Virginia Business Litigation Lawyer Blog

Non-competition and non-solicitation clauses found in employment agreements often do not provide employers with the protection the employers assume they are getting. Virginia courts will refuse to enforce such "noncompetes" if they are written in vague terms or if they are broader than necessary to meet the employer's legitimate business interests. As restraints on trade, restrictive covenants are disfavored by the courts. Consequently, any ambiguities in the contract will be construed in the employee's favor. Fairfax Circuit Court Judge Michael F. Devine recently illustrated these principles in Daston Corp. v. MiCore Solutions, Inc., in which he upheld a nonsolicitation clause but struck down a noncompete agreement as unenforceable.

The case was brought by Daston Corporation, an information technology company that provides, among other things, a range of services based on Google Apps software, against two former employees who went to work for MiCore Solutions, a business offering similar services. Both employees had signed identical employment agreements with Daston containing both a noncompete clause and a nonsolicitation clause. The employees sought to dismiss Daston's claims, arguing that the employment agreement's restrictions were unenforceable. Judge Devine agreed in part and disagreed in part.

The court began its analysis by noting that, in Virginia, non-competition agreements will be enforced only "if the contract is narrowly drawn to protect the employer's legitimate business interest, is not unduly burdensome on the employee's ability to earn a living, and is not against public policy."

The non-solicitation clause in question provided that, for a period of two years after the termination of employment, "Employee will not, directly or indirectly, solicit, invite or by any way, manner or means, attempt to induce any of Daston's Customers to do business with a Competitor." The court upheld the clause as enforceable, finding that the plain language is no broader than necessary to meet Daston's legitimate interest and because it only applied to solicitations for services in direct competition with Daston's services, or services developed by Daston with the employee's assistance. The court observed that the non-solicitation clause did not unduly burden the employee's ability to earn a living in his chosen field because it allowed the employee to solicit customers to provide them with services that do not directly compete with Daston's services. The court rejected arguments that the language was impermissibly vague.

The noncompete, however, was deemed overbroad and unenforceable. The relevant language provided that, for one year after the termination of employment, "Employee will not...provide Services to any Client to which Employee...provided substantially similar or related Services during Employee's employment was Daston." The court found the phrase "substantially similar or related" to be both vague and overbroad in the sense that it appeared to restrict more than was necessary to protect Daston's legitimate business interests. Therefore, the court struck the clause and severed it from the rest of the employment agreement (as permitted by the contract's severability clause).

There are no guarantees when drafting noncompete agreements. As expressly noted by Judge Devine, language deemed enforceable in one case may be found overbroad and unenforceable in a different factual context. Each case will be decided on its unique facts. Still, there are certain considerations to keep in mind. First, do not make the noncompete broader than it really needs to be, either in terms of duration, geography, or scope. If the noncompete is overly broad, most Virginia judges will strike the clause in its entirety. They are not going to blue-pencil it to conform it to Virginia law. Similarly, ensure the language is not unduly burdensome on the employee's ability to earn a living in his chosen field. The language should focus on restricting activities that directly compete with the employer's services. Finally, write in plain English that is easy to understand. If the noncompete does not fairly apprise the employee of the prohibitions on his conduct, the clause will be stricken as impermissibly vague.

Lawyers around the country have come to learn of the Eastern District of Virginia's legendary "rocket docket." With divisions located in Alexandria, Norfolk, Richmond, and Newport News, Virginia's federal court is known as the most efficient in the country for handling intellectual property cases and complex business litigation. Also known for being friendly to business, trademark owners around the country often look for ways to establish venue in Virginia instead of a location closer to home where cases move at a slower pace. In the context of protecting trademark rights, one such opportunity can be found in the Anticybersquatting Consumer Protection Act.

The ACPA provides for a cause of action against those who register or use a domain name confusingly similar to, or dilutive of, the trademark of another. Enacted in 1999, the ACPA was designed to address the practice of "cybersquatting," which generally involves the practice of registering a domain name containing somebody else's name or trademark with the intention of either profiting from the resulting confusion or of selling the domain name to the less-Internet-savvy trademark owner. You could sue the individual in the jurisdiction of his residence, but what if that person lives in the District of Minnesota, one of the slowest federal courts in the country? Or what if the registrant took steps to shield his identity when registering the domain name and you can't determine whom to sue?

One option available to you is to sue the domain name itself. And because VeriSign--the world's largest registry and operator of the .com and .net top-level domains--is located in Dulles, Virginia, which falls within the jurisdiction of the Eastern District of Virginia, there is a good chance you can bring that action in the Rocket Docket, regardless of where the actual registrant resides.

MetroPark, a fashion clothing store incorporated in Delaware and based in Los Angeles, successfully utilized this procedure in recent weeks and obtained a judgment against metropark.net in Virginia's highly efficient federal court. MetroPark's online store is located at metroparkusa.com. On October 2, 2009, a registrant registered metropark.net and, shortly thereafter, put up a website at that domain advertising clothing and accessories substantially identical to and in direct competition with the goods and services offered by MetroPark.

MetroPark identified the individual as someone with a history of cybersquatting, and who is the current registrant of multiple domain names that mimic famous trademarks of third-parties, such as bankofamericaa.com, dicksportinggood.com, abcnewschicago.com, and officedeppotcom.com. Rather than sue the individual directly, MetroPark sued the domain name itself. The court recognized the validity of this procedure, writing "Pursuant to the Lanham Act, '[t]he owner of a mark may file an in rem civil action against a domain name in the judicial district in which the domain name registrar, domain name registry, or other domain name authority that registered or assigned the domain name is located'" provided that the domain name is violative of the trademark provisions of the Lanham Act.

The Court found that metropark.net was being used in a way likely to cause confusion or mistake, as Internet users looking for MetroPark's site might come across metropark.net and, if they did, would likely to be deceived into believing that the site is affiliated with MetroPark. The ACPA is designed to remedy this very situation. Therefore, the magistrate judge recommended (and the district judge ordered) that VeriSign, the operator of the registry of the metropark.net domain name, transfer the domain name from the current registrar, Moniker Online Services, to a domain registrar of MetroPark's choosing, and that such registrar thereafter register the domain name in MetroPark's name.