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Non -Compete Provisions / Restrictive Covenants:
a) What are they?
Restrictive covenants or Non-Compete Provisions are said to be obligations where employers often incorporate post-termination obligations into an employee’s contract of employment hence an employee agrees not to do certain things after he or she leaves the company. They usually designed to protect and safeguard the employers business and are usually enforceable only to protect unfair competitive use of both customer contacts and trade secrets.
b) Are they used in hospitality industry?
The hotel industry is largely engaging itself in Protective Trade Secrets through Non-Competition Agreements thus with the rising occupancy and room rates that are cropping a turnaround in the hospitality industry, it is thus regarded that all the relevant time share organizations are duly placing an increased emphasis on keeping and attracting the best employees. But it is also good to know in a wide view what really happens when your best employee who the organization has fully invested heavily in and entrusted with the organization’s best kept trade secrets, makes a decision to abandon the organization and join the completion. For instance in a recognized case from the mid 1990’s, Radisson came up with an action against Westin and its chief executive officer, whereby the morals of the case was very clear in that an individual or an organization may be able to get an award of damages for valuable trade secrets that are actually lost or disclosed to an immediate competitor.
It is therefore better to protect the trade secrets ahead by avoiding your employees from engaging into enforceable non-competition agreements because this might bring about the meaning of the difference between keeping, or sharing, your trade secrets and holding onto that very amazing and star employee in regard to the hospitality industry.
c) What other industries are they utilized?
Restrictive covenants are widely used in most sectors with regard to the safeguarding of the most trusted business secrets and information.. Moreover currently with many of the people changing jobs frequently, an employer’s very need to protect its important information is very vital and secure.
Thus For instance, physicians are still trying to maintain successfully that restricting employment beyond 20 or 30 miles approximately from the employer’s place of business which is necessary to protect the physician business interests. Similarly the restrictive covenants are widely used in consultancy services of different fields, this can be noted greatly in the case of in Pathfinder, LLC v. Luck, whereby the employer provided consulting services to a chemical industry. Again they are largely used in manufacturing industries to safeguard the same from their manufacturing interests and hence control their businesses more better with their competitor’s out of hand, that is with no relevant information about them.
d) Legal cases that demonstrate the meaning and significance of the provisions/covenants.
Case one: Sherman v. Pfefferkorn
The issue it was noted that during the course of his duties, the deliveryman acquired valuable information regarding customers' names and addresses and upon his termination, used all this information to compete with his former employer.
Applicable rule: frankly speaking, a specific restriction in a non-compete agreement that stops a former employee from competing or working for a competitor thus this may be deemed reasonable and enforceable.
Analysis: thus if the restrictions in the said covenant not to compete are unenforceable because they are more than overbroad, then the court will look deeply at the covenant to make the restrictions more than narrow thus making the covenant enforceable.
Conclusion: Hence the court noted that "contracts restraining freedom of employment can be enforced only when they are reasonable and not wider than is necessary for the protection to which the employer is entitled and when not injurious to the public interest, thus the court enforced the agreement.
Case two: Wells v. Wells
The issue: this case here illustrates the most important distinction between buyer-seller and employer-employee non-competition agreements. The central issue in the case involved the reasonableness of the limitation on competition in Fall River and New Bedford.
Applicable rule: holistically a geographical restriction in a restrictive covenant that safeguards an ex-employee from working for a competitor in a specific area or single location or the same is deemed or said to be reasonable, thus moreover those that restrict her from competing or engaging in this activities in a wider area or anywhere else unreasonable and unenforceable.
Analysis: thus it is always important to largely ensure that the geographical limits are deemed reasonable in the consideration of the market or client served by the employee, or hence the specific covenants become unenforceable.
Conclusion: hence the court duly upheld that the enforcement of the non-competition agreement, explaining that the good will interest a party could protect was more expansive in the buyer-seller setting, hence unenforceable.
Case three: Alexander & Alexander, Inc. v. Danahy
Issue: The non-competition covenants issue in this case arises out of an arrangement that had aspects of both a sale of a business and a contract of employment.
Applicable rule: strategically the specific will to a change in the due terms and conditions of employment provide sufficient consideration to support a covenant not to compete entered into after the employment relationship has begun.
Analysis: there should be no difficulty in concluding that the restrictions should apply the standards applicable to covenants that arise out of the sale of a business, hence every vital information should be looked at importantly for this to be deemed reasonable.
Conclusion: The court henceforth concluded that all the restrictive covenants were generally a very important and integral part of the said agreement for the sale of the business.
Part two: Trademark Law
A Trademark is simply a brand identifier in form of a word, name, symbol, phrase or their combination utilized or meant to be used commercially to distinguish a particular manufacturer’s products from another’s and to show the source of the products. In some circumstances a trademark protection may stretch beyond mere words or letters to encompass broader aspects such as a product’s color or its packaging. Trademark rights give the owner a legal ownership and exclusive rights to utilize the mark for commercial purposes.
For a trademark to be registered it must be very distinctive. By distinctive the law stipulates that a trademark must have the ability to clearly identify the source of a particular product it is being used on. The sole purpose of trademarks apart from giving manufacturers a reason to invest in quality products is that they make it obvious to the consumers the product identity and source. Trademark laws regulate the proper use of trademarks by giving a producer the rights to commercialize the mark nationwide for a given period of time, file an infringement suit in a federal court and recover damages, trade fees and other remedies in the event of a breach of that trademark.
