A federal court in Michigan will allow a company’s claims that a former employee allegedly breached a non-competition agreement to proceed. Gene Codes Corp. v. Thomson, No. 09-14687 (U.S. Dist. Ct., E.D. Mich., S. Div., decided February 11, 2011). The company develops software to analyze DNA sequences and convert them into readable computer data. The employee worked at the company for about 10 years and “performed a variety of roles related to product development, sales and technical support.” Her responsibilities were reduced and her compensation was cut in half about a year before she left the company due to a corporate restructuring and the employee’s “lackluster” performance. In her final role as “global manager,” the employee worked in technical support with limited access to the company’s customer database.
The employee took a position with a competitor, which developed a different DNA sequencing software product, and her new job involved marketing and selling this product. She allegedly contacted 24 of her former company’s clients. The company sued her alleging that she violated state uniform trade secrets law and breached her employment agreement’s non-compete clause.
The court dismissed the trade secrets claims finding that no reasonable jury could conclude that the former employee misappropriated the company’s trade secrets because the company “failed to identify any particular customer list that Defendant could potentially misappropriate.”
The court allowed the breach of contract claim to proceed finding that “a material fact exists as to whether [the current employer] is a ‘direct competitor’ within the meaning of the non-compete clause.” The claim will be limited, however, with the court finding that the non-solicitation clause “is enforceable only as to customers that Defendant herself successfully solicited on behalf of Plaintiff or with whom Defendant had built up goodwill while working for Plaintiff.” The court also indicated that it was inclined to allow some limited additional discovery as to the interpretation of the term “customer” in the non-solicitation clause. According to the court, it was unclear whether entire institutions, individual departments or individual scientists were within the term’s ambit.