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SimpliVity Corp. v. Moran

Superior Court of Massachusetts, Suffolk

August 12, 2016

SimpliVity Corporation
v.
Keith Moran

         Filed August 14, 2016

          MEMORANDUM OF DECISION AND ORDER ON EMERGENCY MOTION FOR A PRELIMINARY INJUNCTION

          Maureen B. Hogan, Associate Justice

         The plaintiff SimpliVity Corporation (" SimpliVity") brings this action to enforce confidentiality and non-competition provisions of a Proprietary Information and Inventions Agreement signed by its former employee, the defendant Keith Moran (" Moran"), as a condition of his employment.[1] The matter is before the court on SimpliVity's motion for a preliminary injunction. After hearing and consideration of the verified complaint, the affidavits of Jakob Wahlberge, and the affidavit of Moran, as well as the attached exhibits, * for the following reasons, the motion will be ALLOWED.

         BACKGROUND

         The following facts were obtained from the verified complaint, the affidavits, and exhibits submitted by the parties.

         SimpliVity is a start-up corporation which develops and sells converged IT infrastructure and software defined data center products in the markets of the information technology and services industry. SimpliVity was established in 2009, but did not formally launch its innovative converged IT infrastructure products into the information technology market until September 2012.[2] SimpliVity's products are designed to simplify IT for businesses by converging a number of functionalities of numerous disparate products, including server, storage, IT protection and management, into " all in one" products. SimpliVity is a leader in the market for converged IT infrastructure products. SimpliVity sells its products to small, medium and large for-profit and non-profit civilian and government entities all over the world. SimpliVity's products have received broad market acceptance due to their technical superiority to competing products and the team of sales professionals at SimpliVity who market and sell these products.

         The IT infrastructure and data storage industry is highly competitive. SimpliVity competes with many companies, such as EMC, VCE (a joint venture of EMC and Cisco), Hewlett Packard, and Dell, but its direct and primary competitor is another start-up company, Nutanix. Like SimpliVity, Nutanix also develops and sells converged IT infrastructure and software defined data center products in the same markets as SimpliVity. Both SimpliVity and Nutanix pursue the same target customers, pursue the same type of resellers and partners, and present a very similar set of value propositions, marketing tactics, and themes to customers. Both Nutanix and SimpliVity refer to themselves as direct competitors in their marketing materials, on blogs and through social media. Customers, partners, and the media also view and refer to SimpliVity and Nutanix as direct competitors.

         To maintain a competitive advantage in this highly competitive and rapidly developing market, SimpliVity expends substantial resources and effort to train its employees and to safeguard and protect its confidential information. SimpliVity password protects its computers, requires employees to sign non-disclosure agreements, restricts employee access to confidential information, and employs physical security measures at its offices. In order to protect its patentable, trade secret and confidential information, as well as its customer and employee relationships, SimpliVity requires employees to sign Proprietary Information and Inventions Agreements.

         Moran began working for SimpliVity on or about April 29, 2013 as a Regional Sales Director, shortly after SimpliVity introduced its innovative products into the IT market. Prior to working for SimpliVity, Moran was employed as a salesperson by two companies, EMC and NetApp, which sell data storage products and services in the markets of the information technology and services industry. Moran began working for EMC in 2003. For the first nine months, he performed inside sales work and attended EMC's training program, where he learned how the date storage industry worked. He next worked for EMC for approximately two years in the San Francisco Bay area, selling date storage products and services. Moran left EMC in 2006 and joined NetApp as a salesperson in the Illinois area. He worked with NetApp until he joined SimpliVity in April 2013. One year before he left NetApp, he was promoted to Regional Sales Manager with a sales territory that covered the upper Midwest, including Illinois and Indiana.

         During the ten years Moran worked in the data storage industry prior to joining SimpliVity, Moran developed a network of IT professionals involved in the data storage industry with whom he developed relationships. Such IT professionals included buyers of data storage product, individuals who make referrals to buyers of data storage products, and business partners who are referred to as value added resellers--companies that sell IT infrastructure products. Such business partners make recommendations and introductions to buyers of data storage products. Moran's relationships with business partners was a key source of customers for him. Moran also found new customers through Trade Shows and on-line databases. When Moran joined SimpiVity, he was asked to tap into the network of IT professionals he had developed to find customers and employees for SimliVity. The relationships Moran has with such IT professionals make him a valuable salesperson.

