$180,000 warning against employee-poaching suits.

Silicon Valley is competitive, and employees feel the brunt, Any company hiring a competitor’s employees will more often than not find itself on the wrong end of a lawsuit, facing allegations by hiring the employees it was really trying to steal the competitor’s trade secrets. The high possibility of facing these difficult and extensive cases will deter employers from hiring away each others’ employees

Cypress Networks learned the hard way that a trade-secrets suit could be the wrong response to  a competitor hiring away its employees. Cypress and Maxim Integrated Networks compete in touchscreen technology. Maxim hired a headhunter who sent emails to nine Cypress employees asking if they would be interested in working for Maxim. Cypress sued Maxim, claiming that Maxim was trying to steal its trade secrets. Less than six months after filing suit, Cypress dropped the case, and Maxim demanded its attorney’s fees.

The superior court awarded Maxim over $180,000 in fees because Cypress had sued in bad faith. Cypress never had any evidence that Maxim did anything more than solicit its employees, which Maxim had every right to do. (Cypress argued that even which employees worked on touchscreen technology was a trade secret; the headhunter pointed out that he easily learned the information on LinkedIn.)

Last month a California Court of Appeal affirmed. It made very clear that anyone suing a competitor for stealing trade secrets had better make sure that the competitor did more than hire away employees.

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