New England Circuit Sales, Inc. v. Randall, 1996 WL 1171929 (D. Mass. June 4, 1996).
Factual Background Edit
Randall was General Manager of NECX Direct, a division of the plaintiff which sells computer equipment over the Internet. During his employment at NECX, Randall signed two employment agreements, which contained non-disclosure and non-competition clauses. Pursuant to those agreements, Randall agreed not to work for a competitor for one year after the termination of his employment with the plaintiff and agreed not to disclose any trade secrets or confidential business information.
In February 1996, Randall informed NECX that he was resigning. In March 1996, Randall accepted an offer to be the President and Chief Operating Officer at ISN, a “direct competitor” of the plaintiff. Plaintiff filed suit, seeking to enjoin and restrain Randall from working or being employed by ISN for a period of one year from the date of the termination of his employment with NECX and ordering Randall and ISN not to use, distribute, disclose or disseminate any of plaintiff's confidential business information. The court granted plaintiff's motion.
Trial Court Proceedings Edit
The court found that Randall breached his employment agreements by taking an executive position with ISN and that the plaintiff will suffer irreparable injury if an injunction was not granted and granted the requested preliminary injunction.
The court did little analysis of whether Randall was likely to disclose confidential information. Once the court found that the two companies were competitors, and that Randall had therefore violated the non-competition provision, it held that he had also violated the non-disclosure provision.
The result of entering into such a restriction is that Randall is essentially barred from being employed in the online industry for a year. The court did say that this type of restriction “does not prevent the defendant from working in the industry, it only forbids him from working for a business which is substantially similar to or competitive with that of the plaintiff for a limited one-year period.” However, it is difficult to see how Randall could take any meaningful job in the industry without the court holding that it is “similar to or competitive” with the plaintiff.
The court stated that “[t]he defendant was exposed to highly confidential information relating to this currently fast-emerging, even revolutionary, industry, and therefore, the non-competition and non-disclosure clauses are necessary to protect the plaintiff's legitimate business interests.” However, the fact that the business is “fast-emerging” would dictate against a long non-competition provision, since the information Randall would have learned at his prior employer would more quickly become dated. The court did no analysis of the reasonableness of the one-year restriction. Nor did the court do any analysis of whether Randall was privy to any confidential information at all. It referred to the “techniques of NECX used to compete effectively in the on-line marketplace,” but to the extent these “techniques” are disclosed on the online service itself, they cannot constitute protectible trade secrets. The court stated that:
|“||The defendant became familiar with the computer programs and used them to assist in the collecting, organizing, re-formatting and re-presentation of the data and information all part of the content management aspect of the business. The successful content management techniques that the plaintiff has developed and the defendant has learned allow the plaintiff to market over 25,000 products in a way that is generally considered within the industry to be superior.||”|
The court concluded that Randall “plans to use the confidential information which he acquired while working for the plaintiff in his new capacity as President and Chief Operating Officer at the Internet Shopping Network, as evidenced by the April 30, 1996 press release relating to the Internet Shopping Network.” The court quotes extensively from the press release, which merely states that ISN's website stated “was undergoing ‘a major site redesign.'"