Judge Rips IBM’s Non-Compete Agreement

     MANHATTAN (CN) – A federal judge rejected IBM’s request for a restraining order to prevent a former employee from working for HP for a year. U.S. District Judge Loretta Preska found that IBM’s non-competition agreements are overbroad and designed as “retention devices” to prevent workers from leaving, rather than protecting trade secrets.




     Former IBM executive Giovanni Visentin notified IBM on Jan. 19 that he was resigning to work for Hewlett Packard. IBM sued the next day, to enforce a non-competition agreement restraining Visentin for working for its competitor for one year.
     U.S. District Judge Cathy Seibel granted a temporary restraining order on Jan. 24, until a hearing on a preliminary injunction. The case was transferred to Preska, who heard arguments for four days, starting on Feb. 1.
     In her Feb. 16 decision, Preska wrote that the “exhaustive four-day hearing” took place partly “in a closed courtroom to protect the confidentiality of what were said to be ‘highly sensitive’ IBM documents.”
     But, the judge wrote, “IBM has failed to carry its burden of demonstrating that the facts of the present case warrant granting the extraordinary relief requested” – a yearlong injunction.
     Preska found that Visentin did not have the education or expertise to know IBM trade secrets, as he was a general manager rather than a computer scientist.
     “My strength is not giving them technical knowledge. It’s really understanding,” Visentin had testified, according Preska’s ruling.
     IBM countered that the trade secrets they were concerned about involved strategic business and marketing plans.
     But the judge was not persuaded: “In a majority of the areas of information that IBM now seeks to protect as ‘trade secrets,’ IBM’s fact witnesses, Mr. Patrick Kerin and Ms. Emily McCabe, 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.”
     Calling the non-competition agreement “overbroad,” Preska found that it prevents Visentin “from working for a competitor in a business in which IBM does not even participate – for example, retail laptop and printer sales.”
     The judge noted that an IBM employee testified that the non-competition agreements are “retention devices” designed to pressure IBM workers from leaving their jobs.
     “(T)he testimony of the architect of IBM’s noncompetition program, Mr. MacDonald, indicates that IBM’s Noncompetition Agreement is designed not to protect a legitimate business interest but, rather, to keep the leadership talent of IBM from leaving,” Preska wrote.
     Although IBM did not request partial enforcement of the 12-month injunction, Preska added what she called a “coda” to her decision, to prevent IBM from seeking other relief.
     An employer can seek partial enforcement only if it “demonstrates an absence of overreaching, coercive use of dominant bargaining power, or other anti-competitive misconduct,” Preska wrote.
     “Thus, even if IBM were to seek partial enforcement, it would be unavailable.”
     Visentin’s attorneys declined to comment on the record.
Attorneys for IBM were on vacation and did not immediately respond to telephone inquiries.

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