Restrictive covenants can be valuable tools to protect your business. However, it is important to consider at the outset what interests you want and need to protect and what conduct would violate any restrictive covenant. If you don’t (or if you later decide that you want and need to prohibit additional or broader conduct), your restrictive covenants may not bar conduct that poses a competitive threat or triggers an emotional response. The recent federal case of Kissell, et al. v. Biosense Webster, Inc. (M.D. Fla.) (Case No. 12-cv-1569) provides an example of how companies will be stuck with the terms of the restrictive covenants they implement, and may not be able to broaden the protections those covenants provide in a credible way.

Kissell involved a dispute between Biosense and 3 former Biosense sales reps and their new employer, St. Jude. Biosense and St. Jude both sell non-implantable diagnostic and therapeutic products used to treat arrhythmias (“Afib Products”). However, St. Jude also sells implantable cardiac rhythm management devices such as pacemakers and defibrillators (“CRM Products”). The 3 former Biosense sales reps signed agreements that contained 2 restrictive covenants. First, the confidentiality clauses in their agreements prohibited them from working for a competitor in a position where they could use or disclose Biosense’s confidential information to disadvantage BIosense or advantage their new employer. Second, the “goodwill clauses” in their agreements prohibited them from selling competing products to customers with whom they had contact during the last year of their employment at Biosense.

After they resigned from Biosense to work for St. Jude, the former sales reps filed a declaratory judgment action seeking confirmation that their agreements do not prohibit them from selling CRM Products to anyone, or from selling Afib Products to new customers or to Biosense customers with whom they had no contact during the last year of their employment. Biosense counterclaimed and sought a preliminary injunction, arguing that the sales reps’ agreements prohibit them from selling CRM products to any Biosense customers and from selling Afib products to anyone.

The Court first examined the scope of the confidentiality clauses. It explained that, in order for information to fall within the scope of the clause, it must pose a genuine risk of affecting Biosense or St. Jude’s ability to compete. Examining the evidence Biosense presented, the Court observed that Biosense relied heavily on conclusory assertions about broad categories of information to which the sales reps had access at Biosense, rather than concrete examples of how particular information could be used to Biosense’s competitive disadvantage in the marketplace. As a result, the court determined that Biosense had failed to provide sufficient evidence to support the issuance of a preliminary injunction based on the confidentiality clause.

Next, the Court turned to the goodwill clause. The Court explained that, in order to demonstrate a violation of that clause, Biosense was required to demonstrate that the sales reps were selling competitive products to Biosense customers with whom they had contact during the last year of their employment at Biosense. Biosense, however, had failed to demonstrate that CRM Products compete with Afib Products but had instead introduced expert evidence that the products typically are not competitive, but complimentary. Additionally, Biosense failed to offer evidence to contradict the sales reps’ declarations that they had not promoted St. Jude’s Afib Products in violation of the clause and had in fact specifically told applicable customers that they could not discuss Afib Products because of their agreements.

As a result, the Court denied Biosense’s effort to obtain a preliminary injunction based on its broad interpretations of its restrictive covenants.

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