Trade Secrets: The Non-compete Agreement
A non-compete agreement can be a useful tool in protecting the trade secrets and confidential information that give companies their competitive edge. Often, non-compete agreements cover information like customer lists, proprietary techniques, and design information. Companies must be careful when considering language for a non-compete agreement, however, because courts will not enforce non-compete agreements that are too broad. The non-compete agreement must be ancillary to or part of an otherwise enforceable agreement, and it must contain reasonable limitations as to time, geographical area, and scope of activity to be restrained. Additionally, the restrictions should not be any greater than that necessary to protect the good will or other business interest of the company.
A Non-Compete Agreement Can Protect Trade Secrets If Drafted Properly
Though Texas law has changed in recent years with respect to what constitutes a sufficient enforceable agreement and whether such an agreement is ancillary, it is clear that the employer must base the non-compete agreement on more than the promise of continued employment.
For example, a non-compete agreement including a term of years during which the employee will maintain his or her position unless the employer has cause to terminate coupled with the promise to deliver and actual delivery of confidential information is likely to rise to the level of an enforceable agreement ancillary to a non-compete agreement.
Certain Restrictions to Competition Could be Unenforceable
A non-compete agreement that restricts competition for an unlimited amount of time and without geographic borders is unlikely to be enforceable. Similarly, a non-compete agreement that restricts the employee from working in the same city regardless of the type of work the employee endeavors to do upon leaving is likely unenforceable. Neither of these agreements are narrowly tailored to only restrict conduct that is likely to detract from the good will or other business interests of the employer.
Because the reality of business often requires disclosure of trade secrets to employees, and employees often leave companies in this fluid market, an enforceable non-compete agreement can be a useful tool in protecting a company’s trade secrets.
About the corporate and commercial law firm:
Klemchuk LLP is an Intellectual Property (IP), Technology, Internet, and Business law firm. The firm offers comprehensive legal services including litigation and enforcement of all forms of IP as well as registration and licensing of patents, trademarks, trade dress, and copyrights. The firm also provides a wide range of technology, Internet, e-commerce, and business services including business planning, formation, and financing, mergers and acquisitions, business litigation, data privacy, and domain name dispute resolution.
Klemchuk LLP hosts Culture Counts, a blog devoted to the discussion of law firm culture and corporate core values with frequent topics about positive work environment, conscious capitalism, entrepreneurial management, positive workplace culture, workplace productivity, and corporate core values.