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Enforcing a non-compete: Recent court decision highlights common issues

January 28, 2017

On behalf of Greg Aceto at Aceto, Bonner & Cole PC

A Massachusetts Superior Court Judge recently held that a biotech company could not search all of a rival’s computers and storage devices to find misappropriation of trade secrets.

Non-compete agreements are popular in Massachusetts and across the country. In practice, however, drafting and enforcing a non-compete agreement can be a difficult task. Massachusetts law values a mobile workforce, so non-compete agreements must be limited in duration and geography. What is a reasonable limit regarding time and scope of a non-compete agreement depends on individual circumstances. In addition, the employee signing a non-compete agreement must receive some benefit for signing the agreement, called "consideration" or the agreement is not enforceable.

Preventing an employee from taking trade secrets to a competitor

Through a non-compete agreement, an employer can prevent a previous employee from working for a competitor if it violates an existing non-compete agreement. In some cases, an employer can proactively prevent an employee from working for a competitor by reminding the employer of a non-compete agreement in an exit interview, or by sending a cease-and-desist letter if the previous employee begins working for a competitor. If neither action is successful, the employer should file a suit for an injunction, which is a court order requiring the former employee to stop taking certain actions, such as working for a competitor, talking to former clients or divulging trade secrets.

In one recent case, a Massachusetts biotech company was able to obtain an injunction against an employee who went to work for a rival business. The biotech company sought to have the previous employee turn over her old computer and storage devices, as well as passwords that the previous employee had used. She refused to do this, and was held in contempt of court. The employer then asked the court to grant it access to all of the rival businesses' computers to conduct a search for proprietary information.

The judge did not allow the request. As the court phrased it, it was "a bridge too far." Instead, the judge ordered that one computer of the rival business could be searched - the employee to whom it was most likely that proprietary information would be divulged. The case is InVivo Therapeutic Corporation v. PixarBio Corporation.

What the case demonstrates regarding non-compete agreements in Massachusetts

This case is a good example of the nature of non-compete agreements in Massachusetts, as well as an example of the way in which forensic evidence obtained from electronic searches is a vital part of civil litigation. This is doubly true for litigation involving breach of a non-compete agreement and misappropriation of trade secrets.

The rules governing discovery can be complex. Employers who are seeking to prevent a former employee from violating a non-compete agreement do have legal rights and options, but must protect those rights through court action.

The attorneys at Aceto, Bonner & Cole PC, have significant experience in civil litigation involving non-compete agreements. Businesses and individuals looking to enforce a non-compete should contact Aceto, Bonner & Cole PC to discuss their legal needs and options.

Keywords: Trade secret litigation, non-compete agreement, Massachusetts Superior Court, e-discovery.

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