Delaware Non-Compete Law Blog

www.delawarenon-competelawblog.com

News and updates on Non-Competition Agreements, Restrictive Covenants, Unfair Competition and Trade Secret litigation in Delaware.

Recent Blog Posts

  • EXTRATERRITORIALITY NOT A BASIS FOR DISMISSAL OF TRADE SECRET MISAPPROPRIATION CLAIM Parties alleging state law trade secret misappropriation often feel compelled to identify a specific state statute as the basis for their claim, but that identification is unnecessary in the Delaware courts. The Delaware Court of Chancery has recently made clear that a claimant asserting a state law trade secret misappropriation claim need not identify the specific state law or statute that was allegedly violated. In Dow Chem. Co. v. Organik Kimya Holding A.S., C.A. No. 12090-VCG (Del. Ch. May 25, 2018),... More
  • CONSIDERATION COUNTS: COURT NIXES NONCOMPETE ENFORCEMENT BECAUSE EMPLOYER CANCELLED BONUS PLAN When determining the enforceability of a covenant not to compete, Delaware courts typically spend most of their time analyzing whether the scope of the restrictions are reasonable and necessary to protect a legitimate business interest, and also whether the balance of harm favors enforcement.  It is important to remember, however, that covenants not to compete are contracts and thus are subject to fundamental principles of contract law.  A recent Delaware Court of Chancery decision highlights the importance of fulfilling your contractual... More
  • YOUNG CONAWAY FORMS NEW TRADE SECRET AND EMPLOYEE MOBILITY PRACTICE Young Conaway Stargatt & Taylor, LLP recently unveiled the formation of its Trade Secret and Employee Mobility practice.   Our practice is comprised of a team of intellectual property, employment, corporate, and business litigation specialists who have a wide range of experience with internal investigations, employee mobility counseling, and prosecuting and defending expedited cases in various courts in and around the Mid-Atlantic region, including the Delaware Court of Chancery, Delaware Superior Court and District Court for the District of Delaware. The primary areas of the practice will include: Prevention of... More
  • WHAT LAW APPLIES TO YOUR NONCOMPETE? DELAWARE COURT UPHOLDS PARTIES’ CHOICE OF LAW PROVISION Enforcement of noncompete agreements is typically governed by state law, so knowing which state’s law applies is an important question both for drafting and enforcement purposes.  Knowing what law will apply is particularly relevant if any of the parties are located in states which disfavor or even refuse to enforce noncompete agreements (think California).  A recent decision from the Delaware Superior Court may add clarification whether businesses can utilize choice-of-law provisions to increase the enforceability of their noncompete agreements. A Delaware choice-of-law provision provides... More
  • MITIGATING THE RISKS OF HIRING AN EMPLOYEE WITH A DELAWARE NONCOMPETE The use of employee covenants not to compete – once restricted to salespeople and high-level management – has continued to expand into the ranks of ordinary employees. A recent survey suggests that as many as one in five employees have some form of agreement placing restrictions on their post-employment activities. The growing prevalence of such agreements – and their potential restraint on job mobility and economic growth – has led many states to enact laws or propose legislation that would limit... More
  • DON’T LET THE METER RUN ON YOUR NON-COMPETE AGREEMENT When a key employee resigns, the question always asked is “what are your plans?” If the employee is subject to a non-compete agreement, the answer may not always be truthful, particularly if the employee plans to work for a competitor in violation of a non-compete restriction. This is why many employers wisely include a provision in their non-compete agreements which requires employees to disclose the fact that they are going (or intend to go) to work for a competitor.  But even... More
  • IS THE STIPULATED IRREPARABLE HARM CLAUSE IN YOUR COVENANT NOT TO COMPETE WORTH THE PAPER IT IS WRITTEN ON? Business agreements often contain a provision that provides the parties agree that a breach constitutes irreparable harm entitling the non-breaching party to injunctive relief to enforce the agreement.  These provisions are designed to protect the terms of the agreement and make it easier for the non-breaching party to secure an injunction while a claim is pending.  In Martin Marietta Materials v. Vulcan Materials, the Delaware Supreme Court held that contractual provisions as to irreparable harm suffice to establish that element for the purpose... More
  • USING NONCOMPETITION AGREEMENTS EFFECTIVELY: KNOW YOUR LIMITS IN DELAWARE The proliferation of the use of non-compete agreements was highlighted in a recent article in the New York Times (see, “How Noncompete Clauses Keep Workers Locked In”, May 13, 2017).  The article referenced a survey which concluded that about 20 percent of the American workforce was subject to some form of non-compete clause, and how these agreements are hurting employee mobility.  This explains why a number of states, including California and Utah, have banned or limited the use of such agreements, and... More
  • Delaware Chancery Court Blocks Former Exec’s Effort to Invalidate Noncompete in a Massachusetts Court When litigation involving the same dispute and parties has been commenced in two different venues, many courts adhere to the “first-filed rule” which provides that the litigation should be confined to the forum in which it is first commenced. This often results in a race to the courthouse by litigants seeking to have the dispute heard in their preferred choice of venue. Delaware courts, as a general matter, have followed this common law rule and allow judges broad discretion to grant... More
  • Court Applies Delaware Law to Noncompete Agreement and Refuses to Enforce Under “Employee Choice” Doctrine Most agreements not to compete provide for injunctive relief as the primary remedy against a departing employee who joins a competitor.  In some cases, however, companies will condition the payment of post-employment or deferred compensation on the employee’s compliance with a noncompete agreement.  These arrangements are often referred to as the “employee choice” doctrine. Under this doctrine, an employee who departs and subsequently violates his noncompete obligations will forfeit any right to the post-employment compensation. The doctrine is based on the premise that... More