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Enforcement of Non-Compete Agreements When Damages Are Incalculable

Recently, the Appeals Court of Massachusetts had to decide whether a preliminary injunction blocking a Defendant from accepting a new position with a competitor was properly issued in litigation to enforce a non-compete agreement in the pharmaceutical industry. Ultimately, in Genzyme Corporation v. Laidlaw, the Appeals Court upheld an order for preliminary injunction despite the inability of Genzyme to predict and calculate damages and any market effect.

The Defendant Laidlaw started working for Genzyme in 2007 as a medical science liaison. He worked primarily on Genzyme's patented drug Renvela, used in the treatment of patients with kidney failure who undergo dialysis. Laidlaw eventually rose through the ranks to become Director of the national renal medical science liaison team in June of 2012. In the course of his employment Laidlaw signed four separate non-compete and non-solicitation agreements that, prohibited him from competing with Genzyme anywhere in the United States for a period of one year after termination of his employment. In September, 2013, Laidlaw announced that he was leaving Genzyme to take a comparable position with Keryx Biopharmaceuticals, Inc. Keryx had only one drug in development, Zerenex, which will compete directly with Genzyme's Renvela. At the time of litigation, Keryx had filed a new drug application for Zerenex with the Federal Drug Administration, but the earliest Zerenex could be marketed was June, 2014.

Genzyme filed an action to enforce the non-compete agreement on October 18, 2013, and moved for a preliminary injunction the same day. After a hearing, a judge of the Superior Court allowed the motion for a preliminary injunction, enjoining Laidlaw from employment with Keryx until September 23, 2014. Laidlaw appealed.

On appeal, Laidlaw argued that his employment with Keryx is inconsequential because the patent protection for Renvela was set to imminently expire thus reducing Genzyme's market share drastically, and render the drug economically inconsequential to Genzyme, a multi-billion dollar business. Genzyme conceded that eventual patent expiration may lead to diminution of its market share, but cannot reasonably be considered either imminent or necessarily drastic as Keryx was the only company to apply for a new drug application and it was not yet approved. Therefore, it was difficult to predict the potential market developments as a consequence of the prohibited competitive conduct if the Court failed to enforce the non-compete and this unknown outweighed any potential damages of Laidlaw for lost wages.

As in the Superior Court, Genzyme's arguments resonated with the Appeals Court and the Court affirmed the preliminary injunction enforcing the non-compete by holding:

As the judge correctly observed, Genzyme's damages 'although real and likely substantial, will be difficult to isolate and quantify.' ... Laidlaw's maximum damages, by contrast, can be ascertained with reasonable precision: loss of income until September 2014. While taking into account, as did the judge, that Laidlaw works to support his family, we cannot say that the judge's exercise of discretion accorded undue weight in Genzyme's favor to the evidence. The inability to predict market developments, hence to quantify the impact of the prohibited competition on Genzyme's revenues, is a well-recognized attribute of irreparable harm.

This decision in Laidlaw represents an elusive victory for an employer to enforce a non-compete in a Massachusetts court. It is an intriguing decision in the sense that it illustrates that incalculable damage that is difficult to isolate and quantify, but potentially real can support a finding of irreparable harm and form the basis for enforcement of a non-compete agreement.

If you are an employer or an employee with questions about a non-compete agreement and prohibited conductcontact Attorney Mucci, an attorney with experience in litigating non-compete agreements.

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