American Software USA, Inc. v. Moore
| Decision Date | 26 September 1994 |
| Docket Number | No. S94A0662,S94A0662 |
| Citation | 264 Ga. 480,448 S.E.2d 206 |
| Parties | , 1994-2 Trade Cases P 70,786 AMERICAN SOFTWARE USA, INC. v. MOORE. |
| Court | Georgia Supreme Court |
Irwin W. Stolz, Jr. and Seaton D. Purdom, Gambrell & Stolz, Atlanta, for American Software USA, Inc.
Sharon J. Strange Stepler, Lawrenceville, for Robert L. Moore.
Appellant-plaintiff develops and customizes licensed computer software and provides software maintenance and support services to its licensees. While an employee of appellant, appellee-defendant provided software maintenance and support services to appellant's licensees. After leaving his employment, appellee continued, as an independent contractor, to provide to appellant's licensees those same maintenance and support services. Alleging that appellee was violating the restrictive covenants contained in his employment contract, appellant sought injunctive relief. The trial court denied an interlocutory injunction, finding "that the restraint imposed [by the restrictive covenants] is ... unreasonable [and not] ... reasonably necessary to protect the interest of [appellant]." It is from that order of the trial court that appellant appeals.
not provide computer software installation, consulting, training, testing, implementation, programming maintenance or modification services directly on or affecting any computer software product supplied to any third party by [appellant] anywhere in the United States of America.
By the terms of the covenant, appellee is not, for any length of time, prohibited from all post-employment servicing of every computer software product. The only proscription is a limited two-year restriction upon appellee's performance of services in connection with the specific software which appellant has developed and customized for its licensees. Appellee is free to perform services in connection with any other software at any time and for anyone who is willing to hire him, including appellant's competitors and appellant's licensees. Thus, as to duration and proscribed post-employment competitive activity, this restrictive covenant is not unreasonable in its scope.
Appellee urges that the two-year proscription on his post-employment competitive activity is nevertheless unenforceable for lack of a reasonable limitation upon its territorial scope. With regard to restrictive covenants in employment contracts, it has been recognized that,
[a]s the group [of customers] which the employer wishes to protect from solicitation by former employees becomes more narrowly defined, the need for a territorial restriction expressed in geographic terms becomes less important. [Cit.] (Emphasis supplied.)
W.R. Grace & Co. v. Mouyal, 262 Ga. 464, 467(2), 422 S.E.2d 529 (1992). Here, however, the group of customers which the restrictive covenant purports to protect from appellee's post-employment competitive servicing of appellant's software is broadly defined as "any" of appellant's licensees.
[A] restrictive covenant prohibiting a former employee from rendering services to any client of the employer must contain a territorial restriction expressed in geographic terms because that restriction, which does not take into account whether the employee had a business relationship with that client or whether it was the client who solicited the former employee, is otherwise unreasonable and overbroad in its attempt to protect the employer's legitimate interest in keeping the employee from taking advantage of the goodwill generated during his employment with the employer to lure employer customers away. (Emphasis in original.)
W.R. Grace & Co. v. Mouyal, supra at 467(2), fn. 3, 422 S.E.2d 529. This restrictive covenant prohibits the employee from engaging in post-employment competitive servicing of the former employer's software supplied to "any" of the former employer's licensees "anywhere in the United States of America." Thus, we must decide whether the territorial restriction expressed in those geographical terms is unreasonably expansive. There is a "vital difference" between
territorial restrictions relating to the geographic area where the employer does business, and restrictions relating to the area where the employee did business [on behalf of the employer].... [Cits.] A restriction relating to the area in which the employer does business is generally unenforceable due to overbreadth, unless the employer can show a legitimate business interest that will be protected by such an expansive geographic description. [Cits.] A restriction relating to the area where the employee did business on behalf of the employer has been enforced as a legitimate protection of the employer's interest ( [cits.] ), but the prohibition against post-employment solicitation of any customer of the employer located in a specific geographic area is an unreasonable and overbroad attempt to protect the employer's interest in preventing the employee from exploiting the personal relationship the employee has enjoyed with the employer's customers. [Cits.] (Emphasis in original.)
W.R. Grace & Co. v. Mouyal, supra at 466-467(2), 422 S.E.2d 529.
The territorial restriction involved in this case encompasses "anywhere in the United States of America" that appellant does business through the licensing of its software, without regard to whether appellee may have done any licensed software business on behalf of appellant at any specific location in the country. Appellant certainly has a "legitimate business interest" in protecting its trade secrets and confidential business information which were utilized in developing and customizing its software. However, that "legitimate business interest" is otherwise protected by the separate non-disclosure restrictive covenant in appellee's employment contract, rather than by the non-competition restrictive covenant which only precludes appellee from providing service on appellant's already existing software. There is no evidence that it is only those individuals employed by appellant and given access to appellant's trade secrets and confidential business information who possess the technical ability to service appellant's software. Indeed, the evidence shows that numerous independent contractors, who are not former employees of appel...
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