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United States Court of Appeals for the Fourth Circuit - 3 F.3d 730
Tags: Contracts, Public policy, Non-compete
The key 1993 case Comprehensive Technologies International, Inc. v. Software Artisans, Inc. involved an intellectual property dispute between two software developers. The plaintiff, Comprehensive Technologies International (CTI), accused Software Artisans (SA) and its employee Dean Hawkes of copying CTI's copyrighted software and using its trade secrets. SA's software was similar to CTI's database management software, and Hawkes had previously worked for CTI and signed confidentiality and non-competition agreements.
The lower court ruled in SA's favor, finding no copyright infringement or trade secret misappropriation. The court stated that CTI failed to prove the alleged similarities between the software and invalidated Hawkes' non-competition agreement. CTI appealed.
The Court of Appeals affirmed the copyright infringement decision, agreeing that CTI did not prove SA copied any protected elements of CTI's software. However, it disagreed on trade secret misappropriation, finding that there was enough evidence to raise genuine questions about whether CTI's software contained trade secrets and if SA used them improperly, and sent the case back to the lower court for further proceedings on the trade secret issue.
The case is significant as it demonstrates how courts apply different tests to determine copyright infringement and trade secret misappropriation in software cases, and distinguish between protectable and non-protectable elements of software programs. It's often cited and analyzed in intellectual property law education.
CTI filed a lawsuit against former employees and SA for copyright infringement, trade secret misappropriation, breach of confidentiality, and breach of contract. The district court ruled in favor of the Defendants on all counts. CTI appealed the judgment, arguing that the district court erred in applying the appropriate standard for determining copyright infringement, misappropriation of trade secrets, and the enforceability of Hawkes's covenant not to compete. The court affirmed the judgment for the Defendants on copyright infringement and trade secret misappropriation claims but agreed with CTI that Hawkes's covenant not to compete is enforceable and remanded for the district court to determine whether Hawkes breached his covenant not to compete.
The judge agrees that recovery on a copyright or trade secrets basis is not allowed, but disagrees with the decision to uphold the non-compete covenant as it covers all states within the United States, not just the specific states where the company has licenses, clients, or potential clients. The judge suggests that the question should be certified to the Supreme Court of Virginia, but the panel disagrees. Virginia law disfavors restraints of trade, so agreements must be strictly construed in favor of the employee. The agreement in question attempts to impose an unlimited post-employment restraint on the employee, and the court declines to read limitations into the agreement that are not present. Virginia law requires that non-competition clauses be strictly construed against the employer, even if they could be interpreted more narrowly.
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