EarthWeb v. Schlack: The Decision That Tried to Cage Inevitable Disclosure

EarthWeb, Inc. v. Schlack, No. 99 Civ. 10035 (WHP), 71 F. Supp. 2d 299 (S.D.N.Y. Oct. 27, 1999), is the decision that taught courts how to say no. Four years after the Seventh Circuit’s PepsiCo v. Redmond gave the inevitable disclosure doctrine its modern shape, Judge William H. Pauley III of the United States District Court for the Southern District of New York confronted an employer trying to stretch that doctrine across the open landscape of the early internet economy. He refused — and in refusing, he wrote one of the most-cited cautions in trade-secret law: that inevitable disclosure, absent evidence of actual misappropriation, “should be applied in only the rarest of cases.” The opinion did not kill the doctrine. It fenced it.

At a glance

• Case: EarthWeb, Inc. v. Schlack, No. 99 Civ. 10035 (WHP), 71 F. Supp. 2d 299 (S.D.N.Y. 1999)
• Court: U.S. District Court for the Southern District of New York (applying New York law)
• Judge: William H. Pauley III
• Date decided: October 27, 1999
• Holding: EarthWeb’s motion for a preliminary injunction was denied; the contractual non-compete did not reach the new job, and inevitable disclosure could not be used to retroactively broaden the parties’ bargain.
• Significance: Supplied the limiting framework — direct competition, near-identical roles, and highly valuable secrets — that courts nationwide use to confine inevitable disclosure to extreme facts.

The facts: a content editor and the early web

Mark Schlack was a vice president at EarthWeb, an internet company that aggregated and published technology content for information-technology professionals. His domain was editorial: he was responsible for the “content” of EarthWeb’s family of websites — what they published, how they were organized, and the strategy behind them. He had signed an employment agreement containing a confidentiality clause and a twelve-month restrictive covenant, the latter drafted to bar him from working for businesses that competed with EarthWeb in narrowly described ways.

In 1999 Schlack resigned to join International Data Group and its venture ITworld.com, where he would again oversee online technology content. EarthWeb moved for a preliminary injunction on two theories. First, it argued the non-compete covered the ITworld.com role. Second — and more ambitiously — it argued that even if the covenant did not reach the job, Schlack should be enjoined anyway because he would inevitably disclose EarthWeb’s confidential information once he sat in a competing editorial chair. The court rejected both.

Why the contract did not reach the new job

The court began where contract law tells it to: with the words the parties chose. EarthWeb’s restrictive covenant was not a blanket bar on competition. It was drafted to prohibit Schlack from working for a defined category of competitor — businesses whose offerings directly competed with specific EarthWeb products or that licensed content to EarthWeb’s customers. The court read that language closely and concluded that ITworld.com, as an online publisher of IT content, did not fall within the covenant’s carefully bounded terms.

That reading mattered because it framed the inevitable-disclosure argument as an attempt to obtain through equity what the contract did not provide. EarthWeb had bargained for a particular, limited restraint. When the limited restraint failed to capture the new job, the company asked the court to supply a broader one. The court declined, observing that to enjoin Schlack under inevitable disclosure would be to “re-write the parties’ employment agreement” and “broaden the sweep” of a covenant the employer itself had drafted narrowly.

The brakes the opinion installed

The lasting contribution of EarthWeb is its skepticism toward inevitable disclosure as a free-standing route to an injunction. Judge Pauley acknowledged that New York courts recognized the theory, but he treated it as dangerous medicine. Absent evidence that the employee had actually taken or used trade secrets, he wrote, inevitable disclosure should be reserved for the rarest of cases — and even then only where a demanding set of conditions is satisfied.

The opinion identified the factors that have since become a national checklist. A court considering inevitable disclosure should weigh whether the old and new employers are direct competitors offering the same or substantially similar products or services; whether the employee’s new position is so nearly identical to the old one that he could not reasonably be expected to perform it without drawing on the former employer’s trade secrets; and whether the secrets at issue are genuinely valuable to both companies. Applied to Schlack, those factors did not line up. The early internet content space was fluid and rapidly changing; EarthWeb’s “secrets” were largely the kind of industry knowledge and editorial judgment an employee is free to carry; and the editorial role at ITworld.com, while related, was not a mirror image that could only be performed by exploiting EarthWeb’s confidential plans.

