Vol. 73, No. 11, April 6, 2002 

Covenants Not to Compete Could Create Competition in the Courtroom
By Michael E. Chionopoulos

Success in business, particularly in small businesses, is now and has always been dependent upon effectively competing for and maintaining market share. In today's post information age, technology allows small business owners to more aggressively compete for market share— both with other small business owners as well as with their larger business siblings. In any given industry, players change teams or are traded on a regular basis and the employer is, of course, concerned about competition and/or losing valuable or proprietary information. While there are a myriad of pro-employer clauses that could be, and probably have been, used in employment contracts the three most common genres are: 1) Covenant not to compete; 2) Covenant not to solicit; and, 3) Covenant not to disclose trade secrets and/or proprietary information. This article will discuss the tools with which employers sometimes seek to protect their interests by restricting activities of former employees and the recent changes made by the Oklahoma Legislature that will, at least ostensibly, change the competitive landscape in Oklahoma.

Historical Overview of Covenants Not To Compete

The very confusing history of post-employment covenants not to compete will be more fully discussed below. However, the following summary provides a quick reference to the legal developments:

• At common law, reasonable contractual restrictions on trade were allowed;

• In 1948E.S. Miller Laboratories, Inc. v. Griffin, 1948 OK 149, 194 P.2d 877, determined that the common law rules did not survive enactment of Okla. Stat. Tit. 15§§ 217-219;

• In 1970 Tatum v. Colonial Life & Accident Ins. Co., 1970 OK 27, 465 P.2d 448, recognized that reasonable restrictions protecting only a former employers’ business contacts can be consistent with§§ 217-219 (and did not overrule Miller, but rather distinguished the Tatum facts from Miller);

• In 1977, in Crown Paint Co. v. Bankston, 1981 OK 104, 640 P.2d 948, and again in 1981, in Board of Regents v. National Collegiate Athletic Association, 1977 OK 17, 561 P.2d 499, the Oklahoma Supreme Court found that Okla. Stat. Tit. 15 § 217 invalidated only unreasonable restraints on the exercise of trade;

• In 1989 Bayly, Martin & Fay, Inc. v. Pickard, 1989 OK 122, 780 P.2d 1168, recognized the abrogation of Tatum with respect to Miller (and caused West Publishing to put a “red flag” on Miller, see endnote 44);

• In 2000 the Oklahoma Court of Civil Appeals, in Loewen Group Acquisition Corporation, v. Matthews, 2000 OK CIV APP 109, 12 P.3d 977, held that a contractual provision seeking to restrict a former employee against fair competition, i.e. competition that could be had without use of specific knowledge gained during employment, was voided by Okla. Stat. Tit. 15 § 217; and

• In 2001 the Oklahoma Legislature added Okla. Stat. Tit. 15 § 219A, which seemingly codifies the holding in Loewen.

The majority of the reported decisions address the issue of covenants not to compete. At common law, all contracts restraining trade were void.1 Oklahoma also has a statutory scheme whereby contracts in restraint of trade are void and unenforceable unless they fall within one of the two statutorily created exceptions to the general rule2 — sale of good will3 or dissolution of a partnership.4 Over time, contracts founded upon reasonable limitations of time and place were upheld.5 The majority rule was that unreasonable restraints are prohibited and that reasonable restrictions will be enforced.6 The Oklahoma Supreme Court first addressed this issue by considering the effect of Okla. Stat. Tit. 15 §§217-219 on the common law in E.S. Miller Laboratories Inc. v. Griffin7 and determined that the common law rule of reasonableness did not survive the enactment of Okla. Stat. Tit. 15 §§217-219. However, the 1948 holding of Miller was eroded in 1970 by the Oklahoma Supreme Court’s ruling in Tatum v. Colonial Life & Accident Ins. Co. of American;8 and in 19779 and 198110 the Oklahoma Supreme Court found that §217 invalidated only unreasonable restraints on the exercise of trade. Between Sept. 22, 1981(pronouncement of the rule of reason by Crown Paint Company v. Bankston11) and June 4, 2001 (effective date of §219A) the general rule in Oklahoma was that § 217 prohibited only unreasonable restraints on the exercise of a lawful profession, trade or business.12

It is, however, important to keep the different covenants straight. The District Court for the Eastern District of Oklahoma has held that a covenant not to divulge trade secrets is “. . . sufficiently distinct both as to the obligations imposed and the purpose to be accomplished so as to permit its severance and survival from the covenant not to compete.”13  Moreover, at least one state Court of Appeals has held that “[a] covenant not to solicit is subject to a lower degree of scrutiny than a covenant not to compete."14  

The New Law and Its Limited Scope

Effective June 4, 2001, Okla. Stat. Tit. 15 §219A (“§ 219A”) changed the law on covenants not to compete in Oklahoma. It states:

A. A person who makes an agreement with an employer, whether in writing or verbally, not to compete with the employer after the employment relationship has been terminated, shall be permitted to engage in the same business as that conducted by the former employer or in a similar business as that conducted by the former employer as long as the former employee does not directly solicit the sale of goods, services or a combination of goods and services from the established customers of the former employer.

