Educational Hypotheticals: These case studies are fictional scenarios created for educational purposes. They illustrate common patterns and issues but do not represent actual legal cases. Specific outcomes depend on jurisdiction, exact contract language, and individual circumstances. Consult an attorney for advice on your specific situation.
Jump to Case Study
The Departing Developer
Marcus worked as a senior software engineer at DataFlow Analytics, a business intelligence startup. He had access to the company's proprietary algorithm for processing customer data, the customer database including contact information for decision-makers at 500+ enterprise clients, and the product roadmap for the next 18 months.
After three years, Marcus accepted a position at CompeteWell Analytics, a direct competitor. DataFlow's NDA included standard confidentiality provisions plus a 12-month non-solicitation clause for customers.
Three months into his new role, DataFlow discovered that CompeteWell had begun aggressively pursuing several of DataFlow's largest customers. Worse, CompeteWell's new product release included features remarkably similar to items on DataFlow's confidential roadmap. DataFlow's CEO suspected Marcus had shared proprietary information.
DataFlow's legal team sent a cease-and-desist letter to both Marcus and CompeteWell. In discovery, it was revealed that:
- Marcus had forwarded DataFlow's customer list to his personal email before leaving
- He had shared the product roadmap document with CompeteWell's product team
- Several of DataFlow's customers confirmed that CompeteWell salespeople knew details about their DataFlow contracts
Outcome
The court granted DataFlow a preliminary injunction and ultimately awarded $2.3 million in damages. Marcus was personally liable for $180,000 and faced a permanent injunction from contacting DataFlow's customers. CompeteWell settled separately for an undisclosed amount and agreed to destroy all DataFlow confidential information.
Key Lessons
- For Employees: Your NDA obligations are real and enforceable. Never forward company documents to personal accounts. General knowledge is okay; specific customer lists and documents are not.
- For Employers: Document what departing employees accessed. Conduct exit interviews. Monitor for suspicious data transfers before departure.
The Side Project Dispute
Priya worked as a machine learning engineer at HealthTech Solutions in San Francisco, developing AI models for healthcare diagnostics. On evenings and weekends, using her personal laptop and home internet, she developed "FitTrack Pro," a fitness tracking app with AI-powered workout recommendations.
When FitTrack Pro gained traction and Priya started discussing acquisition offers, HealthTech claimed ownership under the Proprietary Information and Invention Assignment Agreement (PIIA) she had signed at hire. The agreement stated that all inventions "related to the Company's business or resulting from work performed for the Company" belonged to HealthTech.
HealthTech argued that because FitTrack Pro used machine learning (Priya's area of expertise at HealthTech) and could theoretically be applied to healthcare (analyzing exercise patterns for patient wellness), it fell within the scope of the PIIA.
Priya countered that:
- She developed FitTrack entirely on her own time with her own equipment
- HealthTech was focused on diagnostic imaging, not fitness tracking
- She never used any HealthTech resources, data, or trade secrets
- California Labor Code 2870 protected her rights to the invention
The case went to arbitration (per the PIIA's dispute resolution clause). Priya presented evidence including:
- Git commit timestamps showing all development occurred outside work hours
- Receipts for her personal laptop and development tools
- Documentation showing FitTrack's architecture was fundamentally different from HealthTech's systems
- Expert testimony that fitness tracking was distinct from medical diagnostics
Outcome
The arbitrator ruled in Priya's favor, finding that California Labor Code 2870 protected her invention. The arbitrator noted that HealthTech's PIIA actually included the required Labor Code 2870 notice, which undermined their own claim. Priya retained full ownership of FitTrack Pro and later sold it for $4.5 million.
Key Lessons
- For Employees: Keep meticulous records of your side projects. Use only personal equipment and time. Make your projects clearly distinct from your employer's business.
- For Employers: Labor Code 2870 (and similar laws in other states) limits your ability to claim employee inventions. Focus your PIIA on what's truly related to your business.
