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Non-Compete Agreement Beyond Term of Employment?
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.
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.
The answer is going to vary from state-to-state and presumably from country to country. California, for example, has laws that greatly reduce the effect of non-compete agreements, but many other states do not. Furthermore, the question of whether they can insist that you sign a new agreement as a condition of continued employment will depend on whether you are in an "at will" jurisdiction or not.
Do it yourself, because no one else will do it yourself. [beta blockade 10-17 Feb]
It depends on the state in the US -- specifically, in techno-centric California, such non compete agreements are not only unenforceable, but are also *illegal* to put in an employment contract. What you do on your own time with your own computer is "yours" unless it substantially overlaps the major business of your company -- then the company will probably win as they'll likely have more legal and monetary resources to carry on a lengthy legal battle. :-(
The 9th circuit court (California, Oregon, Washington, etc.) has ruled these sort of agreements as void. They are deemed to be prior restraint and hence the agreement is unenforceable. Outside of the 9th? Unknown. Either way talk to a lawer. Most likely her/she will laugh at this agreement. However, what ever work you do on your own time, make sure you do not do it on company time or equipment.
Another day closer to redwood heaven
Never give up an idea unless you will own a percentage, otherwise keep them to yourself and try to implement them at home in secret, and then launch your website/product/business the minute your non-compete expires.
Camping on quad since 1996.
One of the companies I used to work for tried to get me to sign an "updated" contract.
I told them, "I already have a contract and I'm happy with it. There are termination measures in the contract, but I don't think any of the issues apply (gross incompetance, etc)."
Legal freaked out. They told me I must sign the new contract or else my employment would end. I said, "The contract I am working under has no expiration date and I don't see any provisions for updating it. As I said, I'm happy with this contract, so unless you offer me large concessions I don't really feel it's in my best interest to sign another one".
Legal freaked out again. They said, "Everyone has signed this contract. You are the last person. You must sign it."
I asked, "Are you saying that you will fire me if I don't sign this contract?"
"Well, no."
"Good because I like the old contract better."
End of story. Never heard from them again.
royalty program? Ha! Best you'll get is a filing bonus.. and maybe when the patent is granted you'll get a jacket with your name on it and get invited to a boring ass party where they try to encourage you to think up more pointless shit for them to patent.
How we know is more important than what we know.
BEFORE YOU SIGN AN AGREEMENT:
( obl: Ask a lawyer, not slashdot )
If you are involved in solving any problems creatively,
and have to do any SOP work for the company in question:
1. Get a stamp, ( DATE: NAME: WITNESS, in boxes )
2. Get a notebook, and STAMP EVERY PAGE.
3. Write down EVERY IDEA YOU HAVE HAD THAT RELATES TO THEIR WORK.
4. DOCUMENT EVERYTHING, AND WHEN YOU TALK TO THE LAWYER, have him initial all the pages. ( EVEN BLANK PAGES)
5. have a copy made, and send one to yourself, and one to the relative nearist you. Make sure you completely cover the entire package with clear tape.
Note: This is from the 'how to protect intellilectial property' book by Nolo press.
Then when something comes up at your work, that you already have invented. You mearly state that its prior art, but you own the idea.
I worked for a company that did the same thing. I had an agreement in place for non-competition. They asked for 7 years, I told them that they had aready agreed to others for 5, and a few instances where they were starting to get the swing of things 2 years. I told them I would sign for 1 year. I had heard that a lot of discussion went on behind the scenes, and after three days, they accepted the 1 year limit. They asked about 'Prior art' and I gave them the business card of the lawyer.
When the eventual day came up that I had to tell them there was prior art, they screamed and yelled at me for about 1/2 hour, and had a vice-president come and give me the soft talk. I asked for 10,000 stock options. The Chairman of the board came and talked to me. I asked him for 10,000 stock options. He said no. I then told him 'Why is the founding and running of this company predicated on not paying people what they are worth?' "Ahh Eee Ohh? Can I get back to you on that?" And I told everyone at the monday morning meeting about it. Monday afternoon, the first person who had asked me for the agreement, said 'One year is acceptable, and we are granting you 7,500 stock options for use of these three ideas.' I ran into the VP years later. He thold me that they had a boardmeeting about this, and someone said, "Were screwed, if we dont do this, we will esaily loose most of the loyah staff. And if we do this, we are actually rewarding the best of the best. Its going to cost us a lot of money, but how much money are we going to make on this? Actually on all of it?"
