Injunctions to Protect Business Interests

Covenant not to compete—disfavored restriction on trade

Requirements—must be viewed together, in context (e.g., longer covenant more reasonable if limited in scope; broader covenant more reasonable if shorter in duration)

Covenant not to compete - Reasonable geographic scope and duration

—scope must be limited to area where employer has legitimate interest that needs protection; in DE, two years is generally reasonable, but longer durations may be okay if rest of agreement is narrow enough

Covenant not to compete - Continued

• Legitimate economic interest—e.g., protecting confidential information or employer goodwill

• Balancing of equities—DE courts will not enforce if, on balance, it would subject employee to unusual hardship

All or none enforcement

—DE courts hesitant to “blue pencil” overly broad agreements; more likely to refuse to enforce them entirely

Means of enforcement

—asking court to enjoin defendant from rendering services

Breach by party to be benefited

—if promisee guilty of material breach of contract, then promisor’s compliance with covenant can be excused

Non-compete agreement in sale of business

—subject to less scrutiny than noncompetes in employment contracts

Trade secrets

—actual or threatened misappropriation may be enjoined; under inevitable disclosure doctrine, threatened misappropriation may be enjoined if there is high likelihood of inevitable and immediate use of trade secrets

Misappropriation of right to publicity

—injunction may be available to prevent unauthorized use of celebrities’ likeness, name, or unique performance style