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Non-Compete Agreement Beyond Term of Employment? 778

Posted by kdawson
from the long-arm-of-the-contract dept.
stellar7 writes "I work in IT for a large company. They have recently asked me to sign a new non-compete and confidentiality agreement. I signed an agreement when I began employment, but now they want me to sign an updated one. Behind the link are a few paragraphs from the new agreement. It states that the company has a royalty-free license to any 'Invention' I create including up to six months after leaving (and the company fully owns any Invention that relates to the company in this same period). Has anyone signed a similar agreement that reaches beyond the end of employment and includes things not related to the business?"

A. Employee shall promptly and fully disclose in writing to [Company] any inventions, improvements, discoveries, operating techniques, or "know-how", whether patentable or not (hereinafter referred to as "Inventions"), conceived or discovered by Employee, either solely or jointly with others, during the course of Employee's employment with [Company], or within six (6) months thereafter.

B. Employee shall, on the request of [Company], and hereby does, assign to [Company] all of Employee's right, title and interest in any of the Inventions which relate to, or are useful in connection with, any aspect of the business of [Company], as carried on or contemplated at the time the Invention is made, whether or not Employee's duties are directly related thereto. [Company] shall be the sole and absolute owner of any of the Inventions so assigned. Employee shall perform any further acts or execute any papers, at the expense of [Company], which it may consider necessary to secure for [Company] or its successors or assigns any and all rights relating to the Inventions, including patents in the United States and foreign countries.

C. [Company] shall be the sole judge as to whether the Inventions are related to or useful in connection with any aspect of the business of [Company] as earned on or contemplated at the time the Invention is made and as to whether patent applications should be filed in the United States or in foreign countries.

D. [Company] shall have the option of taking a permanent, royalty-free license to manufacture, use, and sell any of the Inventions conceived or discovered by Employee during the course of Employee's employment with [Company], or within six (6) months thereafter, that are not assigned to [Company] under paragraph B. of this Agreement.
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Non-Compete Agreement Beyond Term of Employment?

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  • California Business & Professions Code 16600 states:

    "Except as provided in this chapter, 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 rest of the relevant chapter addresses mainly those instances where one sells an interest in a business. In those cases noncompetes are enforceable.

    California courts routinely void noncompetes under B&P 16600.

  • Re:ask a lawyer (Score:5, Informative)

    by imp (7585) on Monday November 12, 2007 @12:37AM (#21319887) Homepage
    While the answer varies from state to state, I'll quote what my lawyer told me when I took him one of these employment agreements. "Warner, never hesitate to sign a vague, badly drafted employment agreement." Basically, for my situation, the upshot was that the agreement was so vague as to what it covered that read literally one would have to tell the company everything I ever thought. New idea for a flavoring for brownies, tell the company. New sexual position to try with the wife, tell the company. Plot for a sitcom staring 13th century spanish cardinals talking about the philosophical conundrum the Islamic occupation of the Iberian peninsula presented, tell the company. Clearly, no court in its right mind would enforce such an over-reaching and broad contract.

    In addition, certain states, such as California, have laws that say, as a matter of public policy, that if you do something on your own time with your own resources, you own it.

    Also, since you didn't post the entire agreement, there's no way to know if there's anything else in it that might be bad, or worse than what's presented here.

    However, without having both a license to practice law, or the entire text of the document in question, the above is prelude to the following non-legal advice: See a lawyer. It cost me about $300 when I needed to get a couple of different documents reviewed.
  • Re:ask a lawyer (Score:5, Informative)

    by stormj (1059002) on Monday November 12, 2007 @12:38AM (#21319897)
    Not enforceable in California. Bus & Prof Code Section 16600.
  • by Anonymous Coward on Monday November 12, 2007 @12:40AM (#21319911)
    California Labor Code Section 2870. Application of provision providing
    that employee shall assign or offer to assign rights in invention to employer.
    Any provision in an employment agreement which provides that an
    employee shall assign, or offer to assign, any of his or her rights in an
    invention to his or her employer shall not apply to an invention that the
    employee developed entirely on his or her own time without using the
    employer's equipment, supplies, facilities, or trade secret information
    except for those inventions that either:
    Relate at the time of conception or reduction to practice of the
    invention to the employer's business, or actual or demonstrably
    anticipated research or development of the employer; or
    Result from any work performed by the employee for his
    employer.
    To the extent a provision in an employment agreement purports to require
    an employee to assign an invention otherwise excluded from being
    required to be assigned under subdivision (a), the provision is against the
    public policy of this state and is unenforceable.
  • by Opportunist (166417) on Monday November 12, 2007 @01:26AM (#21320191)
    In Europe (at least in those parts that I know) it's fairly simple: Nothing you create outside of work can be claimed by your employer, unless he can somehow prove (or at least convince a judge) that you were using company resources to create it.
  • by DustyShadow (691635) on Monday November 12, 2007 @01:28AM (#21320199) Homepage
    Seeing as how the 9th Circuit Court is federal, it was probably interpreting California law and California case law when it made that decision.
  • Re:ask a lawyer (Score:4, Informative)

