Noncompete Agreements

Massachusetts Quick Links – October 2012

by Lee Gesmer on November 5, 2012

Oriental Financial Group, Inc. v.  Cooperativa De Ahorro y Crédito Oriental (1st Cir. October 18, 2012) — In this case the First Circuit adopts the trademark law “progressive encroachment doctrine,” joining the 6th, 7th, 8th, 9th and 11th circuits. The progressive encroachment doctrine may be used as an offensive countermeasure to the affirmative defense of laches (delay in brining suit) where the trademark owner can show that “(1) during the period of the delay the plaintiff could reasonably conclude that it should not bring suit to challenge the allegedly infringing activity; (2) the defendant materially altered its infringing activities; and (3) suit was not unreasonably delayed after the alteration in infringing activity” (quoting Oriental Financial).

Harlan Laboratories, Inc. v. Gerald Campbell (D. Mass. October 25, 2012) — Applying Indiana law, Judge Patti Saris issues a preliminary injunction enforcing a one year non-compete agreement. However, the opinion makes liberal use of Massachusetts and First Circuit precedents.… Read the full article

A recent Massachusetts Superior Court decision holds, on summary judgment, that a company may not enforce a noncompete/non-solicitation agreement against a former employee when the former employer had materially breached the agreement by changing the terms of  employment. Specifically, the employer changed the employee’s job responsibilities and title, and cut his annual salary by $40,000.

There’s nothing particularly surprising about this ruling, which is a reminder to employers that they can sacrifice the enforceability of a noncompete by materially changing the terms of an employment agreement. This can be avoided by entering into a new agreement containing the modified terms, something the employer in this case failed to do.

Protege Software v. Colameta (Sup. Ct. Middlesex, July 16, 2012) ( Kirpalani, J.)Read the full article

Can an employer prevent a former employee from working for a competitor in the absence of a non-compete agreement and with no evidence the employee has violated the former employer’s trade secret or confidentiality rights?  You would think not, but a couple of cases — infamous in the annals of non-compete law  — have imposed a non-compete in these circumstances.  The case cited most frequently on this issue is PepsiCo v. Redmond, a 1995 case in which the 7th Circuit affirmed a preliminary injunction ordering the former employee of PepsiCo to cease working for a competitor for six months, despite the fact that the employee did not have a non-compete agreement.  Another high profile case prohibiting an employee from working for a competitor, even in the absence of a non-compete agreement, is Bimbo Bakeries USA, Inc. v. Botticella, decided by the 3rd Circuit in 2010. In these cases the employee does have non-disclosure/trade secret agreements.  … Read the full article

What is the first thing a lawyer looks for when a client wants to enforce a non-compete agreement?  What is the first thing a lawyer hopes not to find when a client is the subject of a non-competition demand letter or lawsuit? Bad facts. Did the employee take confidential information belonging to the former employer?  Did the employee contact customers of the former employer and solicit them for the prospective employer before leaving the former employer?  If the employee was an executive or owed a fiduciary duty to the former employer, did the employee solicit other employees to leave with her? If the employee did any of these things, did the employee try to cover it up? Bad facts! The plaintiff’s lawyer will say. Give me those bad facts!

OK, I exaggerate a bit – of course a lawyer first wants to see if there is a written agreement that contains a non-compete provision.  … Read the full article