Unfair Competition in Business: What Conduct Is Illegal?

Misappropriation generally involves the bad-faith appropriation of another company's protected commercial advantage.

In ITC Ltd. .. Punchgini, Inc., 9 N.Y.3d 467 (2007), the New York Court of Appeals recognized protection against certain forms of goodwill misappropriation while rejecting a separate famous marks doctrine.

Palming off occurs when a business presents its goods or services as originating from another company. The claim focuses on misleading commercial identity rather than product similarity alone.

Businesses generally may reduce prices, develop competing products, and solicit prospective customers. Additional facts, such as deception or misuse of protected information, can change the legal assessment.

Lost customers or declining revenue alone do not establish an actionable unfair competition claim.

New York common-law unfair competition may address bad-faith misappropriation of proprietary information, goodwill, or other protected commercial advantages.

The Lanham Act, 15 U.S.C. §1125(a), addresses qualifying false representations about commercial origin, affiliation, sponsorship, or advertising.

The Defend Trade Secrets Act, 18 U.S.C. §1836, provides a federal civil remedy for qualifying trade secret misappropriation involving products or services used in, or intended for use in, interstate or foreign commerce.

New York General Business Law §349(a), amended in 2026, prohibits unfair, deceptive, and abusive commercial practices. The New York Attorney General may seek enforcement concerning these prohibited practices.

However, §349(h) authorizes private actions for injury caused by deceptive acts or practices. A private plaintiff generally must establish consumer-oriented conduct, material deception, and resulting injury. Unfair treatment in an isolated business dispute does not automatically establish a private §349 claim.

Contractual Duties and Competitive Restrictions

Confidentiality agreements may restrict how employees or business partners use customer records, pricing information, and proprietary materials.

Unauthorized disclosure may support a breach of contract claim, even when the facts do not independently establish unfair competition.

Noncompetition and nonsolicitation provisions require separate scrutiny. New York courts examine whether post-employment restrictions reasonably protect legitimate business interests without imposing undue hardship or harming the public.

Signing an agreement does not automatically make every restriction enforceable.

In Premium Prods., Inc. .. O'Malley, 2026 NY Slip Op 00918, the Appellate Division, Second Department, considered allegations that a departing employee downloaded customer contacts, proprietary sales information, pricing plans, and advertising materials without authorization.

The court found sufficient allegations to sustain the unfair competition claim at the pleading stage. It also granted limited preliminary injunctive relief against disclosure of the company's proprietary and confidential information, without broadly prohibiting competition.

The court distinguished the unfair competition claim from copyright claims because the alleged breach of confidentiality duties supplied an additional element. It separately found the employment restrictions overbroad but left open whether portions could be enforced after further factual development.

The decision did not establish final liability or conclusively uphold the restrictive covenants.

A business alleging misappropriation should identify the information taken, its protected status, and how the defendant allegedly used it.

Employment agreements, file-access logs, transferred documents, and customer communications can help establish those facts. Public availability or independent development of the information may support a defense.

Businesses can reduce disputes by limiting access to confidential materials, documenting employee obligations, and reviewing information transfers during departures.

These measures may support existing intellectual property protections and broader business risk management procedures.

New York Supreme Court has broad civil jurisdiction over business disputes. Under 22 NYCRR §202.70, qualifying cases may receive Commercial Division assignment.

These amounts govern Commercial Division eligibility, not the minimum required to file a civil action in New York Supreme Court.

Assignment also depends on the case type and applicable exceptions. For qualifying actions seeking equitable or declaratory relief, the value of the object of the action determines whether the monetary threshold is satisfied.

The Eastern District of New York serves Nassau and Suffolk Counties and maintains a courthouse in Central Islip. Qualifying federal trademark or trade secret claims may establish federal-question jurisdiction. State-law claims require an independent jurisdictional basis or valid supplemental jurisdiction.

Damages generally compensate for legally recoverable losses. A claimant must establish a connection between the wrongful conduct and the claimed harm, along with an adequate basis for calculating the amount.

An injunction instead seeks to prevent or restrain unlawful conduct. Under CPLR §6301, preliminary relief generally requires clear and convincing evidence of likely success on the merits, irreparable harm, and a favorable balance of equities.

Filing deadlines depend on the substance of the claim. In Rossi Mktg. Group, Inc. .. Malin Group, Inc., 2026 NY Slip Op 04987, the First Department applied the six-year limitations period under CPLR §213(8) to fraud-based unfair competition allegations.

Other claims may have different limitations periods. Businesses should preserve records of when the alleged conduct occurred and when they discovered it, without assuming that discovery always starts the filing period.

Before pursuing commercial litigation, businesses should examine applicable deadlines, available remedies, and contractual dispute-resolution requirements.