Is our confidentiality and trade-secret covenant enforceable in Minnesota, and what does it get us?
It is outside Minnesota's non-compete ban by the ban's own definition: 'A covenant not to compete does not include a nondisclosure agreement, or agreement designed to protect trade secrets or confidential information', and it does not include a nonsolicitation agreement or an agreement restricting the ability to use client or contact lists or solicit customers of the employer (Minn. Stat. § 181.988, subd. 1(a)). On remedies, the Supreme Court has held that trade secrets and confidential information are both subject to the same duty not to disclose, so once the information has become generally available 'the initial conduct is still wrongful and the employer is still entitled to relief for any injury suffered as a result of the wrongful use'; where a trial court finds that a defendant wrongfully took and used a plaintiff's confidential information, the court may in its discretion issue an injunction restraining the defendant from using and profiting from that information (Cherne).
The trap
The carve-out in § 181.988 is a statement about what the section does not void: it is NOT a statement that your NDA is enforceable, and nothing in the section supplies a duration, a definition of confidential information, or any standard of reasonableness. Minnesota's own trade-secret statute, the Uniform Trade Secrets Act at Minn. Stat. §§ 325C.01 to 325C.08, is NOT among the statutes available here, so this rule cannot quote the definition of a trade secret, the misappropriation standard, or any displacement provision: do not assume from this rule how the Act treats a contract claim. The remedy trap is timing: Cherne holds that injunctive relief based on a contract must generally be coextensive with the terms of the contract, so if the restrictive period of a covenant not to compete has expired an injunction will not be granted to enforce that covenant. The injunction in Cherne survived because it was a remedy for breach of the duty not to use confidential information, and the Court expressly did not decide whether it could have issued for the expired covenant.
6 authorities
- statuteMinn. Stat. § 181.988enactment date not established
The words that state the rule
(a) "Covenant not to compete" means an agreement between an employee and employer that restricts the employee, after termination of the employment, from performing: (1) work for another employer for a specified period of time; (2) work in a specified geographical area; or (3) work for another employer in a capacity that is similar to the employee's work for the employer that is party to the agreement. A covenant not to compete does not include a nondisclosure agreement, or agreement designed to protect trade secrets or confidential information. A covenant not to compete does not include a nonsolicitation agreement, or agreement restricting the ability to use client or contact lists, or solicit customers of the employer.
- case278 N.W.2d 81Cherne Industrial, Inc. v. Grounds & Associates, Inc.Minn.decided 1979read it at the source ↗
The words that state the rule
Where the information has, subsequent to the wrongful taking and use, become generally available, the initial conduct is still wrongful and the employer is still entitled to relief for any injury suffered as a result of the wrongful use. In Winston Research Corp. v. Minnesota Mining and Manufacturing Co., 350 F.2d 134 (9 Cir. 1965), the court of appeals upheld the district court’s granting of— “ * * * an injunction for the period which it concluded would be sufficient both to deny [the defendant] unjust enrichment and to protect [the plaintiff] from injury from the wrongful disclosure and use of [its] trade secrets by its former employees prior to public disclosure.” Id. at 142 . Since trade secrets and confidential information are both subject to the same duty not to disclose, see, Restatement, Agency (2d) § 396, the seme rule regarding remedies available when the information has become generally known applies.
- case278 N.W.2d 81Cherne Industrial, Inc. v. Grounds & Associates, Inc.Minn.decided 1979read it at the source ↗
The words that state the rule
Since the trial court determined here that defendants *93 had wrongfully taken and used confidential information of the plaintiff, the district court could, in its discretion, issue an injunction restraining defendants from using and profiting from that information.
- case278 N.W.2d 81Cherne Industrial, Inc. v. Grounds & Associates, Inc.Minn.decided 1979read it at the source ↗
The words that state the rule
We find that either, or both, of these bases justifies the 2-year injunction. Defendants argue that if the injunction was intended as a remedy for violation of the covenant not to compete, the issuance of the injunction after the expiration of the 2-year period of restriction in the covenant was improper. Generally, in-junctive relief based on a contract must be coextensive with the terms of the contract. See, e. g., Wagner v. A & B Personnel Systems, Ltd., 473 P.2d 179, 180 (Colo.App.1970). Thus, if the restrictive period of a covenant not to compete has expired, an injunction will not be granted to enforce the covenant.
- case278 N.W.2d 81Cherne Industrial, Inc. v. Grounds & Associates, Inc.Minn.decided 1979read it at the source ↗
The words that state the rule
Nevertheless, there may be situations where injunctive relief extending beyond the expiration of the period established by the covenant is appropriate. See, American Eutectic Welding Alloys Sales Co. v. Rodriguez, 480 F.2d 223 (1 Cir. 1973); Premier Industrial Corp. v. Texas Industrial Fastener Co., 450 F.2d 444 (5 Cir. 1971). Since we have determined that the injunction in this case could be issued as a remedy for a breach of the duty not to use confidential information, we need not decide whether this injunction could be issued as a remedy for the breach of the covenant not to compete.
- statuteMinn. Stat. § 181.988enactment date not established
The words that state the rule
Subd. 2. Covenants not to compete void and unenforceable. (a) Any covenant not to compete contained in a contract or agreement is void and unenforceable.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.