Friday, April 13, 2018

Non-Compete Agreements and Trade Secret Litigation - The Fulcrum is Whether the Legitimate Business Interests of the Former Employer Are Detrimentally Affected by an Employee's Violation

What Are the Legitimate Business Interests of a Company That Seeks to Enforce a Non-Compete Agreement?

I have on numerous occasions blogged about the enforceability of non-compete agreements, noting that the heart and soul of a non-compete dispute is whether the legitimate business interests of the former employer are adversely affected by the former employee's breach of either the confidentiality, non-competition and/or non-solicitation covenants found within the employee's contract.

Protect Legitimate Business Interest Only
What are an employer's "legitimate business interests" in this context?

What Does it Mean to Misappropriate Your Employer's Confidential Information?

1) if you misappropriate your former employer's confidential information and use it in an overt fashion (i.e. copy exact wording from a business form and use it to promote another business) or in an attempt to solicit its customers (take a customer list with contact information and use it), you have adversely affected your former employer's legitimate interests;
Not a Good Look....
What is Inevitable Disclosure in a Trade Secret or Non-Competition Case?

2) if you are (one of the few) people who has knowledge of your former employer's "trade secrets," that is a formula, recipe, patentable invention that is kept under lock and key so that only a few people in the world know of its existence, you will likely be stopped from going to work for your former employer's close rivals.

Those Crinkles ARE a Trade Secrete!
Years ago, a vice-president of Thomas English Muffins , one of only a handful of people who knew the recipe used by Thomas to put the crinkles in its english muffins, departed to take employment with Hostess.  Concluding that it was "inevitable" that the the executive  would eventually disclose the recipe to his new employer, the court issued an injunction prohibiting Thomas' former executive from taking the job.

Solicitation of Former Customers is Always Forbidden if You Have a Non-Solicitation Agreement

Typically, employment agreements contain 3 restrictive covenants: 1) Confidentiality; 2) Non-Competition; and, 3) Non-Solicitation.  In general employees are not sued under the first two in the absence of the hypothetical situations outline above.

It's All About the Benjamins
Not true where non-solicitation covenants are concerned. Such provisions, which most critically prohibit a former employee from soliciting customers whom he/she dealt with while employed, most directly implicate a company's legitimate business interests.  That is so because the potential or actual loss of a customer implicates the potential or actual loss of income - and that implicates a company's legitimate business interest!

2018 New York Court Decision Explains and Protects an Employer's Legitimate Business Interests in Non-Compete Lawsuit

In Hoffman, D.O., P.C. v. Raftpol, a New York Supreme Court (i.e. trial level) judge considered a request for preliminary injunction filed by a physician assistant who, having taken a new job within the 15-mile radius prohibited by the non-compete covenant.was in violation of same.  Insofar as there was no evidence that the breaching former employee had solicited patients from her former employer, the court "blue penciled" the agreement, choosing to limit only the former employee's right to solicit patients of her former employer for the length of the 2-year non-compete.  The court found that such limitation was the only one required to protect the former employer's legitimate business interests.

The decision in Hoffman is a perfect example of how prudent court will protect the legitimate business interests of the former employer in the absence of any nefarious conduct on the part of a former employee.

Handling Non-Compete Disputes Since 1991
Philadelphia-Area Non-Compete Attorney

Questions?  John will spend 5-10 minutes with you discussing your current work situation, a U5 claim, your disability/FMLA leave, your employment/non-compete contract, a separation agreement, your wage or overtime claim, your unemployment appeal or your potential lawsuit at no charge to you.  Call 610-647-5027.  John is usually available 24/7.

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