B. Any provision in a contract between an employer and an employee in conflict with the provisions of this section shall be void and unenforceable.

Generally, statutes operate prospectively unless the Legislature clearly expresses a contrary intent.15 However, remedial or procedural statutes may operate retrospectively.16 For instance, statutes relating to the award of attorney fees to a prevailing party are procedural and subject to retrospective operation.17 A settled principal of statutory construction requires statutes be given prospective operation only, unless contrary legislative intent is expressed clearly, or necessarily implied from the language used.18 The rules of statutory construction are well established. First and foremost, the court must give effect to the Legislature’s intent.19 If the language is clear and unambiguous, the plain meaning of the statute shall be applied so as to reflect the legislative intent and no further construction analysis is required or permitted.20 However, when the meaning of a statutory provision is unclear or its application is uncertain, the language is to be given a reasonable and sensible construction.21 There appears to be no specific legislative declaration that §219A is retroactive. Accordingly, because parties are presumed to contract in reference to the law existing at the time the contract was entered into,22 §219A should be applied to employment contracts executed on and after June 4, 2001. Thus, post-employment covenants not to solicit and/or disclose should be assayed according to the rule of reason, while any post-employment covenants not to compete must now be examined through the twisted prism of legal light created by§219A.

The new statutory language makes clear that the Crown Paint23 rule of reason will no longer be applicable to post-employment covenants not to compete. The new law specifically exempts agreements not to solicit sales from established customers of the former employer and, therefore, they should be valid and will probably be evaluated according to the rule of reason. On the other hand, however, post-employment covenants not to disclose trade secrets are not addressed, and therefore arguably not precluded, by the new law. Thus, post-employment agreements not to disclose trade secrets will probably continue to be scrutinized according to the rule of reason and/or other statutory schemes such as the Uniform Trade Secrets Act.24

As with all new statutes, there will undoubtedly be litigation to determine the precise meaning of §219A. One potentially fertile issue is the exact meaning of the phrase “as long as the former employee does not directly solicit the sale of goods . . . from the established customers of the former employer” (emphasis added). A West Law search reveals no cases specifically discussing how the phrase “directly solicit” may be interpreted in Oklahoma with respect to covenants not to compete. Thus, much like the standard set for lawyers, a former employee might argue that “directly solicit” means in person or telephone contact and not direct mailing. Obviously, an employer would be able to distinguish the nature of the anticipated harms to be avoided in those two materially different situations. No matter which position is ultimately found to be correct, an undeniable question of fact, i.e. whether or not there was direct contact, will preclude summary judgment.

The phrase “established customers” will also likely be tested. Some “[c]ourts are hesitant to enforce [sic] noncompetition agreements that prohibit employees from soliciting or servicing not only customers with whom they had direct contact, but also customers they never solicited or had contact with while employed (citations omitted). Courts uphold only those [sic] noncompetition agreements which protect the employer's legitimate proprietary interests and not those whose effect is to prevent competition per se. ”25 Assuming Oklahoma gives a deferential nod to Illinois, which has significant common law on covenants not to compete, the phrase “established customers” will likely be interpreted to include only those customers with whom the former employee had direct contact during employment. Conversely, the employer will likely argue that “established customers” is unambiguous and, therefore, is not subject to be interpreted in a manner other than its ordinary meaning, which would include all established customers of the employer, whether the former employee had contact with them or not. Based upon the current trend, the Illinois conclusion is likely to be reached in Oklahoma.