( That is what happened Monday when they heard about the morning meeting! )
Later on, two of the ideas turned out to be total duds, and were actually based upon other prior work. The one idea that paid off, got me $25,000 in cash, $2,500 for the patent application, and paid for the lawyer ten times over. I PATENT MY IDEAS NOW! THe patent hangs on the wall beside my degrees. Not worth much now, but it was fun.
Another Patent I have seen hang on a wall is the Gene Amplification Patent owned by a guy at Chiron. He said "Its worth about 4.3 billion dollars over the life of the patent" He of course is a multi-multi-millionaire. Drives a toyota station wagon.
You just have to judge... What is your idea really worth?
( HA! The Capatia is 'fr**tf*l' Best fortune cookie this month!
I knew someone about 10-15 years ago that it happened too - they lost (in Tennessee).
Of course, not being a lawyer I can't say - however I rather suspect it is quite enforceable if you create something the company works on. That is - if you work for Microsoft and you invent some nifty software at home you have little to stand on (especially if you are a software engineer). I think it would be fairly easy for them to argue that you, at the very least, used company resources to learn and you are payed to write software (effectively the case of the person I mentioned above). The further away you go from there I simply do not know - I know that some places hire you as a "researcher" to make that as broad as possible. As to how enforceable that is I would guess it would depend on your state (and the one case I personally know of is old enough new laws may vary well have been passed).
I'm also under the impression that short term non-competes are pretty much enforceable. While I didn't personally know any people who fought them, there were quite a number of news stories about such contracts during the DotCom bubble. Many had *permanent* non-competes, that was obviously unenforceable, but the trade mags said that the limited, reasonable term stuff was. Reasonable being up to the judge and state legislature and of course a state may very well totally nullify such things too.
Of course, were I the OP I would get a lawyer to look at it - there should at least be some monetary compensation for those six months if the company was the one to decide to terminate the position. I rather suspect that the "all inventions" clause could be re-worded to where both sides are happy.
In both cases I can see the point of the employer - they do not want you to have advance internal knowledge of their product, quit, and go "sell" yourself to their main competitor (and that could very well happen given how much some software is worth, how much money several companies have, and that those companies aren't the most honest places on the planet). I can also see why a software company would feel they own your software if you are a software engineer, they are paying you to do that and there is no way you can totally separate yourself from the company.
Of course if they terminate your employment with them then they should not be able to detain you from earning an income for those six months nor should they own a lawnmower blade you made if you are a software engineer.
Normally such things *can* be negotiated without a big hassle.
------- Sorry about the spelling, I suffer from two problems. Dyslexia makes it difficult to spell well, lazy makes it
I had the same type of agreement when I was at MSI. When the workers comp. insurance turned me down -- claiming that the injury was not solely from work, I used that agreement to argue that all computer related work belongs to my employer, therefore work related.
Fight Spammers!
The Microsoft culture hates people that don't do everything they're told to do even when it is stupid and useless.
... they are immediately cut off from the rest of the collective.
... pretty unbelievable document.) As it happened, when I was hired I was given the usual bunch of paperwork to sign and return. I just didn't bother to return the contract, figured I'd wait until somebody noticed. Well, about a year later the president's secretary comes over with a clipboard, with some papers on it and blank piece on top covering everything but the signature line. "Here, you need to sign this." "What is it?" "Just sign it." "Nope, gotta see it first, duh." Turns out it was that contract. I told her "Not gonna sign it." Next thing I know the personnel manager comes over and tries to talk me into putting my JH on it, "It's just the standard agreement, all the other developers signed it." "Then they're idiots. I'm not signing that until you take out all the crap." Then my manager tried to order me to sign it. I told him where do you get off talking to me that way.
... but at least I had the satisfaction of telling them to go screw themselves.
Well, we all know what happens to malfunctioning drones
I worked a full-time job as a game developer (this was some twenty years ago) and they had a particularly nasty employment contract (among other things, that after quitting I was enjoined from working as a game developer for a period of five years, they owned any game-related idea or product that I would produce for an indefinite period, etc. etc.
After that, I never heard another word about it. I worked there for a couple of years without having an employment contract. What the legalities of that are, I have no idea
The higher the technology, the sharper that two-edged sword.
