Putney, Twombly, Hall & Hirson LLP
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November 19, 2008

Trade Secrets and Restrictive Covenants

The protection of trade secrets and the requirement of employee covenants are protective measures companies increasingly are taking to protect against misappropriation, unfair competition, and solicitation of clients and current employees by former employees who now work for the competition.

Though popular lore dismisses the legal enforceability of employee covenants, it is manifestly clear that if the restrictions are reasonable in time, place and space, and are narrowly tailored to protect an identifiable company interest, they will be enforced through injunctive relief and damages. The increased movement of executives among competitive companies in recent years has spawned significant litigation in this regard.

Within the last month, two highly respected judges on the federal court in the Southern District of New York have issued injunctions in this area, one concerning the enforcement of trade secrets, IBM v. Apple, enjoining a former top IBM executive from working at Apple, and the other, Marsh v. Aon, enjoining a former executive of Marsh from violating his agreement not to solicit Marsh clients for a specified period. In Marsh, the judge termed the violations “flagrant” and awarded attorneys’ fees to Aon, unusual in these cases.

Our firm’s Practice Group in Trade Secrets and Restrictive Covenants is highly experienced and notably successful in advising companies concerning the creation of enforceable policies and procedures, as well as both enforcing and defending litigation cases in this regard.