An Epic Heist: Nike Trade Secrets and Breach of Non-Compete

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Nike has sued three former employees who left to work for Adidas. The company is suing for breach of contract, theft of trade secrets, fraud, conspiracy and more. In the Complaint, Nike details fairly shocking allegations against the defendants who launched a plot to leave the Company, steal numerous Nike plans and products and then parlay that into lucrative new careers at Adidas.

The three employees all have a relatively long tenure at Nike. Two of the defendants have worked at Nike for 9 years. The remaining defendant has worked there for 6. Their collective experience covers soccer, football, basketball, cross-training, women’s apparel, running. All three of them climbed the corporate ladder. It is unsurprising that the defendants signed agreements that contained non-compete and non-disclosure provisions. Those provisions themselves were quite reasonable: a one-year non-compete, a one-year non-solicitation and a two-year non-disclosure.

During their years at Nike, all three of these individuals exemplified a great deal of talent and intellect—which explains them reaching such high-level positions within such a major corporation. But greed and arrogance can quickly cancel out other positive qualities like talent and intellect. In April 2014, the defendants began executing the plan for their departure from Nike.

Noteworthy is the fact that defendants launched this plan while still working for Nike. In May 2014, after one of the defendants had a visa issue, Nike paid more than $50,000 to relocate him and his family to Italy, on the understanding that one of the defendants would remain employed with the Company long-term. Upon securing Nike’s commitment to fund his relocation to Italy, the defendants allegedly discussed how the move to Italy would serve their scheme well because Italy was one of those “countries where [Nike’s] non-compete is difficult to enforce.”

While still at Nike, the defendants signed lucrative deals with Adidas. Shortly after resigning from Nike, the defendants began a sloppy attempt to steal as much Nike information as possible and then destroy any evidence.  One defendant copied all of his laptop’s contents onto an external hard drive, then damaged the laptop to a point he thought would render it inoperable and shipped it back to Nike. The defendant sent an email to his personal email address containing a zip file with design drawings for an unreleased shoe tied to a prominent, Nike-sponsored athlete. Unlike in most such instances, where the plaintiff offers vague assertions about confidential information and trade secrets, the materials at issue in this case are certainly confidential and  trade secrets. Between their collective efforts, the Defendants walked away from Nike with a treasure trove of information, including:

  • High-level strategic development plans for the next 3 to 4 years. These plans included proposed and prospective product offerings and the timing of releases.
  • Unreleased product design materials for the next 2 to 3 years. This included models, sketches and designs for soccer footwear and other soccer related products (e.g. team uniforms). These design plans included very detailed information on fabrics, cuts, colors, manufacturing and more.
  • Financial data including both a historical breakdown of all Nike footwear sales by product for the past year and a forward looking projection of growth my product for the next twelve to eighteen months.
  • Documents regarding Nike’s product marketing strategies including documents on product promotions, in-store presentations, pr campaigns, product launches, plans for specific sponsored athletes and plans for specific Nike-sponsored sports teams.

Nike is suing the defendants for every claim imaginable, and rightfully so. Turns out, Nike was, rather obviously, able to retain enough electronically stored data to present a very compelling Complaint. In many cases, especially many non-compete and trade secret cases, there is another side to the story. In many cases, the Complaint talks vaguely about wrongful conduct, confidential information and trade secrets, but never really gives specifics. Here, Nike’s complaint is filled with specific, credible and highly damaging allegations. There is unlikely to be anything the Defendants can say that would mitigate their liabilities.