It is important to note that §219A, by its own terms, specifically applies to employment agreements. Indeed, a thorough read of §219A makes clear the Legislature did not contemplate other types of relationships. Specifically, §219A starts with “A person who makes an agreement with an employer . . .” (emphasis added), and goes on to restrict a former employer from enforcing a covenant not to compete after the “employment relationship has been terminated” (emphasis added). Finally, the last portion of §219A declares that “[a]ny provision in a contract between an employer and employee” (emphasis added) shall not be enforceable if it is in conflict with §219A. The Oklahoma Legislature could have easily selected more broad language, i.e. any person who makes an agreement with an employer, business partner, franchisor or licensor, but specifically declined to do so. Thus, it is clear that §219A applies only to employment relationships and does not extend to relationships such as franchising or distributorships.26

Application of Covenants Not To Compete

The Oklahoma Court of Civil Appeals addressed covenants not to compete in Loewen Group Acquisition Corporation, v. Matthews,27 pronounced on June 6, 2000. On July 3, 1997 Loewen Group Acquisition Corporation (“LGAC”) purchased three funeral home businesses from Baggerley Funeral Home (“BFH”) and/or entities associated with BFH. At the time of the LGAC acquisition, Randy Matthews (“Matthews”) was the manager of BFH. Subsequent to the acquisition, Matthews executed an employment agreement (the “Agreement”) with, and prepared by, LGAC. The Agreement provided, in part, that for three years following Matthews’ employment he could not engage in the funeral, mortuary, cemetery, burial or funeral or cemetery insurance business or any business related to any of the foregoing within 15 miles of an LGAC chapel.

Matthews tendered his resignation from LGAC on Feb. 3, 1999 and thereafter obtained municipal approval for construction of Matthews Funeral Home of Edmond, which was to be located within three miles of two businesses purchased by LGAC in the BFH acquisition. LGAC filed an action in Oklahoma County District Court and sought damages for Matthews' alleged breach of the non-compete as well as injunctive relief to enjoin Matthews from operating a funeral home. Matthews argued, in part, that the Agreement was in violation of Okla. Stat. Tit. 15 §217. The District Court determined that the covenant not to compete in the Agreement was reasonable as to both time and place.28 The District Court entered a temporary restraining order enjoining Matthews from “… participation in any entity that may have as its general purpose conduct that would be considered violative of the Covenant Not to Compete ….”29 

Matthews appealed the District Court’s ruling and the Oklahoma Court of Civil Appeals reversed the District Court, holding that “… an agreement that prevents competition from an employee who has not gained some competitive advantage or opportunity from the employment is inherently unfair.”30 It is key to note that the court seemed to give significant weight to the testimony of LAGC’s representative who stated that Matthews “… has a lot of experience in the funeral service and he knows the community very well” (emphasis in original).31 The court specifically noted that the covenant not to compete, drafted by LGAC, “…was specifically intended to prevent [Matthews] from using in competition with LGAC the considerable experience, contacts and recognition within the Edmond community that he already had gained before LGAC’s purchase of the Baggerly Funeral Home” (emphasis in original).32

The court’s decision in Loewen Group Acquisition Corp. v. Matthews33 was based in large part upon Tatum v. Colonial Life & Accident Ins. Co.34 and Okla. Stat. Tit. 15 §217. Indeed, §219A was not in effect until almost one year after the Loewen Group decision was pronounced.35 While it is interesting to note that Rep. Ray Vaughn of the Oklahoma House of Representatives sponsored the addition of §219A36 and also represented Matthews in Loewen Group Acquisition Corp. v. Matthews,37 one must view §219A  in juxtaposition to Tatum v. Colonial Life & Accident Ins. Co. 38 Ultimately, §219A is consistent with both the Tatum and Loewen decisions because the statute protects employers’ information while preventing unfair competition based upon use of the employer’s information.

In Tatum, the Oklahoma Supreme Court framed the central issue by stating “[t]he primary question presented is whether or not … contractual restriction upon the activities of the defendant is void under the provision of 15 O.S.1961, §217.”39 Tommy Tatum (“Tatum”) signed a written agreement with Colonial Life & Accident Insurance Company (“Colonial”) wherein Colonial appointed Tatum as its “Soliciting Agent for the purpose of canvassing for applications for policies for accident or health insurance on individuals, and groups of individuals.”40 The agreement also prohibited Tatum from “selling, or attempting to sell, any form of accident or health insurance to or on any of [Colonial’s] insureds under group policies or franchise policyholders, and from inducing, or attempting to induce, any of [Colonial ’s] insureds under group policies or franchise policyholders to cancel, lapse, or fail to renew their policies with [Colonial].”41

The District Court, based upon Tatum’s own admitted violations of the agreement, enjoined Tatum from violation of the agreement and he appealed there from. The Oklahoma Supreme Court held that the covenant not to compete between Colonial and Tatum was not intended to preclude Tatum from selling, or attempting to sell, any other form of insurance to Colonial’s insureds or to preclude Tatum from selling, or attempting to sell, any form of insurance, including health and/or accident insurance, to anyone else.42 Therefore, the court reasoned, the contractual provision was not designed to prevent fair competition, but was designed to prevent unfair competition by restraining Tatum from using information furnished to him by Colonial or acquired by him as Colonial’s Soliciting Agent.43

