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TRO Denied Even Though Trade Secret Plaintiff Demonstrates Likelihood of Prevailing on the Merits

Marketing Werks v. Fox, Case No. 13-7256 (N.D. Ill. Oct. 11, 2013)(Judge Kendall)

Marketing Werks was denied a TRO against a former employee that started a competing company and attempted to procure the client that he was primarily responsible for working with while at Marketing Werks.

Fox had worked for Marketing Werks as a senior account executive and was primarily responsible for the Indy Racing League (“IRL”) account.  In this role, he was privy to Marketing Werks’ strategic plans for the IRL account.   Fox then left Marketing Werks and started his own company, in which he immediately bid for the IRL account.

Marketing Werks asserted a number of counts against Fox, including trade secret misappropriation.   The Court found that Marketing Werks was likely to be able to establish both the existence of a trade secret (its strategic plans, for example) and that Marketing Werks would also likely be able to prove that Fox misappropriated the trade secret.

However, the Court denied a TRO because the value of the IRL account could be established based on Marketing Werks with IRL.  In addition, the Court questioned the measures that Marketing Werks took to maintain its trade secret.  Finally, Marketing Werks did not immediately seek a TRO, which is often fatal.

Southern District Grants Limited Preliminary Injunction in Employment Case

Garon Foods v. Montieth, Case No. 13-214 (S.D. Ill. July 2, 2013)(Gilbert)

In a well reasoned and balanced opinion, Judge Gilbert of the Southern District of Illinois granted a much limited preliminary injunction in an employment case.

The facts of this case are that Garon is in the business of selling peppers to various cheese manufacturers.  It receives all (or nearly all) of its peppers from a single supplier.  Montieth had worked for Garon in selling peppers.  She then left of her own accord and went to work for the manufacturer.  Interestingly, Garon had no non-compete agreement with Montieth, but she did sign an agreement recognizing trade secret protection in the identity of Garon’s supplier, the sales terms that Montieth had negotiated with customers in the past, and other items.

Judge Gilbert granted Garon a limited preliminary injunction prohibiting Montieth from soliciting business from any cheese manufacturer she had attempted to solicit for Garon in the twelve months prior to her leaving Garon, but for a limited period of only 8 additional months. She is also enjoined (apparently permanently) from mentioning to any cheese manufacturer that she knew to be a customer of Garon’s during her employment that her present employer supplies Garon.

2nd District Applies Blue Pencil to Save Overbroad Non-Compete Agreement

Saddlers Row v. Michael Dainton, Case No. 2-12-1941, Slip Op. (Ill. App. 2nd Dist. Apr. 23-2013)(Mullen)

In this case, Saddlers Row had employed Michael Dainton – a master saddler.  As a condition of his employment, Dainton executed a non-compete agreement that prohibited him from working for a competitor for two years within 75 miles of Saddlers Row.  After working for Saddlers Row for a number of years, Dainton went to work for a competitor a mere 7 miles away.  Saddlers Row sued.

The trial court had determined that Saddlers Row had a legitimate business interest in its near permanent relationships with its customers, and that the two year term was reasonable.  However, the trial court struck the non-compete due to the 75 mile radius being blatantly excessive.  The trial court also refused to modify the non-compete, so as not to encourage employers from attempting to impose overly large areas where employees could not compete in the future.  Accordingly, the trial court refused to enter a preliminary injunction.

The appellate court overturned as it determined the trial court abused its discretion in not modifying the geographic area of the non-compete to make it enforceable.  On remand, the trial court was ordered to enter a preliminary injunction against Dainton.

One important factor that the appellate court considered was that Dainton understood and had agreed to the provision when he entered Saddlers Row’s employ.  In addition, Dainton was not fired, but rather decided to leave Saddlers Row to go work for a competitor that he knew was within the geographic range of his non-compete.

Non-Compete Agreement Found Unenforceable

Fisher/Unitech v. Computer Aided Technology et al., 13-CV-2090, Slip Op. (N.D. Ill. Apr. 9, 2013)(Tharp)

In this case, Fisher/Unitech sought to enforce a non-compete agreement against a former salesman who had left to join Computer Aided Technology.  The Court ultimately determined that Fisher/Unitech had no legitimate business interest to protect, as all of the allegedly confidential information that it sought to protect from disclosure involved training and experience that its salesman had obtained by working at Fisher/Unitech.  As this was “generalized knowledge and experience” it was not actual trade secrets, and could not comprise a legitimate business interest.

Interestingly, the Court also pointed out that the non-compete agreement was “clearly overbroad.”  In particular, the Court attacked the geographic restriction, which would have included territory that Fisher/Unitech did not compete in, as well as the fact that it covered “generalized knowledge and expertise.”  Also interestingly, the Court did not view the fact that the employee in question apparently admitted to misappropriating true trade secrets as  a sufficiently bad act to enforce the non-compete.