Business Law Discussion

Taser International, Inc. v. Ward Court of Appeals of Arizona, Division 1, 224 Ariz. 389, 231 P.3d 921 (2010).

Facts Taser International, Inc., develops and makes electronic control devices—stun guns—as well as

accessories for them, including a personal video and audio recording device called the TASER

CAM.

Steve Ward was Taser’s vice president of marketing when he began to explore the possibility of

developing and marketing devices of his own design, including a clip-on camera. Ward talked to

patent attorneys and a product development company and completed most of a business plan.

After he resigned from Taser, Ward formed Vievu, LLC, to market his clip-on camera. Ten

months later, Taser announced the AXON, a product that provides an audio-video record of an

incident from the visual perspective of the person involved. Taser then filed a suit in an Arizona

state court against Ward, alleging that he had breached his duty of loyalty to Taser. The court

granted Taser’s motion for a summary judgment in the employer’s favor. Ward appealed.

Issue Can an employee, while working at a company, research and develop a device to use in

competition with the company’s products?

Decision No. A state intermediate appellate court agreed with Taser that an employee may not actively

compete with his employer before his employment is terminated. But the parties disputed the

extent of Ward’s pre-termination efforts, creating a genuine issue of material fact that could

not be resolved on a motion for summary judgment. The appellate court thus reversed the

lower court’s decision in Taser’s favor and remanded the case for further proceedings.

Reason

An agent has a duty to act with good faith and loyalty for the furtherance of the interests of his

principal in all matters concerning or affecting the subject of his agency. One aspect of this

broad principle is that an employee is precluded from actively competing with his or her

employer during the period of employment.

Although an employee may not actively compete prior to termination, the court noted that an

employee can take certain actions to prepare for later competition that are not otherwise

wrongful. Ward argued that his pre-termination activities did not constitute active competition

but were merely lawful preparation for a future business venture. The appellate court

concluded that this dispute was one that needed to be resolved by a trial.

Critical Thinking Question

Critical Thinking

• Legal Environment Did Ward breach any duties owed to his employer in addition to his

alleged breach of the duty of loyalty? Discuss.