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PSC Inc. v. Reiss - 111 F. Supp. 2d 252 (W.D.N.Y. 2000)

Rule:

In cases that do not involve the actual theft of trade secrets, where a plaintiff seeks to preclude an employee from taking a position with a competitor, a court is essentially asked to bind the employee to an implied-in-fact restrictive covenant based on a finding of inevitable disclosure. This runs counter to New York's strong public policy against such agreements and circumvents the strict judicial scrutiny they have traditionally required. Indeed, in post-employment disputes that do not involve trade secrets or tortious conduct on the part of the employee, restrictive covenants may not be implied.

Facts:

Plaintiffs PSC, Inc. and PSC Scanning, Inc. (PSC) seek a preliminary injunction barring one of its former salesmen, defendant Martin J. Reiss (Reiss), from working for a competitor, defendant Optimal Robotics Corporation (Optimal), at least until February 2001. PSC also seeks related relief including an injunction precluding Reiss from disclosing any trade secrets or confidential information to Optimal that he obtained while employed at PSC. Although PSC appeared to concede that it has no evidence that Reiss has disclosed confidential information, it contended that such disclosure will inevitably occur in the future as the latter performs his duties for his new employer.

Issue:

Can plaintiff preclude its former employee from working for a competitor, notwithstanding lack of a noncompetition covenant to be enforced against the employee?

Answer:

No.

Conclusion:

The court declined to grant PSC any injunctive relief because PSC ailed to meet the rigorous requirements for obtaining such relief. A remedy barring a person from working in his chosen field or profession was generally disfavored, except in the most unique circumstances. It was significant that plaintiff had not required a covenant not to compete in this specific circumstance, when it easily could have. In his prior contract, individual Reiss already had agreed not to disclose any confidential information. Reiss was a salesman who sold the product as built with little knowledge of how it worked. It was unclear that he even possessed secret knowledge, let alone intended to reveal it.

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