Antitrust Law Daily Wrap Up, ANTITRUST—6th Cir.: Non-disclosure restrictions on employee did not form unenforceable non-compete agreement, (Nov 18, 2015)

By Jeffrey May, J.D.

A non-disclosure agreement in an employment contract between a medical device maker and a former employee was not an unenforceable non-compete agreement under Texas law, the U.S. Court of Appeals in Cincinnati has decided in a not-for-publication opinion. The district court erroneously concluded that the non-disclosure provision formed a “lifetime non-compete clause” in violation of Texas law because it prohibited the former employee from using his general skills and knowledge without geographic or durational limits (Orthofix, Inc. v. Hunter, November 17, 2015, Merritt, G.).

Under the Texas Covenants Not to Compete Act, employers’ agreements prohibiting employees from using general knowledge, skill, and experience acquired in their former employment are generally prohibited if they do not contain geographic and durational limitations. Because the disputed non-disclosure provision protected the device maker’s confidential information, and not the former employee’s general knowledge, the provision was not a non-compete agreement under Texas law that was unenforceable for lack of geographic and durational limits.

The appellate court explained that the former employee breached the non-disclosure provision of his contract when he joined a competing medical device maker and drew upon his knowledge of his former customers’ habits, schedules, and contact information in introducing the competitor's representatives to these customers. Thus, judgment in favor of the former employee on the medical device maker’s breach of contract claim was reversed. Because Orthofix demonstrated both the existence and breach of a valid contract under Texas law, the case was remanded to the district court for the calculation of damages.

This is Case No. 15-3216.

Attorneys: Michael J. Philippi (Nixon Peabody) for Eric W. Hunter. Michael A. Pollard (Baker & McKenzie) for Orthofix, Inc.

Companies: Orthofix, Inc.

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