Channing Bete Co., Inc. v. Breenberg (29-cv-30032).

Channing Bete filed suit against Dr. Mark Greenberg for trademark infringement, tortious interference with business relations, and violations of non-compete and non-disclosure agreements. Dr. Greenberg jointly developed a curriculum for the social and emotional development of children, known as the “PATHS® Program,” in 1993. This curriculum was exclusively licensed to Channing Bete predecessor Developmental Research Programs, Inc., who registered the PATHS® trademark in 1995. Dr. Greenberg continued to develop the program, resulting in a “PATHS® Preschool/Kindergarten Program,” and jointly registered copyright in these developments. Channing Bete obtained exclusive rights to this program as well, and has since worked with Dr. Greenberg and the other authors to develop additional program-based materials to cover elementary-school children. Channing Bete partnered with a training organization run by Dr. Greenberg, “PATHS® Education Worldwide (PEW), to train purchasers of the PATHS® programs, and licensed PEW certain rights in the programs.

In the summer of 2014, Channing Bete decided to sell its rights in the PATHS® programs. They allege that Dr. Greenberg immediately began to interfere with its efforts to sell. According to the complaint, this interference led to the major large publishers refusing to consider a purchase. Channing Bete subsequently put the program out for bid, requiring non-disclosure agreements from any bidder. PEW placed a bid and executed an NDA, as did Dr. Greenberg personally. Channing Bete subsequently notified Dr. Greenberg that they had selected a different buyer, who would need to coordinate with Dr. Greenberg and the other authors. Dr. Greenberg was reminded of his non-disclosure obligations in this communication. The complaint alleges that Dr. Greenberg threatened to withhold assent to the transfer of the curriculum unless he received concessions for himself and PEW. It further alleges that Dr. Greenberg directly contacted the buyer on multiple occasions, indicating again that he intended to block the sale unless he received concessions and revealing the contents of his communications with Channing Bete, in violation of the NDA he had signed. Channing Bete then received an offer from a different party, seeking to buy the curriculum at the same terms offered by PEW. Channing Bete subsequently received communications from other authors of curriculum materials, each threatening to withhold consent to the sale, that Channing Bete alleges to have been orchestrated by Dr. Greenberg. Finally, Dr. Greenberg has published books laying out “PATHS Plus” that he has marketed as an alternative to the PATHS® program, allegedly in violation of non-compete language contained in his original exclusive license to Channing Bete.

Oxford Global Resources, LLC v. Hernandez (SJC-12439).

Oxford, a Massachusetts LLC with places of business throughout the country, hired Jeremy Hernandez to work as an account manager in its Campbell, California office. Hernandez signed an employee Confidentiality, Non-Solicitation and Non-Competition Agreement that included an agreement that any disputes arising thereunder would be governed by Massachusetts law and that any lawsuit would be brought in a Massachusetts court. As a part of his employment, Hernandez was given access to the “Oxford Database,” a secure database of client information. After Hernandez left his employment, Oxford became aware that Hernandez was soliciting Oxford customers and allegedly had brought confidential information of Oxford to his new employers. After Oxford filed suit in Massachusetts state court, Hernandez moved to dismiss or transfer under the doctrine of forum non conveniens. The SJC first determined that California and not Massachusetts, law should apply despite the language of the agreement. Where a choice of law provision is executed, Massachusetts will uphold the provision unless it is contrary to public policy, which will be found where the application of Massachusetts law would be contrary to a fundamental policy of a state having a materially greater interest in the issue than Massachusetts and would be the law that applied in the absence of the choice of law provision. California has a settled policy in favor of open competition and employee mobility that, among other things, prohibits non-solicitation clauses and provides a statutory remedy to employees where an employer tries to enforce a non-competition or non-solicitation clause. Applying Massachusetts law would run contrary to this policy, and with the exception of Oxford’s place of incorporation, all relevant events occurred in California – Hernandez applied for the job, executed the agreement, worked for Oxford, and allegedly breached the agreement in California. Accordingly, applying Massachusetts substantive law would run afoul of a fundamental policy of California, and the SJC determined that the choice of law provision was unenforceable and California law would apply. Having so determined, the SJC next addressed the non conveniens argument, and held that an agreement to have suit brought in Massachusetts cannot preclude a non conveniens challenge as a matter of law. Noting that all relevant witnesses were in California and could not be compelled to appear in Massachusetts for trial , and that the case would involve interpretation of recently-passed California laws relating to employee agreements, the SJC decided that the California court would be in the best position to address the factual issues and consider the evolution of the interpretation of the new law, and dismissed the Massachusetts complaint so that it could be brought in California.

This case creates a new concern for multi-state corporations seeking to impose restrictions on employees in other states that, while acceptable in Massachusetts, might run afoul of the laws of the states in which the employees work.  Businesses should review the employment laws of states in which they employ people and consider whether a choice of law clause will be upheld in light of the SJC’s decision.

Massachusetts’ New Laws Governing Trade Secrets and Employee Non-Competition Clauses

In August, Governor Baker signed a new law governing trade secrets, broadening the types of information that can qualify as a trade secret and setting up protections for trade secrets during litigation.  By the passage of this law, Massachusetts joins the vast majority of states in adopting the Uniform Trade Secrets law.  Governor Baker also signed a law placing significant restrictions on non-compete clauses in employee agreements, including limits on scope and time and requirements that an ex-employee be compensated during the time the former employee is restricted.  A summary of these laws can be found here.