1 PROTECTING CORPORATE ASSETS How to protect your company’s confidential information, trade secrets, goodwill and other intangible assets Presented By: David M. Cogliano , Esq. CVS Caremark [email protected]Stephen T. Paterniti, Esq. Sarah B. Herlihy, Esq. JACKSON LEWIS LLP [email protected][email protected]
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1 PROTECTING CORPORATE ASSETS How to protect your company’s confidential information, trade secrets, goodwill and other intangible assets Presented By:
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1
PROTECTING CORPORATE ASSETS
How to protect your company’s confidential information, trade secrets, goodwill and other intangible assets
lender, or in any other capacity whatsoever, engage in, become
financially interested in, be employed by or have any business
or professional connection with any business that competes with
the Company in the marketing and/or sales of commercial floor
cleaning services and products in ___________________
counties in Massachusetts, and
____________________________ counties in New York.
Provided, however, that Employee may own any securities of
any corporation which is engaged in such business and is
publicly owned and traded.
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Non-Compete – Most Narrow
Limitation of Practice; Non-competition: The parties
agree that Employer's business is local in scope and that
Employer would suffer serious damage and loss of
goodwill if, upon termination or expiration of this
Agreement or any renewal thereof, Employee competed
with Employer by providing veterinary services for clients
who reside within the practice’s trade area or currently
are regular clients of Employer. It is understood that the
restrictions contained in this Agreement are necessitated
in part because of the time, effort, and resources required
to acquire Employer’s business, its continued
development and maintenance, and in the event that
Employee’s relationship with the business is terminated,
the additional time and effort necessary to replace
Employee.
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Non-Compete – Most Narrow
Therefore, as a material inducement to Employer to enter
into this Agreement and pay Employee the compensation
and benefits offered, and in exchange for the professional
education, experience, and training to be obtained while
working for Employer under this Agreement, Employee
agrees that during the period of this Agreement and any
renewal thereof, and for a period of two years after
Employee ceases to be employed by Employer for any
reason, Employee will not:
26126
Non-Compete- Most Narrow
(a) render, offer to render or attempt to render veterinary
services for,
(b) serve as an independent contractor for,
(c) own, manage, operate or control,
(d) be employed by, participate in or have an interest in,
or
(e) be connected in any manner with the ownership,
management, operation or control of,
27127
Non-Compete – Most Narrow
Any business or profession, including that of a mobile
practice, engaged in veterinary services similar in scope
to those provided by Employer within a ________air-mile
radius of Employer's practice location(s) during the
twenty-four (24) month period immediately preceding
Employee’s last date of employment.
Employee acknowledges that the following is a non-
exhaustive list of practices/entities covered by this
restriction:________________
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Additional Provisions
There are certain provisions that should be considered:•Consideration, describe consideration provided at time of initial hire, consider a clause providing that additional consideration is not needed despite changes in position, compensation, responsibilities, etc. •Consider a tolling provision: time for non-solicit/non-compete is tolled during the period of any breach•Provision clarifying that the agreement supplements, rather than replaces, statutory and common law obligations (e.g., trade secret law)•Provision requiring employee and permitting employer to show agreement to potential subsequent employer•Agreement should apply to subsidiaries/ affiliates/ successors/ assigns•Provision reflecting intent to enforce and “blue pencil” if necessary
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Additional Provisions
• Provision defining the confidential information/trade
secrets at issue
• Provision restricting the jurisdiction/venue for
enforcement (including any claim by employee for
declaratory judgment)
• Consider adding arbitration provision if confidentiality
is a real concern (including right to expedited
discovery and relief)
• Provision permitting a new employer or former
employer to “buy out” of their restrictive covenant (“pay
to play”)
• Provision providing employee with compensation
during the restricted period (“garden leave”)
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Additional Provisions – Remedies
Remedies may also be spelled out in an agreement:
•Irreparable Harm - acknowledges that breach will cause
and entitle employer to seek and obtain injunctive relief
•Attorneys’ Fees - if the employee is found to have
breached the agreement, employee pays the cost of
establishing the breach and otherwise enforcing the
agreement, including the cost of any investigation
•Forfeiture - conditions the receipt of certain
benefits/compensation (particularly deferred
compensation) on the promise of non-competition
•Liquidated damages - may simplify enforcement and
litigation
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HIRING A RESTRICTED EMPLOYEE
32132
The Flip Side – Considerations When Hiring A Restricted Employee• Employees have common law obligation regarding
former employer’s confidential information, irrespective
of whether they have a restrictive covenant with their
former employer
• Employers need to protect against violation of
restrictive covenants and inadvertent “infection” with a
competitor’s confidential information
• “It’s not the crime – it’s the cover-up” – courts act in
equity when issuing injunctions for violations of
restrictive covenants. Conduct such as hiding
information, destroying documents, deleting files are
bad facts for the former employee/new employer.
33133
Acknowledgment of Obligations ClauseI acknowledge that I have informed the Company of, and
agree to provide to the Company a copy of, any
restrictive covenants my former employer may believe or
claim exists between me and my former employer. I have
also been instructed by the Company not to use,
disclose, upload or otherwise bring to the Company any
of my former employer’s confidential information or trade
secrets.
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ENFORCEMENT, BRIEFLY
35135
Two Sides Of The Argument
Presumably, no employer wants to steal another
company’s legitimate trade secrets, but there is a tension:
•Former employers want to protect their information and
relationships when an employee leaves
BUT
•New employers want to leverage an employee’s “tool
box” of knowledge and the new employee’s “personal
relationships”
36136
Initial Strategy Issues
Former Employer•What is the employer’s
largest concern? Goals?
•Initial fact gathering
critical.
•Identify trade
secrets/confidential
information at issue
•Any “bad” conduct?
New Employer•Taking the “high road”
early on may minimize risk
(e.g., limit work done by
new employee)
•Proper onboarding may
also minimize risk
37137
Legal And Strategy Issues
Initial handling of trade secret or restrictive covenant
issues often focuses on attempts to get leverage through
legal arguments, including:
•Testing the enforceability of the contract, both as to
whether it is a valid contract and whether it is being
enforced too broadly
•Challenging whether there is a legitimate interest at