Dear Captains of Industry: Where is the Data to Support Your Position on Noncompetes?

Scott Kirsner of the Boston Globe has an excellent post today about employee non-competes.

Check it out.

Boston Post Mortem group officially supports House Bill 1794

Read the blog post & endorsement here.

Massachusetts House Bill 1794

An Act to Prohibit Restrictive Employment Covenants

A bill entitled “An Act to Prohibit Restrictive Employment Covenants,” House Bill Number 1794 (bill text and two-page fact sheet), has been filed on January 12, 2009 (186th General Court of the Commonwealth of Massachusetts) to prohibit noncompete contracts between employers and employees. The lead sponsors are Representative William N. Brownsberger and Senator Patricia D. Jehlen. The bill has been referred to the Joint Committee on Labor and Workforce Development. For more information, please contact Rep. Will Brownsberger or info@ProhibitRestrictiveEmploymentCovenants.net.

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Upcoming public event in Boston about Employee-Non Compete Agreements

Please join and/or spread the word to attend this important upcoming event hosted by the Boston Bar Association.

Details:

Name: A Symposium on Bills Affecting Employee Non-Compete Agreements
Date: Wednesday, July 22, 2009
Time: 4:00 PM

Description:

A Symposium on Bills Affecting Employee Non-Compete Agreements

It is argued that employee non-compete agreements have chilled the spawning of new enterprises in Massachusetts compared to California where such agreements are generally unenforceable under a statute first enacted in 1872. It is countered that businesses large and small need these agreements enforced to protect their investments and that failure to do so will give rise to protracted trade secret litigation.

State Representative William N. Brownsberger, with 25 co-sponsors, filed H. 1794, which would institute a rule similar to the California statute. http://www.mass.gov/legis/bills/house/186/ht01pdf/ht01794.pdf

State Representative Lori Ehrlich, with seven co-sponsors, filed H. 1799, which would require, among other things, establish minimum thresholds for the enforceability of noncompetes, including advance notice of noncompetes to new employees, and provide a presumption of enforceability where “garden leave” compensation is paid to certain employees restricted by non-competition agreements. http://www.mass.gov/legis/bills/house/186/ht01pdf/ht01799.pdf

Under Anglo-American common law, servitudes were disfavored and non-competition agreements were enforceable only to protect goodwill in the sale of a business or trade secrets. Massachusetts has extended enforceability to protect “confidential information” that does not meet the restrictive requirements for a trade secret under the 1939 Restatement of Torts. The Massachusetts Uniform Law Commission filed H. 87, and State Representative Daniel E. Bosley and State Senator John A. Hart, Jr., filed H. 329, which would expand Massachusetts protection for trade secrets as more broadly defined under the Uniform Trade Secrets Act adopted by 45 other states and the District of Columbia. http://www.mass.gov/legis/bills/house/186/ht00pdf/ht00329.pdf

Please join proponents of these bills and the alternative status quo in a discussion of law and policy:

William N. Brownsberger, Esq., Sponsor of H. 1794
Russell Beck, Esq., Foley & Lardner, LLP, Drafter of H. 1799
Stephen Y. Chow, Esq., Burns & Levinson LLP, Massachusetts Uniform Law Commission, Drafter of H. 87, Symposium organizer
Michael L. Rosen, Esq., Foley Hoag LLP, Author of the Massachusetts Noncompete Law Blog, Speaking for the status quo
Hon. Gordon L. Doerfer (Ret.), JAMS, Moderator
Dr. Matthew Marx, MIT Sloan School, Investigator on longitudinal study of electrical engineer parties to non-compete agreements

We will also be joined by Mr. Scott Kirsner, “Innovation Economy” columnist, Boston Globe, who recently wrote on this issue. See
http://www.boston.com/business/articles/2009/06/21/start_ups_stifled_by_noncompetes/

Full details and sign up information here.

Start-ups stifled by noncompetes

Scott Kirsner at the Boston Globe wrote a great piece on employee non-competes.

Highly recommend checking it out.

EMC vs HP & non-competes

StorageMojo has a great post about the problems with non-competes. Check it out here.