The Tatum Court specifically distinguished their holding from that found in Miller Laboratories Inc. v. Griffin,44 in which the employment agreement restricted the former employee from working in a specific territory for any other pharmaceutical company or distributor for a period of two years following employment.45 The Miller Court held that “… since the restraint herein comes within neither of the exceptions recognized in sections 218 and 219 it is void and unenforceable …”46   Essentially, the Miller Court held that it was inherently unreasonable to restrict all post-employment activity within a specified geographic area because such a restraint did not discriminate between fair and unfair competition. On the other hand, contractual restraint with respect to a former employer’s customers, as were the facts in Tatum, did not offend the principle of §217 because such a restraint precluded only unfair competition. The Tatum court protected Colonial’s trade secrets, but did not preclude Tatum from fair competition with Colonial.

Uniform Trade Secrets Act

Notwithstanding the common law and, now, the recent statutory development regarding covenants not to compete, employers may still effectively prohibit unfair post-employment competition. Oklahoma adopted the Uniform Trade Secrets Act (“UTSA”) on Nov. 1, 1986.47 Under the UTSA a  “trade secret” means information, including a formula, pattern, compilation, program, device, method, technique or process that:

•   -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

•   -is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.48

Moreover, the UTSA defines “improper means” to include a “…breach or inducement of a breach of a duty to maintain secrecy ….”49 Thus, assuming that a former employee has a post-employment covenant not to disclose certain information that amounts to a “trade secret,” employers can likely prohibit a former employee from unfair competition by using the UTSA.

The UTSA does not affect contractual remedies between the parties, whether or not based upon misappropriation of a trade secret.50 Therefore, if an employment agreement contains a post-employment covenant restricting the former employee’s use of a trade secret, an employer could likely maintain an action sounding in both contract and violation of the UTSA. In order to prevail on a claim in Oklahoma under the UTSA, the plaintiff must prove by a preponderance of the evidence that: 1) a trade secret exists; 2) the trade secret was misappropriated by the defendant(s); and, 3) defendant(s) used the trade secret to plaintiff’s detriment.51 A plaintiff can also obtain an injunction under the UTSA for actual or threatened misappropriation of a trade secret.52

As with any other statute, there are some considerations of which one seeking refuge under the UTSA must be aware. For instance, the UTSA has a three-year statute of limitations.53 A violation of the UTSA brings with it the potential for, under certain exceptional circumstances and including those that render a prohibitive injunction inequitable, an injunction that may condition future use upon payment of a reasonable royalty.54 Also, a plaintiff may be awarded punitive damages, not to exceed twice any award of actual damages, for willful and malicious misappropriation of a trade secret.55 Attorney’s fees are authorized by UTSA, but such an award is permissive in that “[t]he court may award reasonable attorney’s fees to the prevailing party” if a claim of misappropriation is made in bad faith; if a motion to terminate an injunction is made or resisted in bad faith; or, if willful and malicious misappropriation exists.56

At least one employer has suffered the consequences of using the UTSA as an inappropriate business weapon. In Green Bay Packaging Inc. v. Preferred Packaging Inc.,57 the Oklahoma Supreme Court sustained the District Court’s award of attorney’s fees against the plaintiff and noted that “[t]he record contains evidence that Green Bay’s intent in bringing the claim of misappropriation of trade secrets was to drive [defendants] out of business. Under such circumstances, the trial court was correct in awarding attorney fees.”58 So, while the UTSA is designed to protect employers from misappropriation of their trade secrets, abuses will not be tolerated and the law will manumit an honest businessperson by stentorian pronouncement of attorney’s fees.

The Doctrine of Inevitable Disclosure

Anyone who has ever dealt with covenants not to compete, solicit or disclose trade secrets knows full well that an injunction is oftentimes the omphalos of such litigation. In most restrictive covenant cases, the ultimate issues are almost always significantly shaped, and sometimes decided, during the injunction phase of litigation. Accordingly, while not specifically adopted by Oklahoma, it is necessary to discuss the doctrine of inevitable disclosure, which has been used to hurdle the irreparable harm prong of the injunctive litmus test under certain conditions.

The Seventh Circuit’s pronouncement of PepsiCo Inc. v. Redmond59 firmly established the doctrine of inevitable disclosure. While there are no decisions in Oklahoma discussing the inevitable disclosure doctrine, as a general rule “a plaintiff may prove a claim of trade secret misappropriation by demonstrating that defendant’s new employment will inevitably lead him to rely on the plaintiff’s trade secrets.”60 The doctrine of inevitable disclosure has been held to be a viable theory under the UTSA by Illinois.61 There is, however, still much confusion about what specific standard shall be applied to invoke the doctrine of inevitable disclosure. There is no uniformity among the jurisdictions that have applied the doctrine.