         When Moran started with SimpliVity on April 29, 2013 as a Regional Sales Director, he was responsible for developing SimpliVity's business in five states in the Midwest region of the United States. Moran was promoted in the third quarter of 2013 to a position where he managed SimpliVity's sales for eighteen states. In the second quarter of 2014, Moran was again promoted to Director of Midwest Sales, in which position he was responsible for SimpliVity's sales for the entire Midwest, Central, Plains and Texas regions of the United States, as well as the Central Canadian Territory, which included 19 states and two Canadian provinces. In this position, Moran supervised nine SimpliVity employees.

         On April 29, 2013, as a condition of his employment, Moran entered into a Proprietary Information and Inventions Agreement (the " Agreement") with SimpliVity. By agreeing to the terms of this Agreement, Moran agreed that the Agreement was " a material part of the consideration of my employment and continued employment by" SimpliVity. By signing this Agreement, Moran agreed to the following non-solicitation and non-competition restrictions, provided in Section 4(d) of the Agreement:

After Termination
For the period of one year immediately following termination of my employment with the Company (for any or no reason, whether voluntary or involuntary), I will not directly or indirectly: (i) Cause any person to leave their employment with the Company; (ii) Cause any person who was employed by the Company during the last six months to become an employee of mine or a third party; (iii) Solicit any Business Partner; or (iv) Act in Any Capacity in or with respect to any Competing Business located within the Commonwealth of Massachusetts, the rest of the region known as New England, the rest of the United States, or anywhere else in the world.

         Section 4(c) of the Agreement defines " Competing Business" as " any commercial activity which competes or is reasonably likely to compete with any business that the Company conducts, or demonstrably anticipates conducting, at any time during my employment." Section 4(a) of the Agreement also defines other relevant terms:

Definitions
Any Capacity includes, without limitation, to (i) be an owner, founder, shareholder, partner, member, advisor, director, consultant, contractor, agent, employee, affiliate or co-venturer, (ii) otherwise invest, engage or participate in, (iii) be compensated by, or (iv) prepare to be or do any of the foregoing or assist any third party to do so; provided, Any Capacity will not include being a holder of less than one percent (1%) of the outstanding equity of a public company. Business Partner means any past, present or prospective customer, vendor, supplier, distributor or other business partner of the Company with which I have contact during my employment. Cause means to recruit, employ, retain or otherwise solicit, induce or influence (or to attempt to do so). Solicit means to (i) service, take orders from or solicit the business or patronage of any Business Partner for myself or any other person or entity, (ii) divert, entice or otherwise take away from the Company the business or patronage of any Business Partner, or to attempt to do so, or (iii) to solicit, induce or encourage any Business Partner to terminate or reduce its relationship with the company.

         In Section 3 of the Agreement, Moran " agree[d] that all Assigned Inventions and all other business, technical and financial information, including the identity of and information relating to the company's employees, Affiliates and Business Partners (as such terms are defined below), which I develop, learn or obtain during my employment that relate to the Company or the business or demonstrably anticipated business of the Company, or that are received by or for the Company in confidence, constitute Proprietary Information ." Moran further agreed to " hold in confidence and not disclose or, except within the scope of my employment, use any Proprietary Information" and upon termination of his employment " to promptly return to the company all items containing or embodying Proprietary Information . . ."

         In Section 4(b) of the Agreement, Moran " acknowledge[d] and agree[d] that (i) the Company's business is highly competitive, secrecy of the Proprietary Information is of the utmost importance to the Company and that [he] will learn and use Proprietary Information in performing [his] work for the Company." He further acknowledged that his " position may require [him] to establish goodwill with Business Partners and employees on behalf of the Company and such goodwill is extremely important to the Company's success." In Section 4(e) of the Agreement, Moran further agreed that he understood that the restrictions set forth in section 4, namely the non-solicitation and non-competition restrictions, " are intended to protect the company's interest in its Proprietary Information and established relationships and goodwill with employees and Business Partners" and he agreed that such ...


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