Header graphic for print
Trading Secrets A Law Blog on Trade Secrets, Non-Competes, and Computer Fraud

Illinois Federal Court Issues Preliminary Injunction Prohibiting Use Of Misappropriated Trade Secrets But Rejects Request For Expanded Injunction Based On Alleged “Inevitable Disclosure”

Posted in Non-Compete Enforceability, Practice & Procedure, Restrictive Covenants, Trade Secrets

A recent Illinois trade secrets and non-compete decision involving a 3D printing salesman serves as a reminder that some Illinois courts will scrutinze overly broad non-compete provisions and may limit injunctive relief to the territory that the employee actually serviced for their former employer. Fisher/Unitech, Inc. v. Computer Aided Technology, Inc., Case No. 13 C 2090 (N.D.Ill., 4/9/13).

Preliminary injunction granted.  The salesman signed an employment agreement containing confidentiality and non-compete provisions.  Subsequently, after accepting a position with a competitor, he allegedly misappropriated his former employer’s trade secrets and provided them to his new employer.  His former employer filed suit in an Illinois federal court.  On the plaintiff’s motion, the court entered a preliminary injunction barring the salesman, while the case was pending, from (a) using or disclosing his former employer’s confidential information in his former territory, and (b) selling his new employer’s competitive products or services to any customer or potential customer with whom he had contact during his previous employment.  But his former employer was not satisfied.

Expanded preliminary injunction denied.  The salesman’s non-competition covenant purported to apply, for two years after termination of his employment, anywhere within 200 miles from any office or territory of his former employer.  Relying on the “inevitable disclosure” doctrine and the terms of the covenant, his former employer asked the court to enter an expanded preliminary injunction prohibiting him during the pendency of the lawsuit from competing anywhere within that 200-mile area.  The court denied the request.     

Inevitable disclosure of what?  The inevitable disclosure doctrine provides that an employee who had access to the former employer’s confidential information invariably will make use of it, consciously or subconsciously, in the course of subsequent employment.  The judge asked the attorney for the former employer to describe what had been provided to the salesman, other than confidential information (which was covered by the existing injunction), that warranted protection.  The attorney’s response was: “field experience” and “on the job training.”  The judge concluded that this type of generalized knowledge is not subject to restriction and, therefore, the scope of the non-compete covenant was “greater than is reasonably necessary to protect the employer’s business interests.”  

 Unreasonable geographic area contemplated.  The 200-mile area referenced in the non-compete covenant extended far beyond the salesman’s territory and even into places where the former employer did not do business.  According to the court, there was no showing of a likelihood that the former employer would succeed on the merits, and no demonstration that irreparable harm would result, regardless of where the salesman competed for business while the litigation was pending, so long as the current preliminary injunction was not violated.

Blue-penciling.  Lastly, the judge considered “blue-penciling” the non-compete covenant to narrow it within reasonable confines.  Having found that the ex-employee “will not ‘inevitably’ disclose any information as to which [the former employer] has a protectable interest,” the court refused to blue-pencil.  

What this opinion teaches.  The judge seems to have had two reasons for refusing to expand the preliminary injunction’s territorial scope to coincide with the provisions of the non-compete clause.  First, the area purportedly encompassed by the clause was held to be too large, particularly because it dwarfed the salesman’s territory.  Second, the court held that the only relief the former employer needed and was entitled to during the pendency of the lawsuit was protection of its confidential information.  This second reason seems to have rendered the non-competition clause superfluous.  But confidentiality and non-compete covenants can serve quite different purposes.  For example, a former employer may be blind-sided by the sudden defection of one or more employees who immediately launch a sales blitz on behalf of the new employer, and in order to compete effectively the former employer may need some breathing room in order to recruit one or more replacements.  In the Fisher/Unitech case, perhaps a more expansive preliminary injunction would have been entered if the employment agreement had set forth carefully drafted, explicit and separate rationales for each of the two covenants.