MicroStrategy has won an appeals court ruling in a legal dispute concerning former employees who went to work for rival business intelligence vendor Business Objects.
MicroStrategy alleged that the employees used confidential company information to solicit customers for Business Objects. The appeals court determined that a “non-solicitation” clause in MicroStrategy’s employment contract was valid and non-ambiguous, and that it prohibited the employees from taking any action that “drives MicroStrategy customers away” from its products, MicroStrategy said at the hearing.
The ruling, from the US Court of Appeals for the Federal Circuit, reversed a lower court decision that found the non-solicitation clause invalid. The case now goes back to the lower court for further proceedings.
It’s the latest example of the problems vendors can face when they hire staff from rivals. Microsoft and Google are in the midst of a dispute over Google’s hiring of a former Microsoft employee, Kai-Fu Lee, to run its research and development efforts in China. Microsoft claims the hiring violates a non-competition clause in Lee’s contract. Google disagrees.
Another non-competition case that gained notoriety is that of former Motorola executive Mike Zafirovski, who was hired by Nortel Networks and had to forfeit most of a payout given when he left Mororola. He agreed not to poach any Motorola employees from Nortel as part of a settlement between Motorola and Nortel over his hiring.
As part of the settlement, Zafirovski’s communications with certain unnamed companies — some of whom are Motorola competitors — are limited and limits are also placed on Zafirovski’s ability to advise Nortel on “competitive strategy or analysis relating to Motorola”.
Initially, Motorola had sought to block Zafirovski’s appointment altogether for two years.
The ruling between Business Objects and MicroStrategy is part of a broader, ongoing legal dispute that goes back to 2001 and involves several patent infringement claims made by both companies.
MicroStrategy says it has filed an additional patent infringement suit against Business Objects. That case, in the US District Court for the District of Delaware, is expected to go to trial in May, MicroStrategy says. It is seeking monetary damages and an injunction.
Business Objects had no immediate comment.