and proprietary information;
• Having defendant Dekovic return the Nike hard-drive referred to in his declaration in opposition to Nike’s motion for temporary restraining order
Finally, both parties agreed to appear before the Court on June 22-25, 2015, for a trial on Nike’s claims for injunctive and equitable relief. One can only speculate why the defendants would stipulate to such an injunction and lengthy schedule.