Spark Capital Backs Brownsberger’s Bill to Ban Non-Competes

From Xconomy:

Boston’s Spark Capital came out publicly today in favor of Massachusetts House Bill 1794, which would outlaw non-compete agreements in employment contracts in the state. The venture firm has been vocal on the issue for some time—its partners helped found theAlliance for Open Competition and sent Governor Deval Patrick an open letter opposing non-compete clauses in 2007—so it’s no surprise to see Spark backing the new bill, filed by State Representative Will Brownsberger in January.

[Full story here]

Next top: Beacon Hill

State Representative Will Brownsberger of Massachusetts’ 24th Middlesex district, which includes Belmont, north Cambridge, and east Arlington, says he plans to introduce a bill in the upcoming legislative session that would abolish non-compete agreements in the Bay State.

This is a major milestone. 

But we need your help. Spread the word, get involved and contact your local state representative. Let them know that you support Rep Brownsberger efforts!

Apple vs IBM and the non-compete clause

I’ve been a critic about employee non-compete clauses.

They are not enforceable in California and as result they generally don’t come up in that state. Entrepreneurs and companies are free to innovate as long as they respect confidentiality agreement and non-solicitation agreements.

I think that is the exact right model. You never hear tech leaders in California moan about this. Instead they worry about more important things like innovation, h1b visa issues, building a great environment to work, etc.

On the hand, non-competes are standard practice in the state of MA. And according to an independent study by UCLA, MA enforces these agreements more heavily compared to other states.

Just last week IBM sued a former employee over this issue. The employee is joining Apple.

Jay Parkhill wrote a great post about the IBM lawsuit and compares it with how Apple is keeping one its stars from going to the competition. Jay’s key point:

“If Fadell worked in Massachusetts, New York or most other US states, Apple could simply tell him he could not go to work for a competitor.  Fadell’s expertise is in developing portable audio/video players, so this might make him choose between not working at all for a period of time and trying to break into an entirely new area.  Since Fadell is in California, Apple can’t do that.  Instead, Apple had to figure out how much it was worth to keep Fadell on the sidelines.  VB reports that value is $300,000 per year through March, 2010 plus stock worth $7.6M at today’s prices.

The point here is that the burden fell on Apple as the employer to protect its competitive advantage without cutting off Fadell’s ability to make a living.  Fadell could probably have survived even without the extra compensation, but others might not be so fortunate and this is why I believe California has the rule right.  If a person is that valuable, the employer should pay to keep him/her on the bench.”

That’s exactly right.

(this post is reblogged from bijansabet.com)

Please join us at the Berkman Center event to discuss Employee Non Competes

Employee Non-Compete Agreements: Protecting Innovation or Stifling It?

A Discussion Hosted by the Berkman Center and Spark Capital; Sponsored by Gunderson Dettmer and Silicon Valley Bank

Thursday, June 19th from 3:00-7:00PM

The use of employee non-compete agreements by Massachusetts companies is routine, with employers mandating that employees steer clear of any business of a competitive nature once they leave their present jobs, typically for a year or more. Many believe these agreements are critical to guarding a company’s hard-earned intellectual property — protecting legitimate business interests, and thus our region’s economy. Others, however, believe that non-competes are nothing more than handcuffs that prevent talented entrepreneurs from bringing new innovations to market and, in some cases, even driving entrepreneurs to leave the region to pursue their innovations elsewhere. In this session, we’ll bring together some of the area’s best known venture capitalists, entrepreneurs and executives to explore the issue of non-competes and weigh the pros and cons of their use here in the Commonwealth.  Are non-competes protecting innovation and economic growth in Massachusetts? Or stifling it?

Panelists will include:

• Jeremy Allaire, founder & CEO, Brightcove
• Melanie Haratunian, general counsel, Akamai
• Paul Maeder, general partner, Highland Capital Partners
• Lee Fleming, associate professor of business administration, Harvard University
• Bijan Sabet, general partner, Spark Capital
• Moderator: John Palfrey, Clinical Professor of Law and Executive Director of the Berkman Center for Internet & Society, Harvard Law School

Join us on Thursday, June 19th from 3-7PM in the Ames Courtroom at Harvard Law School in Cambridge, Mass. The panel will be followed by a cocktail reception.

RSVP required by 6/12: Please email your name, title and company to Amar Ashar at the Berkman Center: ashar@cyber.law.harvard.edu