In your situation requiring employees not to make use of your proprietary information if they leave would suffice to protect your legitimate interests. What possible justification could you have for laying claim to ideas that they have in areas unrelated to your business? The agreement presented to the poster is outrageously broad. I hope that yours isn't.
But do cross out the parts you don't like.
That way, they can never say you don't have a contract, aren't a full-time employee, you're just another cog in the system -- just in case there's some reason to be.
But, when you leave, you'll have it on record that you signed a different contract, which, I imagine, is a lot more convincing than if there was no record at all.
Don't thank God, thank a doctor!
You must not write on the tubes much. Newsflash: if you go to a site that has 95%+ male readership and are surprised when people assume you're male when you have (at best) an ambiguous handle then... Well, I have nothing. You probably get surprised easily. Boo. Did that surprise you? I expect it did.
I work for nvidia. My employment contract said:
a) Any inventions I invent on my own time with my own equipment are mine.
b) Any inventions I invent on their time and/or with their equipment are theirs.
c) I can leave nvidia whenever I want (duh) and go work for whomever I want, on whatever project I want.
All they ask is that if I'm thinking about leaving, I let them know so they can see if they can make the reason I want to leave go away.
You can have my job when you pry it from my cold, dead fingers.
I currently have no clever signature witicism to add here.
The parent seems to represent the reaction of most. It just feels wrong for the dead hand of an old employer to reach into the future and take from you. Since most of the comments thus far have been from those in IT who are affected by agreements by this, I'll share some thoughts from someone who has gone to law school and is a Patent Agent.
Realize that this isn't a new problem and that this company isn't particularly clever. IP rights have been contracted for by employers for a long time. Any significant employment agreement will address it. But patents are a special case. Unlike copyright's works-made-for-hire which allows a company to have ownership of a copyright of a work they commissioned, patents must be issued to the true inventor (yes, this is a US-centric discussion). So if an employee invents something, how does a company come to own it?
So that's well and good for inventions totally unrelated to duties within the scope of employment. How about the middle ground? A "shop right" may exist where there's no explicit agreement, but the employee uses the owner's resources to invent something. Thus, the employer may be able to get what appears in subpart D above.
Now, let's say the employee was hired to invent something. The hired-to-invent doctrine suggests that inventions that are a product of such a relationship should be assigned to the employer. All of this seems to be present in the agreement above.
So where are the problems? The scope of the agreement. I'm not convinced that the collective's theory that this is invalid as a non-compete is the way to go. (Some people have suggested that this is simply invalid in California. Note also that California severely limits the ability of an employee to dictate the terms of an assignment of patent rights to employers.) So what makes a non-compete invalid? First, it has to be ancillary to some other valid transaction. Here this seems to be the creation of an employment relationship - so we're ok there. Second, the restraint can't protect beyond the employer's legitimate interests or unduly burden the employee or the public. (See REST 2d CONTR 188.) Basically, don't make it too broad or unreasonable. It's clear what the employer is trying to do here: keep you from taking your inventions that they paid for (or what are now their trade secrets) and running with them. They aren't trying to keep you from inventing elsewhere and obviously have no right to those unrelated inventions. This part of the agreement isn't well worded. The thrust of the agreement is: they own what they hired you to invent, even if that inventive step doesn't occur until 6 months down the road. They got you thinking about a particular problem, and the solution may come after business hours while watching TV or after you leave the job. This seems to be within their interests and therefore isn't an impermissible restraint on trade. They aren't trying to stop invention; they just want a return on their investment.
The executive summary is this: the contract isn't clearly invalid as many have suggested. So I wouldn't just sign it because you think the whole thing is rubbish (or even if you think portions are rubbish that could be blue-penciled out). It's just hard to imagine a scenario where 3 months after leaving the job you come up with an invention that wasn't the result of your employment but would have fit under subpart B that directly relates to your job and what you were working on. These are intellectual property rights and they are paying yo
"16MB (fuck off, MiB fascists)" - The Mighty Buzzard
...in about 1980, so I resigned. I remember there was an idiotic clause that I had to tell them about every idea that I had, regardless of quality. I spent half-an-hour arguing with some legal drone that (a) they didn't need to know how I chose which toilet to use for a crap and (b) writing that sort of trivia down would take my entire day.
