2. RESEARCH PLANNING SIMULATION 235

Memo to File: (Distributed prior to class. In class students are divided into groups representing the major audiences-Waters, Mooney, Michaels, WNF, Inc., PRU, Inc. and the Children's Toy House, Inc. Students brainstorm audience interests and needs,236 common and conflicting interests among the audiences, possible solutions (legal and non-legal) and research plans to protect their “clients” interests. Simulations of this nature based on representative clinical cases would be a valuable part of a clinical research instruction module.)

Bob Waters spent the first half of his career creating many popular characters on children's public television programs. In 1987, he left television to start his own business, the “Warm /N Fuzzy Toy Factory” (“WNF”), in [City], [State]. WNF began as a regional toy manufacturer, marketing its own line of nurturing, cuddly-type toys primarily to smaller, non-chain toy retailers in New England and along the Atlantic coast. WNF began turning a profit in 1992, enjoying steady growth through 1996, when annual sales peaked at [fill in amount].

Waters is philosophically opposed to producing toys that encourage or promote violence. His nephew, who spends most of his free time playing video games, has a history of violent, delinquent behavior. Waters has steadfastly rejected suggestions from WNF managers/product developers to establish online products for children, because he believes the medium lacks proper safeguards for protecting children from violent influences. Unwilling to embrace the preferences of the video generation for action entertainment, WNF's business has stagnated in recent years. In 1999, Waters was forced to sell [fill in amount] of his WNF interest to “Profits R Us” (“PRU”) to save the company.

PRU's CEO, Moore Mooney, and Waters who stayed on as WNF's president, have had a rocky relationship. PRU owns many national businesses, but WNF is its first venture into the toy industry. Mooney believes that WNF must establish a national presence, like other PRU businesses. Not surprisingly, Waters prefers to concentrate on regional growth so that WNF won't get spread too thin or compromise its [his] mission to produce wholesome toys.

In 2000, at Mooney's urging, Waters hired Todd Michaels to turn WNF around. Michaels was considered a rising star in the toy industry, combining sound business acumen with a creative streak for designing toys that captured children's imagination and parents' pocketbooks. Michaels signed a non-competition agreement providing that he would not compete within [ ] miles of WNF's headquarters for two years after leaving the company. The agreement also provided that WNF would retain exclusive rights to Michael's work product created at WNF.

Michaels succeeded in increasing WNF's regional toy sales through 2002, but became frustrated over Water's refusal to expand online. Under the guise of market research, Michaels developed a video game and web site featuring hipper versions of the traditional WNF line of characters. Michaels' game would likely be “E” rated and presumably suitable for Waters audience. Several members of WNF's management team agreed with Michaels that this would be an excellent opportunity to take the business online without compromising the traditional image of most of its major characters. Waters and a few of the more senior managers disagreed and nixed the project.

WNF's business plummeted in 2003. Michaels decided he had enough of trying to breathe life into the stale and dated WNF line of toys and invented “Mad Morton”, a smart-talking, no-nonsense, in your face action figure. Market tests indicated that 6-8 year old boys would fall hard for Mad Morton. Mad Morton bears a striking resemblance to “Magnificent Marty”, an original WNF character. (Remove Mad Morton's nose ring and tattoos and you have Magnificent Marty.) Waters was appalled and halted production before the first Mad Morton hit the assembly line. Michaels resigned.

In 2004, Michaels set up his own company in [city], [state], 85 miles from WNF headquarters. He sells “Mad Michael” (Morton minus the nose ring) on his web site, but doesn't have the production capacity PRU could have provided to fill all his orders. His web site receives orders for Mad Michael nationwide. Along with his production woes, Michaels is not all that happy about his new home. The cost of living is higher in [new city] than in [old city], the schools aren't as good (Michaels has six and eight year old daughters), and he misses working with most of his former WNF colleagues.

Waters wants to sue Michaels for breaking the employment contract, stop him from selling Magnificent Marty's “evil offspring,” and shut down his web site. Michaels claims that he is not competing with WNF since WNF doesn't sell its products online. He also believes that WNF has no legal right to Mad Michael.

Mooney, PRU's CEO, believes there's still money to be wrung from WNF, but not without completely overhauling its outdated product and marketing philosophy. Michael's web site intrigues Mooney as a base for building PRU's toy business, but it was Mooney who originally insisted that Waters require Michaels to sign the non-competition agreement. Non-competition agreements have been required as a matter of course in all PRU businesses. Mooney is concerned, however, about alienating potential PRU and WNF customers if Waters succeeds in shutting down Michaels.

The “Children's Toyhouse” which is based in [City], [State] and which operates primarily in southeastern states, has contacted Waters about merging the two companies. Children's Toyhouse claims to be on solid economic footing. Based on their initial approach, Waters is encouraged that Children's Toyhouse's corporate values appear to be compatible with his. He believes that a deal could be struck quickly subject, of course, to Mooney's approval. The Children's Toyhouse is especially interested in the old Magnificent Marty character, which it sees as a valuable asset with a little sprucing up and some clever marketing.

The following preliminary summary of the law (including the fictional Uniform Law described in the summary) is made up solely for the purposes of this exercise. Assume it is accurate for purposes of this exercise.

Courts in WNF's home state have traditionally weighed the employer's interest strongly when construing non-competition agreements. The cases are based on common law principles set out in a 1973 state high court decision. Three years ago, the National Conference of Commissioners on Uniform State Laws approved the Uniform Non-Competition Act, which, in part, attempts to bring the law of non-competition agreements in line with modern e-commerce business practice.

Commentators suggest that the Act is employee-friendly. New York, Michigan, Connecticut, Texas, and Maine enacted versions of this Act in 2003. Massachusetts and California, Pennsylvania, and WNF's home state enacted similar versions this year.237