The Northern District of Illinois recently held that “[t]o invoke this doctrine the complaint must do more than make conclusory allegations that the employees will necessarily use trade secrets in their new positions.”62  Conversely, the New Jersey Court of Appeals was satisfied that the record adequately supported a preliminary determination by the Chancery judge that a defendant knew trade secrets of an employer and that there was sufficient likelihood of “inevitable disclosure.”63  Likewise, the Ohio Court of Appeals has held that an actual threat of harm exists when an employee possesses knowledge of an employer’s trade secrets and begins working in a position that causes him/her to compete directly with the former employer or the product line that the employee formerly supported.64

A specific showing of bad faith is not always required to obtain injunctive relief to protect a trade secret. In North Carolina, when a trade secret of significant value is established and there is a high possibility of disclosure, there need not be a showing of bad faith for a preliminary injunction to be granted.65 However, to support a broad injunction effectively precluding competitive employment, North Carolina courts would probably require a showing of bad faith or underhanded dealing and evidence that the competitor lacked comparable levels of knowledge and achievement.66 On the other hand, to obtain an injunction under the UTSA in Minnesota, the moving party need only show that there is a high degree of probability of inevitable disclosure.67

In the New York District Court decision  EarthWeb Inc. v. Schlack,68  the court  made clear that the inevitable disclosure doctrine should have some specific limits and absent evidence of actual misappropriation by an employee, the doctrine should be applied in only the rarest cases.69

The New York District Court used the following litmus test to assay facts under the doctrine:

Factors to consider in weighing the appropriateness of granting injunctive relief are whether: (1) the employers in question are direct competitors providing the same or very similar products or services; (2) the employee’s new position is nearly identical to his old one, such that he could not reasonably be expected to fulfill his new job responsibilities without utilizing the trade secrets of his former employer; and (3) the trade secrets at issue are highly valuable to both employers. Other case- specific factors such as the nature of the industry and trade secrets should be considered as well.70

The court went on to discuss the hazards and risks of confidentiality agreements executed at the commencement of an employment relationship being used as restrictive covenants at the end of the employment relationship.71 The court appeared concerned that employers would abuse the UTSA and covenants not to disclose trade secrets so as to effectively enjoin all competition by previous employees. The court further stated:

Another drawback to the doctrine is that courts are left without a frame of reference because there is no express non-compete agreement to test for reasonableness. Instead, courts must grapple with a decidedly more nebulous standard of “inevitability.” The absence of specific guideposts staked-out in a writing will only spawn such litigation, especially as the Internet becomes a primary medium for ideas and commerce. Clearly, a written agreement that contains a non-compete clause is the best way of promoting predictability during the employment relationship and afterwards.72

In keeping with the EarthWeb decision, the Southern District of New York further limited the doctrine of inevitable disclosure in Tactica Intern. Inc. v. Atlantic Horizon Intern. Inc, which, of course, cited EarthWeb.73 In Tactica, the court held that the doctrine of inevitable disclosure was not available to plaintiff because the defendant employees were of sufficiently low level as to not represent a threat to plaintiff’s trade secrets. Thus, absent a showing of actual disclosure, the Tactica court declined to issue a temporary injunction protecting plaintiff’s trade secrets.

Oklahoma has not yet considered the doctrine of inevitable disclosure in a published opinion. However, while it is possible that Oklahoma would accept the doctrine, it is also likely that Oklahoma would place significant restrictions on the doctrine. Based upon the tone of §219A and the Loewen decision, it is clear that Oklahoma is concerned about eliminating unfair competition while fostering an environment in which fair competition is unmolested by the law. To that end, it is  unlikely that Oklahoma would adopt the inevitable disclosure doctrine without significant controls to ensure that employers would not have a legal club with which to restrain free trade and fair competition.