    by lena_10326 (1100441) on Monday November 12, 2007 @02:02AM (#21320411) Homepage

    he
    God, I hate that. It's she.

    but if you really prefer to sign away your freedoms than to stay unemployed for a couple of months, then that explains why the US is so screwed up.
    Anyway. I must believe you don't work in USA then, because I've never seen an IT job without a non-compete requirement in the last 13 years of my career.

    The only difference between this non-compete and non-competes I've signed is their claim of ownership on new products developed after termination, however I've seen non-competes laying claim on very general things from everything created after hours to things created on your personal desktop.

    First, it's a bullshit scare tactic. Second, signing doesn't mean you're signing your freedoms away. Here, if a contract violates the law, it's unenforceable regardless of your signature. And third, you really have no choice but to sign if you plan to work in USA. I suppose you could find a very small IT company that doesn't push non-competes, but it'll be hard to find that. You won't be unemployed for a "couple of months", you'll be unemployed for YEARS with that sort of search criteria.

  • Re:ask a lawyer (Score:5, Informative)

    by Garridan (597129) on Monday November 12, 2007 @02:17AM (#21320489)
    Yup. I saw that in a contract, told my soon-to-be boss that there was no way in hell that I'd ever sign such a thing, he talked to his lawyer, and we got it stricken from the contract. That easy.
  • Close (Score:3, Informative)

    by Anna Merikin (529843) on Monday November 12, 2007 @02:42AM (#21320619) Journal
    Negotiate for what you want. You may find theirs is a defensive position, one that seeks to prevent making off with work they paid you for under the guise of it being "done on my own time."

    For example Paragraph B says the invention must be related to their company, its goals, etc. If you work in IT and devise a solar collector, it's yours.

    If you can't live with these kinds of binds at all, you may be unemployable.
  • by shmlco (594907) on Monday November 12, 2007 @03:36AM (#21320863) Homepage
    ".. who then basically took the whole codebase and founded a competing company. ... But yeah, beyond term of employment is a bit of a problem."

    Look at the two clauses, and you can see the problem. If any ideas are "yours" the moment you quit, then the second you have a great idea you can simply quit.

    Most non-competes extend past the end of employment precisely to ward off such an event. They're also used for non-technical types likes salespeople in order to prevent them from wandering off with their entire client base. I've even seen some that extended for up to two years.
  • Don't Sign It (Score:1, Informative)

    by Anonymous Coward on Monday November 12, 2007 @05:13AM (#21321285)
    I have worked as an electronic design engineer for 30 years. I hate to say it, but this type of agreement is pretty much de rigueur for companies in my line of work. My response to it has always been not to sign it. In some cases I left the company with the still unsigned agreement in the papers that I cleaned out of my desk. In other cases it led to a meeting with my boss where we crossed out the offending paragraghs, initialed them and then I signed it.

    Go ahead and talk to a lawyer if you want; I have in the past. The answer you will get is vague; most think that it is unenforceable anywhere in the US, but regardless of what you read here about this or that state ruling against such agreements, I couldn't get one lawyer to say, unequivocally, that it would or wouldn't stand up in court. If you sign it and it goes to trial, the result is most likely going to depend upon who the judge is and how capable the company lawyers are more than anything else.

    There was not even any clear-cut agreement about the legality of crossing out paragraghs and initialing the modifications but there is clear precedent for this action. The agreement represents a "contract" between you and your company and the act of modifying and initialing modifications is accepted in a lot of contracts. For instance, when I signed the loan agreement for my last house, there were several clauses that I took exception to and these were fixed in just that way. Any legal challenge to changes like this rest on whether or not the person initialing for the company has the right to negotiate such things for the company.

