Agreements Without Borders: Court Enforces Worldwide Non-Competition Agreement
By: Lizzette Alameda Zubey
Can a worldwide non-compete agreement be enforced? Typically the answer is no because, in deciding, Courts consider whether the geographic scope and duration of non-compete clauses are reasonable. An agreement that forbids competition worldwide, of course, has no geographic limitation and, therefore, is usually considered unreasonable and unenforceable.
But in Estee Lauder Companies, Inc. v. Batra, 430 F.Supp.2d 158 (S.D.N.Y. May 4, 2006), the New York district court enforced an agreement that prohibited a former executive from competing anywhere in the world. The plaintiff, Estee Lauder, sells skin care, makeup, fragrances and hair care products throughout the world. The defendant, Shashi Batra, was the Global Brand Manager and the General Manager of the Estee Lauder brands “Rodan & Fields” and “Dauphin” and had access to many of the Plaintiff ’s trade secrets.
Batra signed an employment agreement with Estee Lauder that contained confidentiality, non-solicitation and non-competition provisions. The non-competition provision prohibited him from working for an Estee Lauder competitor for twelve months following termination in any geographic area for which he had work-related responsibility during the preceding twelve months.
Batra resigned from Estee Lauder and disclosed his new position as Worldwide General Manager of Perricone, a competitor of Estee Lauder. Even though the non-compete had a forum selection clause of New York, Batra reportedly told Estee Lauder that he did not believe the restrictions were enforceable in California, where his office had been located. Batra filed a declaratory judgment action in California asking the court to hold the agreement unenforceable. Estee Lauder, in turn, filed a temporary restraining order and preliminary injunction in New York to enforce the agreement and to prevent Batra from working for Perricone.
California has strong statutory and common law policies against enforcing restrictive covenants and California courts have, in the past, refused to enforce choice of law provisions that apply other states’ laws regarding non-competition. Application Group, Inc. v. Hunter Group, Inc., 61 Cal.App. 4th 881 (Cal. App. Ct. 1998).
Although the agreement between the parties said that New York law would govern, Batra argued that California law should apply due to the presence of significant contacts in California and California’s strong public policy against the enforcement of non-competition agreements. Batra resided in San Francisco at the time of the suit and throughout his employment with Estee Lauder and he carried out many of his responsibilities from California.
Regardless, in the New York Court’s opinion, that did not overcome the fact that the work he performed was not “centered” in California. Batra’s responsibilities for Estee Lauder covered all of North America for one brand and the entire world for the other brand and many of the significant functions for both brands were located in New York and involved employees and management that were predominately New York-based. The Court also noted that New York, as the “financial capital of the world,” had an interest in protecting companies doing business in the state. The Court concluded that California’s interest in protecting its employees was not greater than New York’s interest in protecting companies by enforcing non-competition agreements that are reasonable in geographic scope and duration.
The Court recognized that the geographic restriction constituted a worldwide prohibition. While the court noted that under some circumstances such a widespread restriction would be unreasonable, it found it to be reasonable in this case given Batra’s responsibilities and the international scope of Estee Lauder’s business. Moreover, the Court reasoned that the impact of the worldwide geographic scope on Batra was negligible since Estee Lauder had contracted to pay Batra his salary during the non-competition period.
However, the Court found the duration of the restriction, twelve months, to be unreasonable where Estee Lauder had previously waived enforcement of the full term of other similarly situated employees and had offered to reduce Batra’s restrictive period to four months if he remained with Estee Lauder for a month. As a result, the Court reduced the period of enforcement to five months.
This decision is a good reminder that clients with key employees in California should take proactive measures to guard against the state’s strong public policies. Before entering into restrictive covenants in any state, employers and employees alike should seek legal advice on forum selection and enforceability.
Ask the Attorney: Unraveling the Mystery of IP Symbols
When can I use the ® symbol with my trademark?
The ® can be used only after a federal trademark registers with the United States Patent and Trademark Office (“USPTO”). The ® symbol should only be used in connection with the goods or services that are recited in the certificate of registration. Use of the ® symbol prior to the issuance of a certificate of registration may result in a loss of rights in the mark, though this result is rarely enforced. Many countries have similar rules, so if your products are sold outside of the U.S., you should verify your use of the symbol complies with local laws.