- For Both: Include prior inventions in Exhibit A of your employment agreement to avoid disputes later.
The Remote Relocation
Jordan was hired by FinServe Corp, headquartered in Texas, as a remote sales executive. At hire, Jordan lived and worked from New York. The employment agreement included a 2-year non-compete with Texas choice of law.
After 18 months, Jordan's spouse got a job in California, and they relocated. Jordan continued working remotely for FinServe from their new California home. FinServe updated Jordan's address in HR records but didn't modify the employment agreement.
Six months after the move, Jordan resigned to join a competitor, RivalFinance, also based in Texas.
FinServe sent a cease-and-desist letter invoking the non-compete and filed suit in Texas state court, arguing:
- The agreement specified Texas law
- FinServe was headquartered in Texas
- The competitor was also a Texas company
- Jordan had agreed to Texas jurisdiction in the contract
Jordan argued that as a California resident, California Business & Professions Code 16600 (the non-compete ban) applied.
The case presented a genuine conflict of laws issue. The Texas court had to consider:
- The parties' chosen law (Texas)
- Where the employee was located and performed work (California for the last 6 months)
- California's strong public policy against non-competes
- Which state had the most significant relationship to the dispute
Outcome
The Texas court ultimately declined to enforce the non-compete, finding that California's fundamental public policy against restraints on employment would apply to a California resident. However, the court did enforce the confidentiality provisions and non-solicitation clause for customers Jordan had personally developed relationships with while at FinServe. Jordan could work for the competitor but couldn't solicit FinServe's customers or use confidential information.
Key Lessons
- For Remote Employees: Your location matters significantly for NDA and non-compete enforcement. Moving to an employee-friendly state can change your legal protections.
- For Employers: Track where your remote employees actually work. Consider updating agreements when employees relocate. Choice of law provisions have limits.
- For Both: Confidentiality provisions are generally enforceable everywhere, even when non-competes aren't.
The Overbroad NDA
Alex worked as a marketing manager at BrandCo, a mid-size advertising agency. The NDA Alex signed defined "Confidential Information" as "any and all information, knowledge, or data, whether written or oral, tangible or intangible, that Employee learns, develops, or acquires during employment, including but not limited to business practices, marketing techniques, client preferences, industry knowledge, and professional skills."
After leaving BrandCo, Alex joined a non-competing company in a similar marketing role. BrandCo sued, claiming Alex was using "confidential marketing techniques" learned at BrandCo.
BrandCo's NDA was so broad that it essentially claimed ownership over:
- General marketing knowledge that exists industry-wide
- Professional skills Alex developed through experience
- Industry contacts and relationships
- Everything Alex learned during five years of employment
Alex's new employer was concerned and considered letting Alex go to avoid litigation.
Alex hired an employment attorney who filed a motion to dismiss, arguing:
- The NDA's definition of confidential information was unconscionably broad
- It effectively functioned as a non-compete by preventing Alex from using any professional skills
- BrandCo failed to identify any specific trade secret or truly confidential information that Alex had disclosed
- General marketing knowledge and skills are not protectable
Outcome
The court found BrandCo's NDA unenforceable due to overbreadth. The judge noted that an NDA cannot be used to prevent employees from using general skills and knowledge acquired through work experience. BrandCo was ordered to pay Alex's attorney fees ($45,000) because the court found the lawsuit was brought in bad faith to intimidate a former employee.
Key Lessons
- For Employers: Overbroad NDAs are worse than useless - they may be entirely unenforceable AND expose you to fee-shifting. Define confidential information specifically.
- For Employees: Don't be intimidated by overbroad NDAs. Courts generally won't enforce provisions that prevent you from using general professional skills.
- For Both: The best NDAs specifically describe what's confidential rather than using catch-all language.
