New York Judge Rejects IBM Non-Compete Agreement

New York Judge Rejects IBM Non-Compete Agreement

On January 19, 2011, Giovanni Visentin informed his employer, IBM, that he was resigning to work for Hewlett-Packard.  The next day, IBM filed suit against Visentin seeking to enforce the non-compete agreement between Visentin and IBM.  Many companies like IBM operate under the misconception that in exchange for providing their employees with compensation and benefits, the company is entitled to create barriers or disincentives for those employees considering a departure.  In fact, courts in most states recognize the anti-competitive nature of non-compete agreements, and will carefully weigh requests to enforce such covenants.  On the one hand, courts recognize a company’s need to protect its confidential and trade secret information to foster innovation and encourage development.  On the other hand, courts consider the employee’s right to work and seek employment in the area where the employee has obtained skill and experience.  The majority of states will only enforce a non-compete agreement to the extent necessary to protect the company’s legitimate confidential business interest, such as a trade secret.

In International Business Machines Corp. v. Visentin, Case 11 cv 399, Judge Loretta Preska of the U.S District Court for the Southern District of New York ruled against IBM and denied its motion for a preliminary injunction to prevent Visentin from working for HP for one year.  The court specifically noted that IBM’s fact witnesses “failed to provide specific examples of confidential or trade secret information that could actually be used to IBM’s detriment if Mr. Visentin were allowed to assume his new position at HP.”  Judge Preska also noted that some IBM employees who worked with purported trade secret information were not bound by any non-compete or confidentiality agreements, weakening IBM’s claim that it took reasonable measures to maintain confidentiality.  The judge also took note that an IBM employee testified that the non-competition agreements are “retention devices” intended to pressure IBM’s employees from leaving their jobs.  Given these findings, it is hardly surprising that Judge Preska refused to take the extraordinary step of enjoining a former employee from working for a competitor for an entire year.  The Visentin opinion strongly emphasizes the need for companies to narrowly tailor their non-compete agreements to insure that they are limited in scope to genuine trade secret and confidential information, and serve to protect the company’s legitimate business interest, rather than to keep employees from leaving the company.