Non-Compete Not Enforced Because New Employer Does Not Qualify as a “Competitive Business.”

The Business Litigation Session in Suffolk Superior Court refuses to grant an injunction to prevent employee from new employer after finding the new employer does not qualify as a “competitive business” barred under the employee’s non-compete.

Commonwealth of Massachusetts, Superior Court

SUMMARY: (court decision – opens in PDF)

“Plaintiff Hyannis Port Research, Inc. (‘HPR’) commenced this action against a former employee, Defendant Christopher Gonzales (‘Gonzales’), alleging that Gonzales misappropriated trade secrets in violation of G.L.c. 93, §§42-42G (the ‘Massachusetts Uniform Trade Secrets Act’) (Count I), and breached the parties’ Non-Disclosure, Inventions Assignment, and Non-Competition Agreement (‘Agreement’) (Count II). HPR seeks damages and injunctive relief. HPR alleges that it employed Gonzales as a hardware engineer from January 2018 until his resignation on October 12, 2022. HPR further alleges that Gonzales resigned in order to work at Headlands Technologies LLC (‘Headlands’). The case is before the court on HPR’s motion for a preliminary injunction seeking to enjoin Gonzales from disclosing HPR trade secrets and from working at Headlands. …

“The non-competition provision in the Agreement provides that while Gonzales is associated with HPR, and for a period of one year following the termination of his employment, he ‘shall not participate, directly or indirectly, on [his] own behalf or as owner, stockholder, partner, director, officer, manager, employee, agent or consultant in any “Competitive Business.”’ …

“HPR seeks to enjoin Gonzales from revealing its trade secrets. Gonzales does not oppose the entry of such an order. However, HPR further seeks an order preventing Gonzales from working for Headlands on the grounds that it would violate the non-compete provision of the Agreement and/or the Massachusetts Uniform Trade Secrets Act. G.L.c. 93, §§42-42G. Gonzales disputes HPR’s assertion that Headlands is a ‘Competitive Business’ and opposes an order prohibiting him from working for the company. …

“Based on a careful consideration of the Verified Complaint, the parties’ memoranda and accompanying affidavits submitted in support and in opposition to this motion, and the testimony presented at the evidentiary hearing, the court finds that HPR has not met its burden of establishing that it is likely to succeed on the merits of its claim that Headlands is a competitive business within the meaning of the Agreement or that it will be irreparably harmed if Gonzales works for Headlands. … “The evidence does not establish that Headlands ‘provides’ any of the products or services for which Gonzales possesses trade secrets. …

“HPR further alleges in its motion papers that Gonzales threatened to disclose HPR trade secrets; however, there is no evidence to support this allegation either. Rather, Gonzales credibly testified that he is aware of his obligation to protect HPR trade secrets and that he has no intention of revealing them.

“Nevertheless, HPR argues that Gonzales should be enjoined from working at Headlands because his work there would result in inevitable disclosure of HPR trade secrets, causing irreparable harm to HPR. …

“… Although HPR has established that Gonzales possesses HPR trade secrets that could be used if Gonzales were to work on similar products at Headlands, since Headlands does not provide, sell, or market these products, the risk of harm to HPR is minimal at best. There appears to be no risk that anything Gonzales might improperly reveal at Headlands, whether intentional or inadvertent, would impact HPR’s standing in the marketplace. Moreover, since Andresen credibly testified that Headlands has no interest in HPR’s trade secrets, and Gonzales credibly testified that he knows that he cannot reveal any HPR trade secrets while working at Headlands, the court is satisfied that HPR’s legitimate interests in protecting its trade secrets can be accomplished without the broad relief it requests. To the extent that it is impossible to work on the same product without using HPR trade secret information, that risk can be assuaged by ordering Gonzales not to work on similar products, a restriction that Gonzales and Headlands do not oppose. Accordingly, HPR’s motion for a preliminary injunction preventing Gonzales from working at Headlands is denied.”



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