On September 7, 2007, the Illinois Appellate Court for the Second District issued an opinion on the enforceability of non-competition agreements and the applicability of the Illinois Trade Secrets Act. In Stenstrom Petroleum Services Group, Inc., v. Robert Mesch, Case No. 07-CH-366 (2d Dist. Sept. 7, 2007), Stenstrom Petroleum sued Robert Mesch and his then-current employer, Precision Petroleum, for an alleged breach of a covenant not to compete and an alleged violation of the Illinois Trade Secrets Act. When Stenstrom hired Mesch as an estimator and project manager, he signed a non-competition and confidentiality agreement. Mesch resigned after working for Stenstrom for 3 years and went to work for Precision Petroleum, one of Stenstrom’s competitors as an estimator and project manager.
The trial court issued an injunction enforcing the covenant not to compete. On appeal, the appellate court affirmed. The Court noted that the non-competition provision limited the period of non-competition to six months and the geographical limitation to just two counties in Illinois. This was the geographical area of Stenstrom’s operations. The provision also limited the type of work Mesch could not perform to “excavation and equipment repair work,” the type of work Stenstrom performed and for which Mesch estimated and managed projects.
However, the trial court denied the motion for an injunction on the alleged breach of the Illinois Trade Secrets Act. According to the Court, trade secrets are a protectable interest, if the information is sufficiently secret to give an employer a competitive advantage and if the employer took affirmative measures to prevent others from acquiring or using the information. Stenstrom contended that the information revealed Stenstrom’s material costs, labor costs, profit margins and future bids. The appellate court disagreed with Stenstrom, ruling that this information was not sufficiently secret to give Stenstrom a competitive advantage. For example, Mesch could reproduce some of the information from memory. Other information was readily available from manufacturers, such as part numbers, quantities, list prices, discounts, markups, and labor hours. Regarding discounts, the court ruled that the mere knowledge of a profit desired by an employer does not constitute a trade secret. Therefore, the appellate court affirmed the trial court’s refusal to issue injunctive relief in favor of Stenstrom and against Mesch for an alleged violation of the Illinois Trade Secrets Act.
Alan M. Kaplan recommends that employers review their non-competition agreements to ensure their enforceability. Such agreements should have limits regarding the time and geographic scope of the former employee’s obligation not to compete with his former employer. These time and scope restrictions should be reasonable in relation to the company’s industry and geographic area of its customers and operations. More importantly, employers need to understand that a court will not find that all of the information considered confidential will be found to be confidential. The information must rise to the level of information that is sufficiently secret to give the employer a competitive advantage. An employer seeking to obtain injunctive relief needs to provide proof of the competitive advantages it has from the information and that it has taken steps to keep the information confidential. To ensure success in court, employers should audit their non-competition and confidentiality agreements as well as the steps they take to keep the information confidential.