Underlying the analysis was a policy worry the court made explicit. Inevitable disclosure, used loosely, becomes a judicially imposed non-compete — a restraint the employee never agreed to, imposed after the fact, in a field where talent moves constantly and where today’s confidential strategy is obsolete in months. The doctrine, the court suggested, should not let an employer convert ordinary career mobility into actionable threat.

How EarthWeb fits the national split

EarthWeb occupies a distinctive middle position in the inevitable-disclosure landscape. It is not California’s flat rejection of the doctrine, and it is not the Seventh Circuit’s confident embrace in Redmond. It is acceptance on a short leash: yes, the theory exists, but it is presumptively unavailable unless the facts are extreme and the secrets concrete. That posture proved enormously influential precisely because it gave courts a workable vocabulary for refusing weak claims without abolishing the doctrine outright. Later New York decisions — including federal courts declining to enjoin departing executives even at large technology and consulting firms — trace their reasoning back through EarthWeb’s insistence on direct competition, role identity, and particularized secrets.

Open questions

EarthWeb sharpened the doctrine but left its hardest seams unresolved. How “nearly identical” must two jobs be — and who decides, on a preliminary-injunction record compiled in weeks, whether an editorial or strategic role can be performed without tapping protected knowledge? The opinion also leaves uncertain how its industry-specific reasoning travels: the court leaned on the volatility of the early internet, where confidential plans aged quickly, but the same logic cuts differently for durable secrets like formulas or source code. And because EarthWeb turned substantially on the narrowness of EarthWeb’s own covenant, it raises a drafting puzzle — does a broader covenant strengthen an inevitable-disclosure claim, or simply invite the antitrust-flavored scrutiny that California applies to all such restraints? Finally, the decision predates the federal Defend Trade Secrets Act of 2016, whose injunction provision bars conditions that prevent employment based “merely on the information the person knows,” and whose interaction with EarthWeb’s framework remains underdeveloped.

Implications

• For employers: Inevitable disclosure is not a backstop for a covenant that misses. Draft restrictive covenants to actually capture the competitive moves you fear, and preserve evidence of any genuine misappropriation — the doctrine is weakest when offered as a substitute for proof.
• For departing employees: A move to a related-but-not-identical role at a company that is not a head-to-head competitor is the profile EarthWeb protects. Document the differences between the old and new jobs.
• For litigators: Identify the trade secrets with particularity and tie them to the specific tasks of the new role. Generalized fears about “knowledge” rarely clear the EarthWeb bar.
• For drafters in fast-moving industries: Where confidential information ages quickly, courts may discount its value. Confidentiality obligations and security practices may protect more reliably than after-the-fact injunctions.

Frequently asked questions

Did the court abolish inevitable disclosure in New York? No. It recognized that New York courts entertain the theory but held it should be applied only in the rarest of cases absent evidence of actual misappropriation, and it set out the demanding factors a claimant must satisfy.

Why did EarthWeb lose if Schlack was going to a competitor? Two reasons. The narrowly drafted non-compete did not actually cover the ITworld.com job, and the court refused to use inevitable disclosure to expand the covenant beyond its terms. On the facts, the roles and the secrets were not the kind of near-identical, highly valuable match the doctrine demands.

What are the EarthWeb factors? Whether the employers directly compete with the same or similar products or services; whether the new position is nearly identical to the old; and whether the trade secrets are highly valuable to both employers. Courts across the country still cite this framework.

Authorities and sources

• EarthWeb, Inc. v. Schlack, 71 F. Supp. 2d 299 (S.D.N.Y. 1999): opinion (Justia); opinion (CourtListener).
• Doctrine analysis and reception: Hofstra Labor & Employment Law Journal, “The Inevitable Disclosure Doctrine and Its Application”; Boston Bar Journal, “The Inevitable Disclosure Doctrine in Employment Litigation”.