Public policy favors protecting intellectual property in arbitration, and both Congress and the courts support, and in fact encourage, arbitration of intellectual property disputes. This support stems from the history of favoritism toward private arbitration agreements and other alternative dispute resolution in lieu of judicial adjudication. Because intellectual property disputes often involve commercial parties transacting business across state lines, arbitration is governed by the Federal Arbitration Act (FAA). Availability of provisional remedies such as injunctions has also proven effective in the area of intellectual property disputes. However, unlike the option and process of private arbitration where there is little to no court involvement, provisional remedies can be awarded either by the arbitral panel or by court order. As a result, complications arise when parties decide to involve the courts when seeking provisional remedies pending arbitration of disputes. Courts are split as to whether parties can seek provisional remedies such as preliminary injunctions in disputes that are subject to arbitration under the FAA." This paper will demonstrate the consequences of the unavailability of provisional remedies by examining the cases involving Merrill Lynch, Pierce, Fenner & Smith, Inc. (Merrill Lynch), an investment firm, in the field of trade secret disputes with former employees. In short, the cases illustrate how this split in the Circuit Courts can have an unwarranted impact on the enforceability of protective covenants in employment agreements. This paper suggests that the courts should not only be uniform in their interpretation of the extent of their authority to issue preliminary injunctions under the FAA, but they should also adopt a common standard for issuing such injunctions. This paper will introduce the concept of trade secrets in section I(A). Section II will introduce preliminary injunctions under Federal Rule of Civil Procedure 65 and its relationship to trade secret disputes. The Federal Arbitration Act will be discussed in section III. Section IV will give the background information on Merrill Lynch, including a summary of the dispute that typically arises. Section V will summarize the main issues to be discussed in the rest of the paper. Section VI will discuss and analyze the Merrill Lynch cases. Section VII will discuss further implications as evident from the history of this issue, and Section VIII will conclude with a final thought as to why this issue should be resolved by the Supreme Court.
A Secret in One District Is No Secret in Another: The Cases of Merrill Lynch and Preliminary Injunctions Under the FAA ,
6 Pepp. Disp. Resol. L.J.
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