Friday, January 20, 2017

The Reading List (2017, No. 3)

Non-Compete and Trade Secrets News for the week ended January 20, 2017

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New Jersey Non-Competes

Non-compete disputes in the medical device and implant field are a dime a dozen these days. In that realm comes Synthes, Inc. v. Gregoris, No. 2:16-cv-6255, out of the District of New Jersey. There, Synthes successfully obtained a preliminary injunction against a former area sales vice-president who had sought to join Globus, Inc. to head up its new trauma sales division. The injunction opinion is quite long, but it hits nearly every significant legal question under New Jersey law and is a very readable primer for lawyers and non-lawyers alike.

Of particular interest is the passage concerning the employee's negotiation of a $475,000 payment from Globus if the court enforced Synthes' restrictive covenant. Crediting the employee and his counsel for obtaining this protection, the court felt that this obligation seriously mitigated the undue hardship that otherwise might result from judicial enforcement. This is the double-edged sword of indemnity obligations: they provide much-needed insurance for employees for jumping ship, but undoubtedly hurt the employee when it comes time to litigate. A copy of the Opinion is available here.

Weird Lawsuits

Perhaps because they are wrought with emotion, dust-ups over non-competes can yield some very strange lawsuits. I once had a client sued in divorce court over a non-compete because the business owner's divorce lawyer felt my client's actions somehow impacted marital property. (I won't explain here, but will say it was even more convoluted than it sounds.)

One of these bizarre non-compete related suits comes from Washington, where the Court of Appeals recently affirmed the dismissal of an action against the spouse of a former employee. The employee had breached a non-compete, and the employer sued his spouse for a constructive trust on the earnings that her husband contributed to the family's shared expenses. The employee had filed for bankruptcy, but the judgment concerning the non-compete agreement was deemed non-dischargeable. Suing the spouse didn't help the employer collect. A copy of the Opinion is available here.

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A few weeks back, I commented on the pending cert petition that asked the Supreme Court to address the International Trade Commission's authority to investigate trade secrets theft when the acts occurred outside the United States. As Jones Day writes, the Supreme Court denied Sino Legend's petition, essentially leaving intact the Tian Rui decision from several years ago that allowed the ITC to exclude the importation of goods when the misappropriation occurs outside the U.S.

Milwaukee Mayor Tom Barrett authored an op-ed in the Journal Sentinel in which he advocated for reducing employers' reliance on non-compete agreements. Wisconsin is a rather difficult enforcement state, and despite legislative efforts to liberalize non-compete law there is no indication that this will gain any real foothold. The op-ed provides an interesting viewpoint of those who believe that non-competes stifle, rather than promote, innovation.

Fisher Phillips comments on the Sultanov case, in which a federal judge denied an emergency application under the Defend Trade Secrets Act for entry of an ex parte seizure order. I wrote on this last week. The post nicely summarizes the considerations counsel must consider when seeking this type of extraordinary remedy.

From the Las Vegas strip comes a non-compete dispute between two casinos, Aria and The Cosmopolitan. The lawsuit centers on a claim that a former Aria executive wooed the casino's top customers to gamble at The Cosmopolitan. The dispute has factual shades similar to Golden Road Motor Inn v. Islam, in which the Supreme Court of Nevada held that judicial modification of non-competes was not permitted. The Las Vegas Review-Journal reports on the emergency proceedings now pending in federal court.

And in my favorite story over the past seven days, the New York Post has an article about a competition dispute between two barber shops. Three former stylists left Paul Mole's Barber Shop to start their own business, and none had a non-compete agreement. They are striking back, accusing their former employer of slandering them on Facebook and lodging allegations of "stealing" customers. Though such talk may sound like bluster, it indeed can be defamatory and non-privileged speech, potentially giving rise to presumed legal damages. Rob Radcliff has more on this story, and some practical tips, in his recent blog post.

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