Conclusion

When drafting a contractual clause for post-employment restrictions one must first clearly define the parties’ goals. If the employer’s goal is to eliminate all competition, even for a reasonable period of time and within a reasonable geographic limit, such a clause will not likely be enforceable in Oklahoma. Rather, employers need to understand that reasonable restrictions must be tied to their business information or resources. For instance, under the current law in Oklahoma it would probably be reasonable for Pepsi Co. to draft a post-employment clause with its senior Oklahoma management team restricting, for a reasonable period of time (two years under Tatum) following employment, those employees from selling beverages to any customer within Oklahoma that the management team serviced during their employment. Such an agreement is temporally and geographically reasonable and, as seemingly required by Loewen, is related to knowledge or information obtained by the employee during the employment relationship so that use of that information outside the employment relationship would create unfair competition. Moreover, such a clause is in keeping with §219A. On the other hand, if Pepsi Co. sought to restrict its former employee(s) from selling beverages to any customer within Oklahoma for two years following employment, such a clause would not likely withstand either the current common law or statutory tests in Oklahoma because it would likely be viewed as precluding fair competition.

The meaning of “directly solicit” and “established customers,” as used in §219A, will almost certainly be litigated. Oklahoma is likely, based upon interpretations accepted in other jurisdictions and the trend as begun by Loewen, to hold that “directly solicit” means no in-person or telephone contact with an established customer. Oklahoma is also likely to hold that an “established customer” means those customers of the former employer with whom the former employee had direct contact during employment. There is, however, plenty of room for good faith argument that, because the rules of construction do not extend to unambiguous terms, the plain meaning of “established customer,” i.e. any customer of the former employer that was a customer during the former employee’s employment, should be applied.

By its own terms, §219A applies only to employment relationships. Accordingly, the courts and, more importantly, lawyers must be careful not to wrongfully apply §219A, or the cases interpreting employment relationships, to other relationships of a different substantive nature. Employers can still prohibit unfair post-employment competition under §219A. However, in order to maximize legal protection — contractual or otherwise – it is imperative that the lawyer drafting the agreement(s) containing post- employment covenants review the UTSA and include language beneficial to their client. It is also important that lawyers drafting contracts based upon a relationship other than an employment relationship do not use language that could allow opposing counsel, if there is a dispute, to draw upon the provisions of law that were not intended to govern the substantive nature of the parties’ relationship. On the other hand, the UTSA is not restricted only to employment relationships. Accordingly, a well drafted instrument may allow the UTSA to provide substantial relief to parties in a variety of substantive relationships, including but not limited to employment situations.

The UTSA, while not without limits, can provide a mechanism for employers to protect their competitive advantage based upon valid trade secrets. However, Oklahoma counsel for both employers and employees should be mindful of the fact that Oklahoma has not yet adopted the doctrine of inevitable disclosure. Further, if Oklahoma does adopt the doctrine, it is likely to have some significant limitations that restrict employers from asserting the doctrine based upon naked allegations of potential harm.

Certainty is one significant reason that parties enter into written contracts. To that end, the interest of all parties is well served by an instrument that properly identifies the employer’s bonafide trade secrets and/or proprietary information. Once having established that a bonafide trade secret or piece of proprietary information is at issue, employers will next have to prove wrongful misappropriation, or inevitable disclosure and irreparable harm caused thereby. In that light, an employer is well advised to have a specific policy that establishes the information alleged as a trade secret or proprietary information was properly safeguarded and treated as such. Indeed, absent systematic policies for the handling and retention of trade secrets and/or proprietary information an employer will likely have an uphill battle in meeting its burden of proof for injunctive relief. Even if an employer can still prevail on the merits, it might be a pyrrhic victory because the employer may have already lost the commercial advantage by not having obtained a preliminary injunction to protect bonafide trade secrets and/or proprietary information.

Ultimately, while §219A seemingly codifies Oklahoma common law, the future will most likely hold an increase of post-employment litigation that involves restrictive covenants and preliminary injunctions. Our uncertain economic future, at least in the short term, coupled with technology such as the Internet, significantly increases competition for market share while decreasing certainty of previous pedestrian issues such as jurisdiction, will undoubtedly cause an increase in litigation. The first few appellate decisions on issues such as the inevitable disclosure doctrine in Oklahoma, will cause a salubrious reduction of cases. However, in the meantime, a general read of the legal tea leaves seems to favor individual rights that will protect legitimate employer trade secrets and/or proprietary information while, at the same time, fostering fair competition in Oklahoma.

