Noncompetition & Other Restrictive Covenants

trade secrets


whistle blower trade secretsThe new Defend Trade Secrets Act (“DTSA”) allows owners of trade secrets to now bring a civil action in federal court to protect their trade secrets and confidential information. Further, under the DTSA, a trade secret owner may be awarded actual damages, injunctive relief, restitution, the extraordinary relief of ex parte seizure orders and, if there is willful or malicious misappropriation, exemplary damages (up to double damages) and attorneys’ fees. Although the DTSA is a big win for employers seeking to protect their trade secrets and confidential information, employers may be precluded from being awarded exemplary damages and attorneys’ fees if the employee’s confidentiality agreement does not contain an express exception for disclosures related to whistleblowing.… Keep reading

TAGS: , , , ,


I’ve been involved in many cases where it is alleged that someone violated his or her non-compete agreement or misappropriated the company’s confidential information or trade secrets. Often, the key issue has been not what the former employee did, but what the company did not do to protect the information it contends is proprietary. The issue of failing to protect one’s confidential information and trade secrets was highlighted recently in the Appeals Court decision of Head Over Heels Gymnastics, Inc. v. Ware.… Keep reading

TAGS: , ,


No doubt, ensuring that any agreement is consistent with judicial precedent is critical if you want to enforce that agreement at some point in the future. Nevertheless, merely incorporating precedential concepts or language into an agreement may not be enough to get your client to where it wants to be, and may even result in your client being put in a more difficult position than if the precedent had been ignored. Nowhere is this more apparent than when a company seeks to draft and implement a standard and seemingly straightforward noncompete covenant.… Keep reading

TAGS: , , ,


When seeking preliminary injunctive relief to enforce a non-compete, the moving party is often focused on how obvious it is that the defendant breached the parties’ agreement. As 7-Eleven recently learned, however, even when there is a valid and enforceable noncompetition provision and a clear breach of it, unless you can show that you will suffer irreparable harm without an injunction, and that such harm outweighs the irreparable harm to the defendant that an injunction would inflict, a court will not issue injunctive relief. … Keep reading


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

TAGS: , , ,


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

TAGS: ,


In a previous blog post, The Fiduciary Duty of Preserving Corporate Opportunities, I wrote:

In general, an officer, director, partner, LLC member or shareholder in a closely held corporation owes a fiduciary duty not to usurp for his personal benefit, a business opportunity that could and should belong to the corporation.  

While I have no qualms about that statement, a recent decision out of the Massachusetts Superior Court found that a company insider was not liable for breach of fiduciary duty even though she terminated her employment relationship with the company and started her own independent business that undertook the exact same work she had been doing for her prior company.  … Keep reading

TAGS:


As in-house counsel, how would you like to tell your CEO: “While our customer lists, pricing information, and business processes are trade secrets, we can’t sue the independent contractor who stole them because we did not do enough to protect those trade secrets.”  Sound contrived?  Well, that is exactly the ruling one Massachusetts Superior Court judge recently issued in C.R.T.R., Inc. v. Lao. … Keep reading

TAGS: , , ,


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

TAGS: , ,
A Right to Match Can Provide Multiple Benefits


Photo Credit: David W. Leindecker

A client recently forwarded me an article about a lawsuit that Oakley brought against Nike and golf wonder-boy Rory McIlroy.  In that suit, Oakley claims that as part of its endorsement agreement with McIlroy it had a right to match any new endorsement proposals made to McIlroy.  Nevertheless, after Nike made a proposal to McIlroy, the golf star refused to consider Oakley’s tender of a match.  While it appears that Oakley’s claims in that case will rise or fall based on whether McIlroy/Nike can prove that Oakley waived its right to match, the dispute reminded me that rights to match (sometimes denoted as  “rights of first refusal”) can turn out to be extremely valuable assets in a host of contexts.

Perhaps the most common use of rights to match arises in the context of restrictions on the transfer of equity in a closely held business.  Indeed, without such restrictions, a competitor might easily be able to buy out a minority equity holder and instantly gain access to key company data.  Even if that is not a genuine concern, those involved in a closely held business generally do not want a stranger to suddenly … Keep reading

TAGS: , ,