Q:
I'm an e-business strategic consultant and had to sign a
noncompete agreement when I accepted employment with a global
consulting firm. The agreement stated that I had to disclose
business dealings I was involved in but that if I worked on the
other business on my own time with my own equipment, I could
continue. However, when I disclosed the other business I was
involved in, I was told I'd have to walk away from
commercializing the business and destroy all documentation
(intellectual property frameworks) to prevent my other partners
from pursuing the launch as the firm saw the business as directly
competing with them.
I verbally agreed but felt coerced into agreeing as the
employment offer was being pulled from the table. The contract I
signed states only that I must disclose information about business
dealings that could be a conflict of interest and that I not
directly compete within a 50-mile radius for one year.
Can a noncompete agreement limit me from transferring
intellectual property to my partners to pursue? It appears unfair
that an employer could attempt to have me restrict/destroy works of
intellectual property I had created prior to my relationship with
them. Since the agreement was verbal, am I legally bound?
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A:
Noncompete agreements-the club that gets bashed over a reluctant
employee's head when a company is afraid the ungrateful
employee might take on the company in the big bad world out there
(and maybe even win.)
Over the years, legislators and courts have decided that
noncompete agreements can't be used as clubs. They have to be
reasonable on three accounts:
1. Time. You can't be
restricted from competing "forever" or even close to it.
One to three years is a time period considered reasonable.
2. Geography. You can be
restricted in an area your competitor has his business, not
"nationwide" or "worldwide."
3. Scope. The agreement can
restrict certain core functions but can't be so sweeping that
the signer won't be able to earn a living from doing what he
did for the company.
Laws vary from state to state in terms of how receptive they are
to noncompete agreements. California hates them; many other states
specify that they must be entered into at the beginning of the
employer/employee relationship. If they're tacked on later,
there must be something new given by the employer-either a
significant promotion, large raise or other similar enticement. And
yes, it needs to be in writing.
Which brings us to your situation. There seems to be a few flaws
here. You agreed to "disclose business dealings" you were
involved in but had permission to work on your own projects on your
own time using your own equipment. Fair enough.
But wait! As soon as you leaked a few specifics, all bets were
off. No matter whose time it was developed on, your employer
decided your ideas were too risky to coexist with their ideas.
Destroy documentation? Prevent others from developing your idea?
Way beyond the scope of your agreement. Besides, your partners
didn't agree to anything.
Not to mention the intellectual property grab they attempted.
From what you've said, it was developed prior to your
relationship with the global consulting firm on your own time. And
it was verbal, to boot. You seem to have the upper hand here.
Copyright laws usually only give employers ownership of work
created within the scope of their employment (job
responsibilities), using the employers' resources to create
it.
Since you created documentation outside the scope of your
employment (and prior to it), I can't see that the global
consulting firm has any claim of ownership.
But just to be safe, I'd go to the Copyright Office and
register the intellectual property under your own name. And then
either work out a reasonable noncompete with this company or chalk
it up to experience and find an employer with a fairer attitude
toward competition. And if you're asked to sign a noncompete in
the future, call a time-out and run it by a trusted business
attorney first.
Joan E. Lisante is an attorney and freelance writer who lives
in the Washington, DC, area. She writes consumer-related legal
features for The Washington Post, the Plain Dealer,
the Spokane Spokesman-Review and the Toledo Blade
(Ohio). She is also a contributing editor to LawStreet.com and
ConsumerAffairs.com.
In her practice, Lisante is counsel to ConsumerAffairs.com and was
counsel for Zapnews, a fax-based customized news service for radio
stations. Previously, she served as Assistant District Attorney in
Queens County, New York, and Deputy District Attorney in Nassau
County, New York.
The opinions expressed in this column are those
of the author, not of Entrepreneur.com. All answers are intended to
be general in nature, without regard to specific geographical areas
or circumstances, and should only be relied upon after consulting
an appropriate expert, such as an attorney or
accountant.