The Chief Judge of the District of New Jersey has highlighted the distinction between the proof requirements for interference with a competitor’s restrictive covenants with its former employee and for misappropriation of the competitor’s trade secrets through that employee.

In Baxter Healthcare Corp. v. HQ Specialty Pharma, the court granted summary judgment for HQ on Baxter’s tortious interference claim but denied it on Baxter’s claims for trade secret misappropriation.  Finding that a critical element of tortious interference is actual knowledge of the contract whose breach has allegedly been induced, the court held that Baxter’s lack of evidence showing HQ actually knew that a scientist it hired from Baxter had any restrictive covenants with his former employer required summary judgment in HQ’s favor.

The outcome was far different on Baxter’s claims for misappropriation of trade secrets.  Noting that New Jersey’s Trade Secrets Act imposes liability on one “who knows or has reason to know” that it has come into possession of another entity’s trade secrets, the court found that the record contained at least circumstantial evidence from which HQ “had reason to know” that the scientist, who developed a patent-worthy product in less than a month after joining HQ, did so using Baxter’s trade secrets.

Baxter argued that it should survive summary judgment on both claims because HQ willingly buried its head in the sand regarding the scientist’s history at Baxter.  The court nonetheless said it could only proceed on the trade secrets claim, drawing a distinction between the “actual knowledge” requirement for tortious interference and the “had reason to know” standard under the Trade Secrets Act.