Trade Secrets & Employee Mobility

On February 4, 2010, the United States District Court for the District of Maryland granted summary judgment to Plaintiff TEKsystems, Inc., a leading technical staffing and services company, and enjoined its former Director of Strategic Accounts, Jonathan Bolton, from violating certain restrictive covenants contained in his Employment Agreement

Florida law, specifically section 542.335, Florida statutes, which generally authorizes courts to enforce non-compete and other post-employment restrictive covenants if reasonable, leaves a number of issues unaddressed. Several of those issues are addressed in an opinion issued recently by the Eleventh Circuit Court of Appeals in Proudfoot Consulting Co. v. Gordon (11th Cir., July 30, 2009). The Eleventh Circuit affirmed the district court's injunction, but reversed the $1.66 million damages award to the former employer.

We previously wrote concerning a May 22, 2009 temporary restraining order granted by the U.S. District Court for the Southern District of Ohio against three former employees of UBS Financial Services Inc. ("UBS"), in effect pending an arbitration hearing before the Financial Industry Regulatory Authority ("FINRA"). On June 3, 2009, UBS successfully moved the District Court to expand the TRO and for a preliminary injunction on the basis of additional evidence. The expanded TRO shows that even a plaintiff who has secured temporary injunctive relief from a court need not wait for a scheduled FINRA injunctive hearing if its business interests continue to be threatened in the interim.

Many New York attorneys, when seeking a preliminary injunction against a party that has misappropriated their clients' trade secrets, will argue that a presumption of irreparable harm to their clients automatically arises upon the determination that a trade secret has been misappropriated. A recent decision of the U.S. Court of Appeals for the Second Circuit, however, holds that misappropriation of trade secrets does not automatically lead to irreparable harm. The aggrieved party only faces irreparable harm if the misappropriator will disseminate the secrets to a wider audience or otherwise irreparably impair the value of the secrets.

A recent decision of the United States District Court, Southern District of New York, entitled International Business Machines Corporation v. Papermaster, No. 08-CV-9078 (KMK), 2008 WL 4974508, 2008 U.S. Dist. LEXIS 95516 (S.D.N.Y. Nov. 21, 2008), appears to have breathed new life into the "inevitable disclosure" doctrine, apparently easing the burden of proof that an employer must satisfy in order to show the irreparable harm necessary for a court to grant an injunction preventing the former employee from working for a competitor.

A Florida trial court should not have entered a temporary injunction enforcing a non-compete agreement against a former employee on an ex parte basis, i.e., without notice to the employee, according to Florida's Fourth District Court of Appeals in a recent decision, Bookall v. Sunbelt Rentals, Case No. 08-26291 (Fla. 4th DCA, December 3, 2008).

Under Florida law, where an employment contract expires by its terms and the parties continue to perform as before, an implication arises that they have mutually assented to a new contract containing the same provisions as the old. But this principle does not apply to non-competes and other restrictive covenants contained in employment contracts, as illustrated by a recent decision by the Third District Court of Appeal, Zupnik v. All Florida Paper, Inc., Case No. 3D08-1371 (Fla. 3d DCA, Dec. 31, 2008).