After a trademark qualifies for protection, the rights to the trademark can be gained either by being the first to commercialize the mark or being the first to file a registration with the U.S Patent and Trademark Office (USPTO). The most important aspect they consider before application is the depiction of a particular trademark. The applicant is first required to include a very clear presentation of the trademark in question and the precise products to which the mark will be used. A search on the USPTO database is then conducted to check for any similar existing mark before the applicant specifies the “basis” for the filing. The applicant may then continue to file their trademark application online through Trademark electronic application system (TEAS).
The filing fee for any application is based on the number of marks applied for, the number of classes of goods in the application and the version of the filing form being used with the filing fee of the TEAS plus version of the form being $275 per a class of listed goods/services and the regular TEAS form being $325 per a class of listed goods/services.
Ritz Hotel Limited vs. Shanghai Huangpu Lichi Leisure and Fitness Co. Ltd.
On April 7, 2008, the Shanghai’s Intermediate People’s Court heard a case of Ritz Hotel, Limited v. Shanghai Huangpu Lichi Leisure and Fitness Co. Ltd. regarding trademark infringement issues.
Issue: The plaintiff, RITZ-CARLTON HOTEL COMPANY, L.L.C contends the use of the defendants, Shanghai Huangpu Lichi Leisure and Fitness Co mark RITS which in their view is similar to their already registered trademark RITZ with the two being players in the same service industry.
Rule of law:
The similarity between two Trademarks is determined in accordance with Article 9, Paragraph 2 of the Supreme People’s Court’s Decree. When compared, a plaintiff’s mark is found to be similar to that of a defendant’s if the design, pronunciation, combination of colors, composition, connotation or the overall appearance of the elements combined causes confusion to the consumers as to the source of the goods or services or infers a means of connection between the two.
Application of the law to the case facts
In the case at hand, the RITZ is compared with RITS. They both consist of four identical letters except for the fourth letter; both have a similar appearance in block letters and they share a very close pronunciation. The defendant mark, RITS appears to be very similar to that of the plaintiff’s RITZ trademark with a very high likelihood of causing confusion among the consumers as to the particular legitimate service provider.
The court decided that plaintiff has the legally exclusive right to the RITZ trademark since according to the Trademark Laws that right was the first to be approved and registered for the commercialization of their service. In absence of the permission from the registrant, it constitutes a trademark infringement upon a registered trademark to similarly use it on identical goods/service.
Part 3: Protecting Recipes / Trade Secrets / Trade Dress
a). Can recipes be legally protected from being copied? All the written form of recipes can be legally protected from being copied by use of copyright law, hence these can only be done once they are recorded in some manner or way, and for instance, they can be recorded on tape or else written down.
b) Trade secrets and how they can be protected:
information, including a formula, pattern, compilation, program, device, methods, technique, or process, that: (i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.(according to Uniform Trade Secrets Act (“UTSA”).Significantly trade secret protection is based mainly on a confidential relationship which would not harm the employer and his business interests.
c) Trade dress and how they can be protected:
Generally Trade dress can be referred to as the total overall look and feel of any product or service, thus it incorporates any element or feature that may show the origin of the service or product. Hence to be protected, trade dress must be distinctive and non-functional.
d) Legal Cases for each concept:
Case one : Urantia Foundation v. Maaherra
Issue: the underlying issue in this case was that the court had to decide extensively whether a book believed by both parties to be the words of celestial beings was copyrightable.
Applicable rule: generally where an issue in hand is to be proved not to be copyrightable, then the court must take full measures to make both parties understand the materials are deemed to be protected when they represent full original work of the owner.
Analysis: it is of great importance for parties to understand fully about copyright ownership, as for the foundation claiming to own the copyright and the defendant claiming that the book was not copyrightable because no human creativity was involved in creating the book. Then it is of due importance that the court will rule reasonably from the book’s content.
Conclusion: The court held that even if the book’s content originated with a celestial being, there had been sufficient human selection and arrangement of material to satisfy copyright law’s “originality” requirement. 114 F3d 955 (9th Cir 1997).
Case two: MAGISTRO v. LOU INC
Issue: the underlying issue in this case is that one party alleges that the other party committed a breach of contract and thus henceforth violated the Uniform Deceptive Trade Practices Act, and also violated the trade secrets act.
Applicable rule: When reviewing questions of law, an appellate court has an obligation to resolve the questions independently of the conclusion. (Douglas Cty. Sch. Dist. 0001 v. Johanns, reached by the trial court. 269 Neb. 664, 694 N.W.2d 668 (2005)).
Analysis: there is absolutely no doubt that the only question to be addressed here is whether Nolan with his specific engagements breached the contracts with Magistro by using trade secrets obtained from Magistro in the operation of Nolan's restaurants.
Conclusion: The trial court found no basis upon which it could rule in Magistro's favor on the issue of deceptive trade practices
Case three: ANTIOCH COMPANY v. WESTERN TRIMMING CORPORATION
Issue: The case illustration appeal above engages the question of whether, as a matter of law, the Antioch Company's scrapbook album configuration is fully functional and hence ineligible for trade dress protection.
Applicable rule: generally What Antioch company depends mostly over , is that in order for them not to be restrained from trade dress protection for the overall incorporation and combination of functional features, the said features must be put in an arbitrary, fanciful, or distinctive way. Thus the court must rely on the articulation of the principles of trade dress protection to enable the company follow the same.
Analysis: for the company to recover for trade dress infringement, then the company must prove beyond reasonable doubt that the infringing feature is thus not functional.
Conclusion: thus the district court significantly and correctly concluded that Antioch's claimed trade dress was functional as a whole, and thus it was in line with the laws that protect competitive economy.
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