    Such things are what lawyers get rich on; don't expect a clear answer from a lawyer.

    Now, as for the ethical concerns (and those are usually far different from any legal concerns):
    I have always felt that work I did for the company, on company time, using the company's reosurces, belonged to the company! They invested in those resources, they paid me for my work and what they deserve is the fruit of any labor that I do on their time with their resources.

    I have always felt that work I do at home for myself, with my resources, on my own time, belongs to me! And my resources have always been considerable; even before the cost of computers and electronic test equipment came down to the point where anyone could afford them, I always had a decent lab at home. I try to keep those separate (leave work at work and home at home) and documented. The documentation doesn't go any further than what you would do to defnd any patentable inventions. Keep a lab book, date and sign every entry. Need I mention you should be doing this at work, also? These things go a long way towards forestalling any predatory legal grab later.

    Now the grey areas:
    Does a company have the right to prevent me from working for a competitor? On the one hand, I think that going to work for a competitor and duplicating the company's products for that competitor is absolutely out! Same goes for trying to carry a customer list and company pricing to the competition.

    On the other hand, to use the skills and knowledge that I might have gained at the company while working for a competitor has got to be in! I need to work to live and part of the decision to join a company always involves whether or not the experience will make me more valuable in the job market. The same goes for sales: the knowledge of the market and who plays in that market are what makes a salesman valuable. A restrictive "non-compete" agreement makes that issue moot. I have suggested to companies that, if they insist on a non-compete for some time, that they have to continue to pay me for that time after I leave. The end result in every case (twice) was that the non-compete clause was dropped.

    The above also makes a good case for not changing the agreement. I agreed to come work for a company under certain conditions and one of them is the non-compete agreement. If the company wants to change the non-compete agreemnt, then it is time to review salary, too. Otherwise, I would insist on working under the same "contract" we had when I started.
  • Re:ask a lawyer (Score:5, Informative)

    by stellar7 (309788) on Monday November 12, 2007 @06:52AM (#21321757)
    I'm the original poster. I spoke to a lawyer, and he told me that in my state this type of contract would hold and that the employer can punish employees in any way for not signing. So, I'm thinking I just need to find a better employer.
  • by xristo70 (1184699) on Monday November 12, 2007 @08:00AM (#21322091) Homepage
    hi stellar7,

    I've had year-long non-competition agreement with the Ferrari Formula 1 team when I left them at the beginning of 2005. Their reasoning (fear) behind it was that I could immediately take my knowledge of the race car design to another team. But after a year, with the speed of technology development, this design knowledge would be outdated.

    I did have discussions with lawyers if such a contract is legal or not. Well: in Europe is IS legal IF THEY CONTINUE PAYING YOU after leaving the company. Otherwise a judge in Europe will take about 20 second to review the case and say you are right. So Ferrari continued paying me for a year for not working for another F1 team (I had no restrictions for the rest). (I offered to sign a contract for life instead of 1 year, guaranteeing never to work again for a Formula 1 team, but unfortunately they did not accept my generous offer!!!!).

    Regularly with my work as a consultant customers try to make me sign such non-competition contracts. They always quickly drop it after I point out to them that I'd happyly sign it....if they pay me for it.

    The type of contract they are trying to make to sign doesn't sound legal at all to me.
    good luck! Chris
  • Re:ask a lawyer (Score:3, Informative)

    by WebCrapper (667046) on Monday November 12, 2007 @09:40AM (#21323079)
    I would strike out the whole "all works owned for up to 6 months after employment" and offer to sign that. If they wouldn't accept that, I'd turn in my notice of intent to leave as of X date. Give as much notice as you can, something like a month. Depending on the state, they may have to pay you for the total time, if they decide to let you go before then.

    If enough employees insist on not signing that block, they may remove it anyway.
  • Re:ask a lawyer (Score:4, Informative)

    by Svartalf (2997) on Monday November 12, 2007 @09:57AM (#21323257) Homepage
    Fair warning, it's not always that simple. I've been dismissed 12 months into a job because I wouldn't sign (That wasn't the stated reason- I was "laid off"; which in reality was they let me go, they "let go" someone in the California offices and "hired" a contractor for the position that was strangely the same person they "let go".)- be prepared to get told "NO" on this. My situation will probably be resulting in a lawsuit as it's pretty much illegal for them to pull this stunt in the first place- you can't pull the "you have to sign" thing after you've let me work for you any length of time (magic deal there...).

