Posts Tagged: "non-competition agreements"

Why the IP system works against the small

The decision whether to secure technology using a trade secret or a patent hinges as much on the technology as it does on access to capital. Small companies need funding to commercialize new inventions. A patent provides a private property right that can be leveraged to attract funding. However, most large companies like Waymo, one of the richest on the planet, do not need funding. This is no doubt why Alphabet and its Google subsidiary have lobbied to weaken the patent system. It is understandable because it is in the best interests of their well-funded enterprises. It is, however, not in the best interest of innovation more generally speaking, nor is it in the interest of society… The IP system as it currently exists acts to protect huge monopolistic enterprises at the expense of everyone else – employees, startups, job creation, innovation, and society at large. It is no wonder that startups in America continue to decline, as recently reported by none other than the NY Times.

What Will Not Work to Protect Trade Secrets or Enforce Non-Competes in California

Employers should think twice before including the unenforceable provisions in employment contracts merely for their deterrent effect. Such a practice is risky. If an employer terminates an employee who refuses to sign an agreement that contains an unenforceable non-compete provision, such action would constitute a wrongful termination in violation of public policy and would entitle the employee to recover tort damages, including punitive damages, as well as economic damages… Given the strong protections against non-competes in California, it is too risky to require employees to sign employment agreements that contain these provisions. All employment agreements entered into with employees who live or work in California should be carefully reviewed to ensure compliance.

California Non-Competes: Things You Can Do ‘Around the Edges’

There are not many things an employer can do to prevent unfettered competition by a former employee. B&P Section 16600 states that “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” The statute provides three exceptions, none of which apply to the typical employer/employee relationship: (1) a person who sells the goodwill of a business or sells substantially all of its operating assets may lawfully agree to refrain from carrying on a similar business; (2) a partner may, upon the anticipation of the partnership dissolution or disassociation from the partnership, lawfully agree not to carry on a similar business; and (3) any member of a limited liability company may lawfully agree not to carry on a similar business.

Trade Secrets and Employee Mobility in the U.S. and Asia

Employers often spend considerable resources recruiting, hiring and training key talent, only to face potential disaster when those trusted employees quit to join a competitor, often taking sensitive files on their way out the door. Even if they don’t act in bad faith, departing employees carry critical, confidential information inside their heads, which can’t be deleted. Fortunately, various remedies may be available for the former employer, from confidentiality and non-competition agreements, to lawsuits for actual or threatened misappropriation of trade secrets and the doctrine of inevitable disclosure. But there’s a conflict. Employers have a legitimate interest in preventing misappropriation of trade secrets, while employees have a legitimate interest in utilizing knowledge and skills gained through work experience and working for employers of their choosing.