The Whistleblower Protection
Casey worked as a quality assurance engineer at PharmaCorp, a pharmaceutical manufacturer. During routine testing, Casey discovered that the company had been falsifying stability data for a popular medication, potentially putting patients at risk. Casey's NDA had strict confidentiality provisions covering "all testing data, quality metrics, and manufacturing processes."
Casey raised concerns internally, but management dismissed them and warned that discussing testing data externally would violate the NDA. Frustrated, Casey contacted the FDA with documentation of the falsified data.
PharmaCorp discovered Casey's FDA report and terminated Casey for violating the NDA. The company threatened to sue for:
- Breach of the confidentiality agreement
- Misappropriation of trade secrets
- Tortious interference with business relationships
Casey was worried about the legal threats and concerned about their professional reputation.
Casey consulted an attorney who pointed out several protections:
- The Defend Trade Secrets Act (DTSA) provides immunity for disclosing trade secrets to government officials when reporting suspected violations of law
- FDA whistleblower protections specifically protect employees reporting drug safety violations
- State whistleblower laws provided additional protections
- PharmaCorp's NDA lacked the required DTSA notice about whistleblower immunity
Outcome
PharmaCorp never filed suit, likely recognizing it would lose on whistleblower immunity grounds. Casey filed a wrongful termination claim and settled for $850,000. The FDA investigation resulted in a consent decree requiring PharmaCorp to halt production and pay $23 million in penalties. Casey received a portion of the FDA recovery under the whistleblower reward program.
Key Lessons
- For Employees: Your NDA cannot prevent you from reporting illegal activity to government agencies. DTSA immunity protects disclosures to officials investigating suspected violations of law.
- For Employers: Include the DTSA notice in your NDA - it's required and failure to include it limits your remedies. Never retaliate against employees for protected whistleblowing.
- For Both: There's a difference between competitive disclosure (not protected) and regulatory reporting (protected).
The Negotiated Terms
Sam received an offer for a Senior Developer position at StartupXYZ. The offer included a standard PIIA (Proprietary Information and Invention Assignment Agreement) with broad language claiming all inventions and a 3-year post-employment confidentiality period.
Sam had two concerns:
- An open-source project Sam maintained on GitHub with 5,000+ stars
- A nascent SaaS side project Sam was building on weekends, unrelated to StartupXYZ's business
Instead of just signing or walking away, Sam sent a professional email to HR:
- Expressed excitement about the role
- Listed the open-source project and side project in a proposed Exhibit A
- Requested language explicitly carving out work on these projects (on personal time, with personal resources)
- Asked to reduce the post-employment confidentiality period from 3 years to 2 years for non-trade-secret information
StartupXYZ's legal team initially pushed back, but Sam calmly explained the requests were reasonable and standard in tech employment.
After two rounds of negotiation, both sides agreed to:
- List both projects in Exhibit A as excluded prior inventions
- Add language allowing continued work on "projects unrelated to Company's business, developed entirely on Employee's own time and resources"
- Reduce the general confidentiality period to 2 years (trade secrets remained indefinite)
- Clarify that "confidential information" excluded publicly available information and general industry knowledge
Outcome
Sam accepted the offer and has been with StartupXYZ for two years. The open-source project continues to thrive, and Sam recently launched the SaaS side project without any conflict. The negotiation took about a week and didn't affect Sam's relationship with the company - in fact, the hiring manager appreciated Sam's attention to detail.
Key Lessons
- For Employees: It's okay to negotiate NDA and PIIA terms. Most employers expect some negotiation, especially for senior roles. Be professional, specific, and reasonable.
- For Employers: Reasonable NDA negotiations don't signal a "difficult" employee - they signal someone who pays attention to detail. Consider building flexibility into your templates.
- For Both: The best employment relationships start with clear, mutually acceptable agreements. A negotiated NDA is better than a disputed one.
Apply What You've Learned
Generate a well-drafted employee NDA that avoids the pitfalls shown in these case studies.
Explore Employee NDA Hub