In the mid-1980s, Deere & Co. became interested in installing a draft sensor device on its tractors, which would regulate the depth and mechanical forces on the plow. In June 1986, Deere entered an agreement with Revere Transducers to install the “Gozinta” strain gauge on Deere tractors to serve as draft sensor devices. Revere and Deere worked jointly on the project, taking four years to develop the product. Revere specially hired two men, engineer Francis Delfino and product manager Greg Eckart, in late summer 1986 to work on the “Gozinta” project. Both signed nondisclosure agreements, in which they agreed not to disclose any inventions or discoveries either during their employment or for a one year period after their employment. No other formal agreements existed between Revere and the two men who, in all other respects, were at-will employees.
The “Gozinta” turned out to be a failure. Deere believed the defect resulted from Revere’s decision to use poor-quality knurls without consulting Deere. Due to significant downsizing, Delfino and Eckart were told that they would be released in 1989. At about the same time, Eckart was independently studying the viability of a sensor that could be welded to the plow instead of pressed—an idea previously rejected by Revere. Delfino and Eckart spoke with Deere about the possibility of starting a new company to supply Deere with the welded sensors, and Deere stressed that, if they proceeded, it was vital that they took no documents, models, or engineering drawings from Revere.
In March 1989, Delfino and Eckart started their own company—D & E Sensor Manufacturing, Inc. D & E formally proposed its idea for the new sensor—the “weldzinta”—to Deere and received a purchase order from Deere for $172,900. Revere sued Deere for tortious interference of contract. Deere argued that the suit should be dismissed on the grounds that the nondisclosure contract was not enforceable. Under Iowa law, restrictive covenants are evaluated under a three-pronged test:
(1) Is the restriction reasonably necessary for the protection of the employer’s business?
(2) Is the restriction unreasonably restrictive of the employee’s rights?
(3) Is the restriction prejudicial to the public interest? Is the NDA enforceable? Why, or why not?