Cochran, 408 Pa. Super. 54, 596 A.2d 188, 194 (Pa. Super. 1991).
Here, Robec, a 65% limited partner in Emex, L.P., has conceived two projects and sponsored them for seven years at a cost of more than $ 2,000,000. In the last stages of their development, it contracted out some of the research to its former employees, who worked at an entity it created, Emex, L.P. Robec is undeniably a party with a great interest in reaping the returns from the R & D for these projects. In a rapidly developing field, like computer technology, a company may indeed find a non-compete agreement, reasonable in scope and adequately supported by consideration, to be necessary for the protection of its legitimate business interests.
The remaining issue, then, is whether the restrictive covenant is reasonable in scope. Since competition in the computer market is world-wide and since Robec distributes throughout the nation and overseas, the geographic extent of the covenant--the United States--is reasonable. However, because of the quick pace of obsolescence and technological innovation, three years' ban on competition is longer than necessary to protect Robec's interest in the products on which plaintiff worked. Judging from evidence about the shelf life of other computer technology, these products, in their current form, may be on and off the market in less than 12 to 18 months--that is, a year or more before plaintiff would be permitted to take work with a competitor. Since his notification of departure six months ago, the plaintiff has been cordoned off from these projects and the defendant's plans and strategies for marketing them. Whatever trade secrets or proprietary information the plaintiff may have, which may be of value to competitors, pertains to these products as of January, 1992. Thus, a two-year ban on competition, reckoned from the time of his notification of departure, would suffice to protect defendant's legitimate interests. Since the three-year term is not reasonably necessary to protect the employer's legitimate interest, the court shall exercise its equitable powers, Sidco Paper Co. v. Aaron, 465 Pa. 586, 351 A.2d 250, 254 (1976), and modify the covenant's duration to two years.
CONCLUSIONS OF LAW
1. This Court has subject matter over this action, under 28 U.S.C. § 1332, based on diversity of citizenship.
2. This Erie-bound case is governed by Pennsylvania law.
3. Under Pennsylvania law, although restrictive covenants are a disfavored restraint on trade, a restrictive covenant that is part of an employment agreement is enforceable if it is supported by adequate consideration and the application of the covenant is reasonably limited in both time and territory. Piercing Pagoda Inc. v. Hoffner, 465 Pa. 500, 351 A.2d 207, 210 (1976).
4. A fundamental change in the condition or status of employment is adequate consideration for a restrictive covenant. Bryant Co. v. Sling Test & Repair, 471 Pa. 1, 369 A.2d 1164, 1168 (1977).
5. The December 31, 1986 agreement, which changed Mr. Kramer from an at-will employee to an employee for a term, at minimum of 2 and 1/2 years, unless he was dismissed for cause, was adequate consideration for the three-year restrictive covenant.
6. To be reasonably necessary for the protection of the employer, the restrictions must be designed to protect a legitimate business interest of the employer. Thermo-Guard, Inc. v. Cochran, 408 Pa. Super. 54, 596 A.2d 188 (Pa. Super. 1991).
7. Robec, a 65% limited partner in Emex, L.P., which owns the trade secrets and technology on which Mr. Kramer worked, has a legitimate business interest in these products, which it conceived and funded.
8. Because Robec and its competitors market their products in all fifty states, the geographic scope of the restrictive covenant is not unreasonable.
9. Where a covenant imposes restrictions broader than necessary to protect the employer, the court of equity may not only remove an offensive term, but may supply a new, limiting term and enforce the covenant as so modified. Sidco Paper Co. v. Aaron, 465 Pa. 586, 351 A.2d 250, 254 (1976); Bell Fuel Corp. v. Cattolico, 375 Pa. Super. 238, 544 A.2d 450, 457 (Pa.Super. 1988).
10. In so doing, the court must balance the interest of the employee in his occupation and of the employer in his established business.
11. Mr. Kramer has worked on inter-computer communications most of his professional career. Robec is primarily a wholesale distributer of computer hardware and software. On the record, StackLAN and MicroStack are the only products it has tried to develop on its own. Given the breadth of the geographic scope and virtually unlimited categories of competition prohibited by the restrictive covenant, three years is a heavy burden on Mr. Kramer's ability to find work in his specialty. Since the scope of the restriction is disproportionate to the share of Robec's work and sales in the field of local area network development, the restrictive covenant should be modified.
12. Because of the fast pace of obsolescence, often 12 to 18 months, in the computer industry and the fact that Mr. Kramer has, since he gave notice of his resignation, been out of the know at Robec for nearly six months already, a period of two years from his notice of resignation appears sufficient to protect Robec's legitimate business interests.
13. Since Artisoft's product, LANtastic, is in direct competition with Robec's products, StackLAN and MicroStack, Mr. Kramer is barred by the restrictive covenant, as modified, from working for Artisoft.
14. Because the restrictive covenant barred Mr. Kramer from working at Artisoft, Robec did not tortiously interfere with his prospective contract.
An order follows.
AND NOW, this 10th day of August, 1992, upon consideration of the submissions of counsel and after hearing and argument in open court, it is ORDERED that the Restrictive Covenant is MODIFIED to a term of two (2) years from Mr. Kramer's Notice of Resignation, for the reasons set forth in the accompanying memorandum. In all other respects, it is ORDERED that it is enforceable and shall be ENFORCED.
BY THE COURT:
Robert S. Gawthrop, III J.
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