Unlawful Competition

Question 1

Areas of law that unlawful competiton deals with

Answer 1

can raise both tort and contract issues, injunctions, and specific performance

Question 2

Scope of unlawful competition

Answer 2

• covers a wide variety of inappropriate business activities:
  
  • passing off your product as that of another
  • interfering with existing business relationships
  • most common: employees (unfair competition)

Question 3

2 bases of unfair competiton actions against former employee

Answer 3

• common law fiduciaty obligation (tort)
• employment contract violations (contract)

Question 4

common law fiduciary obligation (tort)

Answer 4

• must be a faithful employee during and for some time after leaving the employer
  
  • e.g. former employee uses confidential information to gain advantage against former employer, such as a customer list
• 2 characteristics of confidential information (trade secrets) in this context:
  
  1. confidential and otherwise unavailable publicly
  2. gives owner a competitive advantage

Question 5

employment contract violations (contract)

Answer 5

• noncompete clauses
• if the restrictions are reasonable, court may reward equitable relief
• court can issue injunction/specific performance, because damages will be speculative

Question 6

3 factors when deciding equiable relief for unfair competition

Answer 6

• employer’s legitimate interest in protecting its business
  
  • e.g. specialized training
• employee’s fair opportunity to accept jobs in the industry
  
  • can’t prevent employee from building a career.
• interest to the public

Question 7

How courts decide whether to impose an equitable restriction for unfair competition

Answer 7

courts look at the entire package of restrictions, if taken together, to determine if restriction should be upheld under equity

Question 8

How to tackle an unfair competition question

Answer 8

Start by noting that the courts do not favor restrictions, and then consider the 3 aspects:

1. the specific job duties prohibited
   
   • do they go beyond employee’s actual duties to employer?
2. the geographic limit of the restriction on competition
   
   • is the limit appropriate to protect the employer’s business?
3. the duration of the restriction
   
   • in general, 1-2 years is reasonable
   • 5 years has never been upheld.

Question 9

Unfair Competition restrictions

blue penciling rule

Answer 9

• Court will not amend an unreasonable restriction.
• The court will strike down the agreement instead of amending the infeasible provisions