As the debate continues in Massachusetts as to whether or not to ban noncompetition agreements, a related question remains: Is there really any value in having employees sign noncompetition provisions? As a recent decision by U.S. District Court Judge Denise Casper in Boston Scientific Corp. v. Dongchul Lee confirms, if an employer has valuable trade secrets and wishes to prevent employees from potentially sharing them with a competitor, the answer is a resounding “yes!”
In Boston Scientific, the defendant, Dongchul Lee, was a former Boston Scientific employee who had worked on a number of its projects, including Mechanism of Action (“MOA”) research related to spinal cord stimulation (“SCS”). While Dr. Lee had signed an employment agreement containing a non-disclosure provision and requiring him to return all Boston Scientific property upon termination of his employment, the agreement did not include a noncompetition provision (presumably because Dr. Lee worked in Boston Scientific’s Valencia, California office and noncompetition provisions are unlawful in California).
In November 2013, Dr. Lee resigned from Boston Scientific and went to work for Nevro, a competitor of Boston Scientific. Further, Dr. Lee’s work for Nevro included engaging in MOA research related to SCS that was extremely similar … Keep reading
Earlier this month Gov. Deval Patrick called for the elimination of noncompete agreements and formally proposed this as part of a bill called An Act to Promote Growth and Opportunity. The Governor’s proposal, and the rallying cry of its various supporters, are firmly based on the premise that noncompete agreements have a negative impact on Massachusetts workers and the Commonwealth’s economy. However, the notion that outlawing noncompete agreements is likely to have any appreciable, positive impact on the Massachusetts economy, as a whole, simply is not justified. In fact, changing the law could well have a negative effect on the Commonwealth.… Keep reading
In a prior blog post Three Issues In-House Counsel Should Raise Before Asking Employees To Sign Non-Competes, my co-publisher, Shep Davidson, provided suggestions to help in-house counsel ensure that non-competition restrictions on employees were appropriate and enforceable.
As it is Valentine’s Day, we look at three ways in which enforcement of non-competition agreements is like dating.
1. Has there been a material change in the relationship? Massachusetts courts have long held that a material change in the terms and conditions of an employee’s employment will void an otherwise valid non-competition agreement. What constitutes a material change, however, can vary widely depending upon which judge is hearing the case. Some judges have applied the material change doctrine only where the change was adverse to the employee (Grace Hunt IT Solutions, LLC v. SIS Software, LLC, 29 Mass. L. Rptr. 460, 2012 WL 108825 (Mass. Super. 2012; Lauriat, J.); R.E. Moulton, Inc. v. Lee, 18 Mass. L. Rptr. 157, 2004 WL 1894910 (Mass. Super. 2004; Kottmeyer, J.). Other judges have applied the material change where the employee had been promoted, demoted and promoted again (Akibia, Inc. v. Hood, No. SUCV201202974F (Mass. Super. Ct. Oct. 09, 2012); Lycos, Inc. v. Jackson, … Keep reading
One size most certainly does not fit all when it comes to noncompetition agreements. Every state has its own requirements when it comes to the enforceability of employee noncompetition agreements. In some, such as California, noncompetition agreements are unlawful by statute. In other states, such as Colorado, noncompetition agreements may only be enforced in certain specific settings, such as the sale of a business. In many states, however, noncompetition agreements will be enforced if they protect the company’s legitimate business interests and are reasonable in time, geographic scope and the scope of the limitations on the employee’s ability to perform his profession. Where noncompetition agreements are not void as a matter of law, they are great fodder for litigators because there is no uniform definition of “legitimate business interest” and no consistent test to determine if the time, geographic scope and the scope of limitations on the employee’s ability to perform his profession are “reasonable.” These criteria are very fact and case specific.
Although most litigation of noncompetes focuses on whether the business interests of the employer are “legitimate,” and/or if the geographic and temporal scopes of the limitations are “reasonable.” Equally important to the enforceability of a … Keep reading