One of the most critical points in the enforcement of a noncompete is when a company first learns that a former employee may be engaging in unfair competition. Indeed, the steps taken by the company in the first few days can often determine whether it will be successful in limiting the amount of harm done.
In many case, the company will act quickly and seek emergency injunctive relief to stop imminent irreparable harm to its business. In other cases, the company may try to resolve the dispute with the competitor by engaging in settlement discussions at the outset. The benefit of the latter strategy, of course, is that a business resolution is often preferable to the expense and uncertainty of litigation.
But companies that chose the settlement route need to be aware that the passage of time can compromise their ability to get relief from a court should discussions break down, particularly if it needs an emergency injunction. In a recent Chancery Court hearing on an application for a temporary restraining order, the court was quick to point out plaintiff’s apparent four month delay after learning of the defendants activities before seeking the TRO. The plaintiff responded that the delay was due in part to its efforts to work out a standstill agreement with the defendants. As noted in the transcript excerpt below, the court was not sympathetic to this argument: