As the debate continues in Massachusetts as to whether or not to ban noncompetition agreements, a related question remains: Is there really any value in having employees sign noncompetition provisions? As a recent decision by U.S. District Court Judge Denise Casper in Boston Scientific Corp. v. Dongchul Lee confirms, if an employer has valuable trade secrets and wishes to prevent employees from potentially sharing them with a competitor, the answer is a resounding “yes!”
In Boston Scientific, the defendant, Dongchul Lee, was a former Boston Scientific employee who had worked on a number of its projects, including Mechanism of Action (“MOA”) research related to spinal cord stimulation (“SCS”). While Dr. Lee had signed an employment agreement containing a non-disclosure provision and requiring him to return all Boston Scientific property upon termination of his employment, the agreement did not include a noncompetition provision (presumably because Dr. Lee worked in Boston Scientific’s Valencia, California office and noncompetition provisions are unlawful in California).
In November 2013, Dr. Lee resigned from Boston Scientific and went to work for Nevro, a competitor of Boston Scientific. Further, Dr. Lee’s work for Nevro included engaging in MOA research related to SCS that was extremely similar to that which he had undertaken for Boston Scientific. In addition, it later was discovered that Dr. Lee failed to return over 300,000 pages of Boston Scientific documents, some of which were expressly marked “Confidential.”
Boston Scientific sued, and the Court agreed to grant an injunction with respect to Dr. Lee’s use and disclosure of Boston Scientific’s trade secrets and proprietary information. The Court also ordered Dr. Lee to return all Boston Scientific property. While Boston Scientific also asked that Dr. Lee be enjoined from working for Nevro because it was inevitable that he would disclose to it the confidential and trade secret information that he possessed, the Court refused, stating that:
Although Boston Scientific has asked the Court to enjoin Dr. Lee’s employment at Nevro, the real harm that Boston Scientific faces absent injunctive relief is not bargained-for competition…, but rather the disclosure of information that could provide Nevro with an unfair competitive advantage.
As such, Boston Scientific is left to speculate whether Dr. Lee is using its trade secrets and proprietary information which may have been retained by Dr. Lee in intangible form, in his memory, for the benefit of Nevro. Interestingly, if Dr. Lee had been located in a state where non-competition agreements are enforceable, his employment agreement could have included a non-competition provision, which may have deterred Dr. Lee from seeking employment with Nevro.
In sum, unless and until non-competition agreements are banned in Massachusetts, employers should use non-competition agreements, where they are permitted by law to better protect trade secrets and confidential information and certainly business goodwill.