Jumping Ship and Getting Sued For It: Nike v. Ralph Lauren

Two days, Nike Inc., filed a breach of a restrictive covenant suit against Matthew Millward, its senior apparel designer. The action was commenced after Millward jumped ship to work and design for an arch competitor of Nike’s, Ralph Lauren’s Club Monaco brand. The suit caught our attention not only because of the notable parties, it is also the type of case that we routinely handle for our own clients.

As a condition of his employment in 2012, Millward was required by Nike to sign a one year non-compete and non-disclosure agreement by which he was not to compete with Nike for one year following the termination of his employment by working for, managing or owning a business in among others, the athletic footwear, athletic apparel, sports electronics, sports equipment, or sports accessories business (the “Agreement”). In addition, the Agreement requires Millward to maintain the confidentiality of Nike’s trade secrets. Unlike many non-competes, Nike is to pay Millward fifty percent of his regular salary during the non-compete period.

Millward resigned from Nike on October 6, 2015, and Nike’s Complaint states that it did not learn that Millward was in violation of the Agreement until November 19, 2015. Although it took Nike three weeks to file its Complaint on December 7, 2015, it can be assumed that cease and desist and response letters were flying back and forth in the interim.

Nike’s Complaint states that “Millward was responsible for “managing the look and feel of new NSW products…design vision” and business plan execution. Nike claims that Millward had access to numerous trade secrets pertaining to design, R&D, and long term strategy both for his group and for others within the company. It alleges that Nike will be “irreparably harmed by Millward’s ongoing employment with Ralph Lauren” and that through Millward “Ralph Lauren will have access to all of Nike’s current planning for its Sportswear line through approximately 2018.”

The case is interesting for a number of reasons: the parties, the industry and the legal questions it presents. First, the parties are high visibility and Nike has a global market. Second, Millward’s designs produced clothing referred to in the industry as “sportstyle innovation” or “athleisure,” the designs and fabrics of one manufacturer often resembles that of its competitors and are often quickly “knock-ed off”. Third, the legal arguments: Is the restrictive covenant too broad given its world-wide geographic scope and the breadth of businesses Millward is precluding from working in? Is it enough to pay Millward only 50% of his salary to keep him out of several distinct job categories world-wide? Millward may further claim that the designs in the industry are not true trade secrets for they are similar in look, fabric and technology and quickly copied.

Indeed, it is ironic that to activate the prohibitions of the Agreement, Nike alleges that Club Monaco manufactures products that are similar to its own and to make its point Nike included in its Complaint a series of side by side photos of Nike and Club Monaco products, that to the untrained eye are virtually identical. Might Millward simply argue that keeping him out the market for a year will not protect Nike’s trade secrets for none are at play, but punitively just prevent him from earning a living? While Oregon has enacted a non-competition statute, Or. Rev. Stat. § 653.295, it does not afford Nike protection to prevent Millward from working and using his “general knowledge that he acquired through training and experience,” something Millward will argue he is entitled to do.

We will keep our readers posted as this case progresses.