1. Bayly, Martin & Fay, Inc. v. Pickard, 1989 OK 122, 780 P.2d 1168, 1171.
2. “Every contract by which any one is restrained from exercising a lawful profession, trade or business of any kind, otherwise than as provided by Sections 218 and 219 of this title, or otherwise than as provided by Section 2 of this act, is to that extent void.” Okla. Stat. Tit. 15 §217, amended by OK LEGIS 406 (2001).
3. “One who sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar business within a specified county and any county or counties contiguous thereto, or a specified city or town or any part thereof . . .” Okla. Stat. Tit. 15 §218; See also Farren v. Autoviable Service, Inc., 1973 OK 4, 508 P.2d 646.
4. “Partners may, upon or in anticipation of a dissolution of the partnership, agree that none of them will carry on a similar business within a specified county and any county or counties contiguous thereto, or a specified city or town or any part thereof. . . .”  Okla. Stat. Tit. 15 §219.
5. Bayly, Martin & Fay, Inc. v. Pickard, 1989 OK 122, 780 P.2d 1168, 1171.
6. Id., at 1170-1171.
7. E.S. Miller Laboratories, Inc. v. Griffin, 1948 OK 149, 194 P.2d 877, 879 (Okla. 1948); overruled by Bayly, Martin & Fay, Inc. v. Pickard, 1989 OK 122, 780 P.2d 1168.
8. Tatum v. Colonial Life & Accident Ins. Co., 1970 OK 27, 465 P.2d 448.
9. Board of Regents v. National Collegiate Athletic Association, 1977 OK 17, 561 P.2d 499, 508.
10. Crown Paint Co. v. Bankston, 1981 OK 104, 640 P.2d 948, 952.
11. Courts read into statutes “rule of reason”, under which only those acts, contracts, agreements or combinations which prejudice public interests by unduly restricting competition, or unduly obstructing the due course of trade, or which injuriously restrain trade, are unlawful. Crown Paint Co. v. Bankston, 1981 OK 104, 640 P.2d 948, 950.
12. Bayly, Martin & Fay, Inc. v. Pickard, 1989 OK 122, 780 P.2d 1168, 1172.
13. Fort Smith Paper Co., Inc. v. Sadler Paper Co., 482 F.Supp. 355, 357 (E.D. Okla. 1979).
14. Lawrence and Allen, Inc. v. Cambridge Human Resource Group, Inc., 685 N.E.2d 434, 442 (Ill. App. Ct. 1997).
15. McCormack v. Town of Granite, 1996 OK 19, 913 P.2d 282, 285.
16. Id.
17. Id.   See also Martin v. Hadix,  527 U.S. 343 (1999) for discussion of when rules that are seemingly procedural may impact substantive rights and thus, may not be applied retroactively.
18. Sunray DX Oil Co. v. Great Lakes Carbon Corp., 1970 OK 149, 476 P.2d 329, 346; See also Benson v. Blair, 1973 OK 102, 515 P.2d 1363, 1365.
19. Sullins v. American Medical Response of Oklahoma, Inc., 2001 OK 20, "Times New Roman";¶ 17, 23 P.3d 259, 263.
20. Id.
21. Id.
22. McKinley v. Prudential Property and Cas. Ins. Co., 1980 OK CIV APP 29, 619 P.2d 1269, 1270. See also Fraternal Order of Police Lodge No. 165 v. City of Choctaw, 1996 OK 78, 933 P.2d 261, 271.
23. 1981 OK 104, 640 P.2d 948.
24. Okla. Stat. Tit. 78 §85 et seq
25. Eichmann v. National Hosp. and Health Care Services, Inc., 719 N.E.2d 1141,1147 (Ill. App. Ct. 1999).
26. Indeed, at least one Oklahoma Court has drawn a distinction regarding franchise agreements and held that “There is a substantial likelihood that Oklahoma courts would follow the majority of courts in holding that covenants not to compete in franchise agreements are valid . . . .”  Domino’s Pizza, Inc. v. El-Tan, Inc. 1995 WL 367893, 3 (N.D.Okla.1995). In that unpublished decision, the Northern District seemingly opined that a franchise agreement is within the ambit of Okla. Stat. Tit. 15 §218 because it necessarily involves good will.
27. 2000 OK CIV APP 109, 12 P.3d 977.
28. “The determination of whether a restraint is reasonable depends on all the facts and circumstances. A restraint is deemed reasonable only if it (1) is no greater than is required for the employer’s protection from unfair competition; (2) does not impose undue hardship on the employee; and, (3) is not injurious to the public. See Tatum, 1970 OK 27 at¶ 8 465 P.2d at 451-52; see also Bayly, 1989 OK 122 at ¶ 2, 780 P.2d at 1176 (Opala, V.C.J., and Lavender, J., concurring in part and dissenting in part); Restatement (Second) of Contracts §188 (1981).”  2000 OK CIV APP 109, ¶ 15, 12 P.3d 977, 980.