    As it stands, there's far, far too many "clever" corporate counsels, too many businesses that think they own you and they're entitled to shake a stick at. Thankfully, there's more than enough places that aren't idiotic about this that it's only moderately problematic.
  • Re:ask a lawyer (Score:3, Informative)

    by einhverfr (238914) <chris.travers@gmail . c om> on Monday November 12, 2007 @01:33PM (#21325991) Homepage Journal
    Note that here in Washington, we have at-will employment laws too. The idea is that an employee can quit without notice, and an employer can terminate the employment without notice. This is fair. I have unfortunately had to be in both sides of this in the past and have had to quit a job without notice and yet remain on good terms with my former employer. But this varies from state to state.

    Anyway the key thing about employment contracts is that they should be bilateral. This shouldn't be the employee giving up additional right in exchange for employment but either a clarification of expectations or an exchange of additional promises (you agree to give x weeks notice, and I agree to a severance package if I terminate your employment without notice, for example).

    Typically non-compete clauses do last beyond the terms of employment though my business has no need for such terms. They should be appropriately scoped, however. I.e. when I worked for Microsoft I was barred from competing with them in areas where I had access to trade secrets for a period of 6 months (iirc, might have been a year) after working for them-- the goal was quite clearly to prevent me from taking Microsoft source code and giving it to competition. This was reasonable. Their moonlighting policies were also somewhat reasonable (but less reasonable since at one point I had moonlighting permissions revoked because Microsoft decided to get into a market where I would be competing with them).

    If things are too one-sided you need to be looking for another job. If you are a good worker you should always be able to find a way (even if it means starting your own business). I hate to plug Microsoft on this forum but I did find their practices reasonable in these areas. I would sooner work there again then at a place that was much more one-sided regarding employment. But then, my company is hiring Perl and PL/PGSQL programmers (email resume to chris@metatrontech.com) for work on FOSS projects.

  • Re:ask a lawyer (Score:3, Informative)

    by IronClad (114176) on Monday November 12, 2007 @06:07PM (#21329631) Homepage
    While asking a lawyer might be a good idea, a lawyer cannot give you all the information you need to make this decision. You really need a good handle on:

    1) Your relationship with your boss

    2) Where this initiative is coming from (how far removed from your boss and how influential)

    3) The perceived value of you personally to the company

    4) The level of your own personal negotiation skills

    5) Your perceived integrity

    Unless you can accurately assess all of those items, in addition to the legal questions of enforceablilty and compliance with labor regulations, you cannot answer your question. Remember that the legal questions, especially enforeceability, only matter if you have the cash, stamina, strength of will, etc. to go to court. Most people don't. Don't expect the company to give hoot about what your lawyer thinks.

    I faced a nearly identical situation 5 years ago, an additional agreement, even the language reads remarkably like what I saw. I had a strong enough position and was perceived to have sufficiently rare skills that I was able to stare down the requests, but not without some *very careful* negotiations. I had to answer verbal cajoling like the following:

    "Aww, the company doesn't ever really expect to enforce those provisions, we trust you, they're just to make the lawyers happy" -> "If you don't then we don't need a signed agreement, right?"

    "You're the last one not to sign this." -> "I'm the only one left who invents stuff around here."

    "It's perfectly legal." -> "Are you practicing law now? I'm still waiting to hear from my lawyers and the Department of Labor."

    "You're an at-will employee." -> "Then why should I agree to a contract that extends my obligations, but not yours? What's my consideration?"

    "We don't want anything but ideas that you invented here." -> "You've already got those, and besides that's not what the contract says."

    So my advice is:

    0) Be nice about it. Express honest misgivings. Don't be a prick, and don't confront.
    1) Delay delay delay. You may be on your next job anyways by the time it's resolved.
    2) Go out on the market immediately, and assess your hireability elsewhere. Have an offer in your back packet just in case. DO NOT BLUFF. (You may just find you're happier elsewhere anyway..)
    3) Consult a good labor lawyer IFF you have the will to go to court to enforce whatever rights he says you have in your venue.

    I did all the above exept #3, and was offered a much better place to work while the issue dragged out over 3 years. I did not sign, and I left voluntarily. YMMV.

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