When Does The Information Protected In A Non-Compete Agreement Become Stale Or Obsolete?

Florida Statute § 542.335(1)(d)(1) through (3) spells out different time periods where a non-compete agreement is deemed reasonable. For example, section 542.335(1)(d)(1) provides that when a non-compete is sought to be enforced against a former employee or independent contractor, "a court shall presume unreasonable in time any restraint more than 2 years in duration." As for trade secrets, section 542.335(1)(e) provides that a court shall presume reasonable in time any non-compete agreement with a duration of 5 years or less. The statute further provides that "[a]ll such presumptions shall be rebuttable presumptions."

Recently, the Appellate Division of the Superior Court of New Jersey issued a decision addressing when a trade secret or other protectable interest under a non-compete agreement may become obsolete and therefore not subject to protection by the court. See Truong, LLC v. Tran, No. A-5752-11T1 (N.J. Super. Ct. App. Div. Jan. 9, 2013). Truong involved the enforcement of a non-compete agreement between the owner of a nail salon and his former employees. The non-compete agreement contained a two year duration which the employer sought to enforce once one of the employees opened a competing salon. The trial court granted an injunction enforcing the non-compete and the employees appealed. Truong at *6.

New Jersey law governing non-competes is similar in some respects to Florida's non-compete statute. In order for a non-compete agreement to be "reasonable" and subject to enforcement, the non-compete must protect the legitimate interests of the employer, impose no undue hardship on the employee and not harm the public. Truong at *8, citing Solari Indus., Inc. v. Malady, 55 N.J. 571,576 (1970). However, in considering whether to enforce the non-compete agreement, the Troung court recognized that it "may also consider the relevant lifespan of a trade secret or other protectable information." Truong at 9. The court noted that a non-compete agreement "may not extend beyond the temporal point when the secret information has become obsolete." Id., citing Earthweb, Inc. v. Schlack, 71 F.Supp. 2d 299, 313 (S.D.N.Y. 1999)(holding that a one-year restrictive covenant was too long given the "dynamic nature"...