EarthWeb provided online products and services to business professionals in the information technology (IT) industry. EarthWeb operated through a family of websites offering information, products, and services for IT professionals to use for facilitating tasks and solving technology problems in a business setting. EarthWeb obtained this content primarily through licensing agreements with third parties. Schlack began his employment with EarthWeb in its New York City office. His title at EarthWeb was Vice President, Worldwide Content, and he was responsible for the content of all of EarthWeb’s websites. Schlack’s employment contract stated that he was an employee at will and included a section titled “Limited Agreement Not To Compete.” That section provided: (c) For a period of twelve (12) months after the termination of Schlack’s employment with EarthWeb, Schlack shall not, directly or indirectly: (1) Work as an employee . . . or in any other . . . capacity for any person or entity that directly competes with EarthWeb. For the purpose of this section, the term “directly competing” is defined as a person or entity or division on an entity that is
(i) An online service for Information Professionals whose primary business is to provide Information Technology Professionals with a directory of third party technology, software, and/or developer resources; and/or an online reference library, and or
(ii) an online store, the primary purpose of which is to sell or distribute third party software or products used for Internet site or software development.
About one year later, Schlack tendered his letter of resignation to EarthWeb. Schlack revealed at this time that he had accepted a position with ITworld.com.
a. What arguments would support EarthWeb’s enforcement of the covenant not to compete?
b. What arguments would support Schlack’s argument that the covenant is not enforceable?
c. Which side should prevail? Explain.
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