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Massachusetts Court Upholds Non-Compete Agreement, Finding That Web Marketing Skill is Confidential Information

We have often commented that cases involving the enforceability of non-compete agreements are quite unpredictable, and often depend more on judicial philosophy than predictable legal principles. A Massachusetts federal court illustrated this point once again when it issued the first decision to hold that the skills involved in Internet marketing web site presentation are “confidential,” and therefore justify enforcement of a non-compete agreement.

NECX and ISN are both “virtual” computer superstores, marketing thousands of products over the Internet. Scott Randall, a General Manager at NECX, accepted a job as President and CEO of ISN. NECX sought to enforce a non-compete that Mr. Randall had entered into with NECX.

To enforce the agreement, NECX was required to argue that a non-compete should be enforced to protect either NECX’s “good will,” its “confidential information,” or both. In this case, Federal Judge Edward Harrington concluded that Mr. Randall had been exposed to highly confidential information relating to “this currently fast-emerging, even revolutionary, industry.”

At first, the judge’s decision seems almost reasonable. The judge held that Randall had become familiar with the computer programs used to “collect, organize, re-format and re-present” the information presented on NECX’s web site. However, the decision does not make clear whether these techniques are in any way proprietary, or are simply generally known approaches to web presentation. However, the coup de grace for Mr. Randall was a press release issued by ISN after Randall had become President, describing an upcoming redesign of the ISN web site. The press release stated that the ISN web site would now include features such as Subject Category, Power Search, Orders Status, Edit Account, What’s New and Hot Deals. In addition, the ISN web site would contain product specifications, as well as “pricing, shipping and inventory information.” Reading between the lines, it appears that the judge concluded that these aspects of web-based marketing were confidential. However, not only are the marketing features described above fairly standard, but ISN could have learned them simply by looking at NECX’s web site.

TLB Comment: We have often advised clients that whether a non-compete agreement is enforceable depends as much on the predisposition of the judge as the “facts” of the case. Some judges believe that these agreements restrict employee mobility and limit competition, and the courts then put a heavy burden on the former employer to justify enforcement. Others, such as Judge Harrington, seem almost predisposed to enforce these agreements. Judge Harrington seemed to reveal his true philosophy when he ended his decision by stating that it is in society’s “best interest to recognize and enforce agreements which were voluntarily entered into and accepted.” The judge noted the individuals should not be allowed to “disregard such promises.”

Another day and a different judge, and this case could easily have ended with the judge warning that non-compete agreements are disfavored, and should be enforced only when the former employer proves that the employee had access to bona fide information that qualifies as a trade secret or is confidential. Marketing techniques for the Internet which are widely known and easily learned by examining competitor sites do not rise to this level, and therefore enforcement would have been denied.