Courts continue to grapple with whether to enforce a non-compete against a former employee who joins a competitor but takes affirmative steps to protect the former employer’s trade secrets and avoids former customers. For example, in Aspect Software v. Barnett, the U.S. District Court of Massachusetts enforced a non-compete even though it found that the employee and his new employer had taken “scrupulous steps” to protect his former employer’s trade secrets decision. Now, another important decision on this issue, IBM v. Visentin, 2011 WL 672025 (S.D.N.Y. Feb. 16, 2011), has just been affirmed by the U.S. Court of Appeals for the Second Circuit. In contrast to Aspect Software, the U.S. District Court for the Southern District of New York found that the efforts of the employee and new employer in Visentin were sufficient to avoid any inevitable disclosure of IBM’s trade secrets; its denial of IBM’s request for a preliminary injunction was affirmed by the Second Circuit on November 3, 2011.
Even by trade secret litigation standards, the Visentin case has moved at warp speed: On Jan. 19, 2011, Giovanni “John” G. Visentin, a general manager at IBM, announced his intention to leave IBM to work for HP. Although Visentin offered to remain at IBM for a reasonable transition period, IBM declined that offer and instead immediately sent someone to his home to retrieve his laptop. The next day, IBM filed a complaint alleging breach of his non-compete and misappropriation of trade secrets, and moved for a preliminary injunction. U.S. District Court Judge Loretta Preska held a four-day hearing beginning on February 11, 2011 and issued a comprehensive 61-page opinion on February 16, 2011 denying IBM’s request.
Essentially, Judge Preska rewarded Visentin and HP for their good behavior. The district court was persuaded that the steps taken by Visentin and HP would safeguard IBM’s interests. Those steps included not only directing Visentin not to share any IBM confidential information but also specifically structuring his new position to avoid any overlap with areas that he oversaw at IBM. In addition, Judge Preska found that as a general manager, Visentin’s exposure to IBM’s trade secrets was minimal and in the absence of misconduct by Visentin, IBM had not met its burden of showing that he would inevitably disclose the few trade secrets that he had.
Judge Preska’s decision also reinforces how an employer initially reacts to the news of the employee’s resignation may be an important factor when the district court balances the equities. In particular, Judge Preska emphasized IBM’s decision to refuse Visentin’s offer to remain at IBM and its refusal to discuss the new position with Visentin exacerbated the very emergency for which IBM sought the court’s assistance.  (For a more detailed analysis of Judge Preska’s decision, which includes the perceptive note that I included above, please see Weil’s reprint of an April 4, 2011 article in The New York Law Journal).
The Second Circuit simply affirmed Judge Preska’s opion with a summary order, concluding for “substantially the same reasons” in Judge Preska’s “thoughtful and well reasoned” opinion that she did not abuse her discretion.
The takeaway? It is difficult to completely reconcile the holdings in Visentin and Aspect Software, as the former employee and new employer implemented similar safeguards to protect the former employer’s trade secrets in both cases. Perhaps the difference in the roles and responsibilities of the respective employees may account for the different rulings, as well as the fact that they were issued by courts in different jurisdictions applying arguably different standards (New York and Massachusetts have not adopted the UTSA). Whatever the case, Visentin certainly stands for the proposition that good behavior, sound planning and methodical execution can save the day.