a. What arguments would support EarthWeb’s enforcement of the covenant not to compete?

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a. What arguments would support EarthWeb’s enforcement of the covenant not to compete?

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EarthWeb provided online products and services to business professionals in the information technology (IT) industry. EarthWeb operated through a family of Websites offering information, products, and services for IT professionals to use for facilitating tasks and solving technology problems in a business setting. EarthWeb obtained this content primarily through licensing agreements with third parties. Schlack began his employment with EarthWeb in its New York City office. His title at EarthWeb was Vice President, Worldwide Content, and he was responsible for the content of all of EarthWeb’s Websites. Schlack’s employment contract stated that he was an employee at will and included a section titled “Limited Agreement Not To Compete.” That section provided:
 
(c) For a period of twelve (12) months after the termination of Schlack’s employment with EarthWeb, Schlack shall not, directly or indirectly:
 
(1) work as an employee… or in any other… capacity for any person or entity that directly competes with EarthWeb. For the purpose of this section, the term “directly competing” is defined as a person or entity or division on an
entity that is
 
(i) an online service for Information Professionals whose primary business is to provide Information Technology Professionals with a directory of third party technology, software, and/or developer resources; and/or an online reference library, and or
 
(ii) an online store, the primary purpose of which is to sell or distribute third party software or products used for Internet site or software development.
 
About one year later, Schlack tendered his letter of resignation to EarthWeb. Schlack revealed at this time that he had accepted a position with ITworld.com.
 
a. What arguments would support EarthWeb’s enforcement of the covenant not to compete?

EarthWeb provided online products and services to business professionals in the information technology (IT) industry. EarthWeb operated through a family of Websites offering information, products, and services for IT professionals to use for facilitating tasks and solving technology problems in a business setting. EarthWeb obtained this content primarily through licensing agreements with third parties. Schlack began his employment with EarthWeb in its New York City office. His title at EarthWeb was Vice President, Worldwide Content, and he was responsible for the content of all of EarthWeb’s Websites. Schlack’s employment contract stated that he was an employee at will and included a section titled “Limited Agreement Not To Compete.” That section provided:
 
(c) For a period of twelve (12) months after the termination of Schlack’s employment with EarthWeb, Schlack shall not, directly or indirectly:
 
(1) work as an employee… or in any other… capacity for any person or entity that directly competes with EarthWeb. For the purpose of this section, the term “directly competing” is defined as a person or entity or division on an
entity that is
 
(i) an online service for Information Professionals whose primary business is to provide Information Technology Professionals with a directory of third party technology, software, and/or developer resources; and/or an online reference library, and or
 
(ii) an online store, the primary purpose of which is to sell or distribute third party software or products used for Internet site or software development.
 
About one year later, Schlack tendered his letter of resignation to EarthWeb. Schlack revealed at this time that he had accepted a position with ITworld.com.
 
b. What arguments would support Schlack’s argument that the covenant is not enforceable?

EarthWeb provided online products and services to business professionals in the information technology (IT) industry. EarthWeb operated through a family of Websites offering information, products, and services for IT professionals to use for facilitating tasks and solving technology problems in a business setting. EarthWeb obtained this content primarily through licensing agreements with third parties. Schlack began his employment with EarthWeb in its New York City office. His title at EarthWeb was Vice President, Worldwide Content, and he was responsible for the content of all of EarthWeb’s Websites. Schlack’s employment contract stated that he was an employee at will and included a section titled “Limited Agreement Not To Compete.” That section provided:
 
(c) For a period of twelve (12) months after the termination of Schlack’s employment with EarthWeb, Schlack shall not, directly or indirectly:
 
(1) work as an employee… or in any other… capacity for any person or entity that directly competes with EarthWeb. For the purpose of this section, the term “directly competing” is defined as a person or entity or division on an
entity that is
 
(i) an online service for Information Professionals whose primary business is to provide Information Technology Professionals with a directory of third party technology, software, and/or developer resources; and/or an online reference library, and or
 
(ii) an online store, the primary purpose of which is to sell or distribute third party software or products used for Internet site or software development.
 
About one year later, Schlack tendered his letter of resignation to EarthWeb. Schlack revealed at this time that he had accepted a position with ITworld.com.
 
c. Which side should prevail? Explain.

Explanation & AnswerSolution by a verified expert

a. What arguments would support EarthWeb's enforcement of the covenant not to compete?

Explanation

The agreement was signed by both parties, Organization E and Individual S. Because of the signed agreement, Individual S is not allowed to work in the mentioned time frame and industry. This is because Individual S is capable of revealing Organization E's business secrets to competitor organizations.

Verified Answer

Organization E can argue on the basis that both the parties agreed by their own will and Individual S cannot work for competitor organizations since it may expose Organization E's business secrets.

 
 
 

b. What arguments would support Schlack’s argument that the covenant is not enforceable?

Explanation

Individual S is being appointed at Organization I for a position that is different than the position Individual S had at Organization E, which makes Individual S incapable of utilizing Organization E's business secrets.
Organization E is planning to rebuild its software infrastructure soon, which is going to result in a change in strategic planning for the organization. So, any prior knowledge about the same is going to be redundant after a little while.
In addition to this argument, Organization I plans to operate on more than 70% of original content, which focuses on target audience dissimilar to that of Organization E.

Sample Response

Individual S can argue that Organization I has a different target audience. Organization S uses more original content instead of acquired or licensed third-party content, which is primarily used by Organization E.
It can be mentioned that strategic planning becomes obsolete in the case of a dynamic content-based organization. It can be further added that Individual S is being welcomed at the new organization for a different role.

 
 
 

c. Which side should prevail? Explain.

Explanation

There is a need for Organization E to prove that the restriction they have put on Individual S is justified and is requirement to protect the legal interests of the organization. Non-competency can be pursued only if it is limited in scope and duration, such that it is done to prevent an employee from leaking the business secrets, to prevent the release of confidential client information, or in case the services of an employee are unique or extraordinary in nature. On applying these principles, it was found by the court that even if the position offered to Individual S falls within the parameters mentioned, Organization E’s restriction does not qualify the muster.
Given that the industry is ever-changing, the restriction duration of one year is very long. Along with this, the services rendered by Individual S at Organization E do not classify as unique and extraordinary and, therefore, do not cause Individual S’s replacement impossible or incurs damages that cannot be repaired or recovered.

Sample Response

Individual S’s arguments are going to win if the restriction put is not reasonable and is important to protect the legal aspects.
Organization E’s arguments are going to win if Organization E succeeds in providing proof that the services rendered by Individual S are of unique and extraordinary nature, the replacement of which is not possible or makes irrecoverable damage.

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