Scenario 1: A Case Study
Dear
Issue I: Lawfulness of Competing against a Former Employer?
The resignation of Ron from Flush Ltd to found Amex Ltd to directly compete against a major client of his former employer will be lawful or not depending on three facts: (a) Is there an employment contract between Ron and Flush Ltd that explicitly includes a non-compete clause? (b) Is there a clause in the employment contract, which requires that Ron cannot enter into a business venture in a competitor company within a prescribed period after the date the resignation became effective? (c) Is Amex a direct competitor of Flush Ltd, considering that the product it sells is not a core product of Flush and even disapproved by the board of directors for manufacturing and distribution? Non-compete laws vary across States, some of which (e.g. Maryland) do not have a specific law on it. However, even in the absence of a non-compete law a State court may still review employment contracts to prevent the misuse of employer established clientele relationships, trade secrets, and customer lists, which is relevant to the Ron case (Breen, Morris, and Cosentino, 2011, p. 2). Under the Maryland jurisprudence, Ron may be liable legally due to his voluntary recognition provided, however, that there was a non-compete agreement between him and Flush Ltd, which is unclear in the case.
Issue II: Lawfulness of Contracting with a Client of a Former Employer?
The sales contract entered to by Ron’s Amex Plc was with a main client of Flush Ltd, effectively taking away this client, which will no longer deal with Flush thereafter. This situation brings up an important issue: (a) was the Amex Plc contract illegal in a since of stealing Flush’s main client Twinkle Plc using information that Ron obtained as a former employee of Flush Ltd? This issue is essentially related to Issue I (Breen, Morris, and Cosentino, 2011, p. 2).
Issue III: Lawfulness of Manufacturing an Abandoned Product Discovered by a Former Employer?
Amex manufacture of an abandoned but discovered superglue of Flush Ltd brings up two issues to resolve: (a) was the manufacture of the superglue by Amex tantamount to stealing a proprietary product information of Flush Ltd? (b) Did the refusal of the board of director to manufacture the superglue effectively and legally constitutes an abandonment of the product, freeing anyone, including Ron, to utilize the proprietary information about the product for personal business purposes?
The U.S. Department of Justice classified surreptitious misappropriation of highly protected trade secret from its owner (Flush Ltd) by a company insider (Ron) or by someone outside a company (Amex Plc) and used to benefit a competitor (Amex Plc), thus, constituting a theft of trade secrets (USDJ, 2013, p. 3, 5).
The contention, however, rests in the phrase “highly protected trade secret”, considering the fact that Flush Ltd has abandoned any plan to put the product into manufacturing, being a non-core product. This condition may not qualify the information as high protected or a trade secret. To be a trade secret, Flush Ltd must have taken “reasonable measures” (p. 5) to keep the superglue information secret. However, since it is known within the company that the board of directors abandoned this product, information about the superglue cannot be considered a trade secret; thus, can be legally appropriated by another (Amex Plc) for economic gain. However, Flush Ltd may still seek economic benefits from it to compensate for the cost in economic resources during the development of the product, which the court may likely grant.
Truly yours,
6.0 References
Breen, George B., Morris, Frank Jr. C., and Cosentino, Casey M. (2011) Non-Compete Laws:
Maryland. MD: Epstein Becker & Green.
U.S.D.O.J. (2013) Reporting Intellectual Property Crime: A Guided for Victims of Copyright
Infringement, Trademark Counterfeiting, and Trade Secret Theft. Washington, DC: U.S. Department of Justice.
Ackoff, R.L. (1990) Redesigning the Future. Systems Practice, 3 (6) pp. 521-524. (Ackoff, 1990,
p. 521)
Boselie, P., Farndale, E. and Paauwe, J. (2012) Performance Management. In: C. Brewster and
W. Mayrhofer, ed. Handbook of Research on Comparative Human Resource Management. Cheltenham, UK: Edward Elgar.
Creswell, John W. (2013) Research Design: Qualitative, Quantitative, and Mixed Methods
Approach. New York: Sage Publications.
Fishman, C. (1999) Engines of Democracy. Fast Company 30 September [online] [Accessed 12
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