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Payment All. Int'l, Inc. v. Ferreira - 530 F. Supp. 2d 477 (S.D.N.Y. 2007)

Rule:

Factors which guide courts in making a determination that there is a risk of disclosure of trade secrets include, but are not limited to: (1) the extent to which the new employer is a direct competitor of the former employer; (2) whether the employee's new position is nearly identical to his old one, such that he could not reasonably be expected to fulfill his new job responsibilities without utilizing the trade secrets of his former employer; (3) the extent to which the trade secrets at issue would be valuable to the new employer; and (4) the nature of the industry and its trade secrets.

Facts:

Plaintiff former employer sued defendant former employee, alleging breach of contract, breach of the duty of good faith and fair dealing, misappropriation of trade secrets, unfair competition, unjust enrichment, and breach of fiduciary duty due to his resignation and subsequent employment with a direct competitor. Pursuant to Fed. R. Civ. P. 65, the employer moved for a temporary restraining order against the employee. The employer was a provider of electronic payment processing services. The employee, whose job resulted from the acquisition of another entity, signed an agreement to refrain from working for a competitor within two years of leaving the employer. Prior to his resignation, the employee was promoted to a senior position overseeing the development of a new software application. 

Issue:

Were there sufficient grounds for the employer’s motion to preliminarily enjoin the employee from disclosing trade secrets and other proprietary and confidential information to his new employer?

Answer:

Yes

Conclusion:

In granting the Rule 65 motion, the federal district court found that, absent a preliminary injunction, the employer would suffer irreparable harm due to the likelihood that the employee would disclose trade secret information to his new employer. In particular, the court found that the employee was knowledgeable about the overall design of the employer's new and secret software application. The employee's new job with a competitor in a similar capacity created a risk that disclosure of the employer's trade secrets was inevitable. Further, it was likely that the employer would succeed on the merits of the suit since the noncompete covenant was enforceable, particularly as it was ancillary to the sale of a business, and the employee was barred only from working for a direct competitor and not from working in the credit industry.

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