29. 2000 OK CIV APP 109, ¶ 10, 12 P.3d 977, 980.
30. Id., at ¶ 21, 982.
31. Id., at ¶ 17, 980.
32. Id., at ¶ 22, 982.
33. 2000 OK CIV APP 109, 12 P.3d 977.
34. 1970 OK 27, 465 P.2d 448.
35. The Loewen Group decision was decided June 6, 2000 (corrected June 26, 2000) and Certiorari was denied September 20, 2000, while Okla. Stat. Tit. 15 §217(A) became effective on June 4, 2001 (see 2001 OK S.B. 662).
36. See 2001 OK S.B. 662.
37. See 2000 OK CIV APP 109, 12 P.3d 977.
38. 1970 OK 27, 465 P.2d 448.
39. 1970 OK 27, 465 P.2d 448, 450. The Court went on to state the specific language of then §217 was: “Every contract by which any one is restrained from exercising a lawful profession, trade or business of any kind, otherwise than as provided in the next two sections, is to that extent void”; and, to declare that §§218 and 219 did not apply to the facts at bar.
40. 1970 OK 27, 465 P.2d 448, 450.
41. Id.
42. Id., at 451.
43. Id.
44. 1948 OK 149, 194 P.2d 877. It should be noted that Miller is listed in West’s key cite with a “red flag.’  Essentially, Miller determined that the common law rule of reason did not survive enactment of §§217-219 (“In E.S. Miller Laboratories, Inc. v. Griffin, [cites omitted] this Court considered the effect of the enactment of §§217-219 on the common law, and it determined that the common law rules which analyzed covenants not to compete based on their reasonableness did not survive the enactment of §§217-219.” Bayly, Martin & Fay, Inc. v. Pickard, 1989 OK 122, 780 P.2d 1168, 1171). However, Bayly also goes on to recognize that the finding in Miller was “eroded” by Tatum v. Colonial Life & Accident Ins. Co., 1970 OK 27, 465 P.2d 448 (see Bayly at 1171).
45. 1948 OK 149, 194 P.2d 877, 878.
46. Id., at 879.
47. Okla. Stat. Tit. 78 §85 et seq
48. Okla. Stat. Tit. 78 §86(4).
49. Okla. Stat. Tit. 78 §86(1).
50. Okla. Stat. Tit. 78 §92.
51. Micro Consulting, Inc. v. Zubeldia, 813 F.Supp. 1514, 1534 (W.D.Okla.1990), affirmed 959 F.2d 245.
52. Okla. Stat. Tit. 78 §87.
53. Okla. Stat. Tit. 78 §91.
54. Okla. Stat. Tit. 78 §87(B).
55. Okla. Stat. Tit. 78 §88(B).
56. Okla. Stat. Tit. 78 §89.
57. 1996 OK 121, 932 P.2d 1091.
58. Id., at 1099.
59. 54 F.3d 1262 (7th Cir.1995).
60. Merck & Co. Inc. v. Lyon, 941 F.Supp. 1443, 1457 (M.D. NC 1996).
61. Strata Marketing, Inc. v. Murphy, 740N.E.2d1166, 1178 (Ill. App. Ct. 2000).
62. AutoMed Technologies, Inc. v. Eller, 160 F.Supp.2d 915, 921 (N.D. Ill. 2001).
63. National Starch and Chemical Corp. v. Parker Chemical Corp., 530 A.2d 31, 33 (N.J. Super. Ct. App. Div.
1987).
64. Procter & Gamble Co. v. Stoeham, 747 N.E. 2d 268, 278 (Ohio Ct. App. 2000)
65. Merck & Co. Inc. v. Lyon, 941 F.Supp. 1443, 1460 (M.D. NC 1996).
66. Id., citing Travenol, 30 N.C.App. at 693, 228 S.E.2d at 484.
67. Lexis-Nexis v. Beer, 41 F.Supp.2d 950, 958 (D. MN 1999).
68. 71 F.Supp.2d 299 (S.D. NY 1999).
69. Id., at 310.
70. Id.
71. Id.
72. Id., at 311.
73. 154 F.Supp.2d 586, 608 (S.D. NY 2001).

Michael E. Chionopoulos graduated with a J.D. from OCU in 1992. In 1988 he graduated cum laude from Midwestern State University with a B.A. in political science. He currently serves as Senior Vice President and General Counsel to CD Warehouse Inc., but will leave CD Warehouse this month to assume the position of Senior Vice President and General Counsel at Vision Management, LLC in Oklahoma City. Mr. Chionopoulos also currently serves as the Deputy Staff Judge Advocate officer in the 45th Infantry Brigade, headquartered in Oklahoma City, and has served as both an armor officer and infantry officer and commanded an infantry company. He is chairperson of the OBA House Counsel Section.