What is the “TM” symbol?
The TM symbol can be used as soon as you start using your trademark, though we recommend you first conduct a trademark clearance search to verify you are not infringing another company’s trademark rights. The TM covers both goods (e.g. hammers, stereos, frozen vegetables) and services (e.g. construction services, retail store services and restaurant services). It is not necessary that a federal trademark application be on file before use of the TM symbol begins. The significance of the TM symbol is that it places others on notice that the producer of a good or the provider of a service is using a designation as a trademark.
What is the difference between the “TM” and the “SM” symbols?
The provider of a service, such as a restaurant owner,may choose to use the “SM” symbol to identify that its trademark is being used exclusively with services. It is not necessary to use the “SM”, but some people prefer the impression it gives.
When should I use the © copyright notice?
The use of the © symbol on works of original authorship (e.g. a book, pamphlet, brochure, painting, etc.) is no longer compulsory in the United States. Regardless, a copyright notice should be used whenever a work is published or distributed to others. It can help ward off a claim of innocent infringement and alerts others that you are aware of your rights. The user of a © copyright notice is not required to have a federal certificate of copyright registration. A proper copyright notice follows the following format: Use of either the “©” symbol, the word “Copyright,” or the abbreviation “Copr.”, followed by the year that the work was first published and concluded with the name of the copyright owner, such as:
© 2006 Lewis and Roca LLP. All rights reserved.
Copyrights contain several distinct rights that are separately assignable, so the use of the “all rights reserved” phrase notifies readers that you are claiming each of the “copy” “rights.”
One on One with Lizzette Alameda Zubey
Who are your greatest competitors?
My greatest competitor is myself. I am my worst critic, but in a good way. I am always trying to improve my skills and be a more virtuous person.
What is your favorite saying?
It is not a saying, but a word: “Perseverance” has been my motto. Coming from very humble beginnings, overcoming many challenges and having to work hard for what I have and all that I have become is, in short, the story of my life. When I look back on my journey, I know that I have persevered.
What is your favorite sport to watch?
Every Friday night from late August through early November, I enjoy watching my husband coach high school football.
Favorite part of your job?
I enjoy getting to know our clients and their industries.
What is your favorite meal?
Traditional Puerto Rican meals remind me of my childhood and are my comfort foods. My favorite meal is arroz con gandules (rice with pigeon peas), pernil (pork roast), and tostones (fried plantains).
What is the best part of being a parent?
There are so many great things about being a parent. One of my favorites is when my ten-month old son greets me with that big, half-toothed smile of his. Whether it is first thing in the morning or at the end of a full workday, I feel uplifted when I see his smile.
Quickie Techie Tips – Time to Hijack Another Domain Name!
Every day companies’ domain names are targeted for hijacking. Many lose control over their domain names and as a result the corresponding e-mail addresses as well. For many companies this can lead to massive damage. How does this happen? Organized criminal groups and hackers target a company’s main domain name and attempt to “hijack” the account and transfer the domain name to their control. Sometimes companies are able to stop this theft in the process, other times they are not. There are several ways for your company to reduce the likelihood of being attacked.
First, become knowledgeable about this subject. Read the Domain Name Hijacking report produced by the Internet Corporation for Assigned Names and Numbers’ (ICANN) at www.icann.org. Second, review your company’s domain name portfolio including all registrant information, domain name expiration dates, and the Registrar with whom the domain names are registered. Also, make sure the company, and not an individual within the company, is listed as the owner of the domain names. This applies to the contact e-mail addresses used as well – they should be generic company addresses and not the address of any one employee. Third, identify the top echelon of domain names your company must protect and ensure each is locked from transfer and registered via a Privacy or Proxy Service (i.e. your company’s information will be replaced with “proxy” information). Doing so will make it harder for a domain name hijacker to gain access to critical information about your company that is publicly posted in the WhoIs Database and make the domain name less susceptible to hijacking.
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