I got my revenge by publishing the best things I invented in my two months at HP in a science fiction story.
Reduce, reuse, cycle
Been there, done that. Their idiotic agreement would have claimed ownership of *ANY* intellectual property I created, even on my own time and my own gear. And it was so general it would have applied to all the music I've composed for my band, as well as software I wrote in my hobby activities. (Both totally ludicrous; I was still developing on Atari STs back then. Stuff that would have absolutely zero relevance to my day-job enterprise software coding. But it's all "IP" and that contract would have laid claim to it.) I refused to sign, left, and started my own company. Today we market commercial support for the fastest LDAP server in the world, and my code totally obliterates the performance of anything that other company makes. And of course, all my code now is open source. No more proprietary bullshit.
Some things must never be compromised.
-- *My* journal is more interesting than *yours*...
I was once asked to sign a new contract to replace my old one. This new contract contained very broadly worded IP ownership clauses that stated among other things:
I felt the first two demands were way to broadly worded. The first one seemed to extend to anything I coded in my spare time even if it didn't compete with my employer's products in any way shape or form. The second point was so broadly worded it forbad me to contribute to any Open Source projects at all even though the company it self was only to happy to use open source software. This is a brand of hypocrisy that really pisses me off. The last point was simply outrageous since seemed to clash with freedom of employment laws in my country, an EU Nation. At the time they presented me with the contract this hadn't been tested in court. I refused to sign the contact along with several other developers. Eventually the PHBs and their legal weasels came back with a revised contract. After much arguing and several revisions it stated something along the lines of the following:
Only to idiots, are orders laws.
-- Henning von Tresckow
Or a better state...
In Ontario, this might be construed as "constructive dismissal". From what I've experienced here, signing any employment contracts is a bad idea. Without an employment contract, you'd be covered by common-law, which is generally favourable to the employee regarding severance amounts, etc. Employment contracts usually replace all that with explicit terms that favour the employer.
IMHO, you'd have to be NUTS to work as an employee in high tech outside of government or unionized employers. Ontario's labour laws are terrible for "technology professionals". As unemployment rates are very low, and there is plenty of unfulfilled demand for skills, you're far better off subcontracting, where the legal relationship is between corporate peers. Some of the rights you retain as a subcontractor include:
- pay by the hour, if you so arrange. No unpaid OT.
- the right to conduct business with other clients
normal employer rights that are NOT applicable in contracting:
- the right to supervise and direct
- the right to set hours of work (duration and timing)
- exclusivity to all the employee's production, intellectual or otherwise, regardless of whether the efforts were during paid working hours.
There is a lot more variation and flexibility in terms, and you still have to keep your clients happy - i.e. they won't be happy if you openly compete against them and work 3h/week, and your contract will be cancelled.
If you are a non-unionized employee, remember, the only real power you have is to quit.
"Beware of all enterprises that require new clothes." --Henry David Thoreau
It is way past time to update your resume.
I was once asked to sign an "updated" non-compete; right before being laid-off.
I am the unwilling control for my Origin.
...there's also the coward's way out:
Sit on the agreement without saying yes or no.
First time someone asks about it, feign ignorance. Tell them you misplaced it, ask them to mail you another copy.
Second time someone asks about it, claim you're busy and haven't had time to review it, but you'll add it to your todo list.
Third time someone asks about it, respond that you did review it, but you have some concerns about some of the language. You think you'd like to run it past a lawyer.
Fourth time? Still looking for a lawyer.
Fifth time? Found and retained council, but his schedule has been booked solid, haven't had time to meet.
Now weave in a few "lost" emails ("must have hit the spam filter, can you send that as something other than a PDF?"), maybe a few questions about who on the company's side is authorized to negotiate changes to the agreement (you can claim your lawyer needs to know "just for the file").
If you've played your hand right, you've done two things:
-You've quietly sent the message that getting you to sign this thing is going to be a big, hairy, painful, awkward undertaking. Basically, a hassle.
-MONTHS have gone by without either side getting their back up and threatening drastic measures. Nobody wants to threaten you if you're just dragging your feet, but seeking counsel.
Basically, you use the bureaucracy's inefficiency against it.
Here's why it works: if you stall long enough, getting you to sign will literally drop off everyone's todo list. Even the biggest waste of an HR drone will prefer to go play minesweeper rather than chase you down, bug your management, etc, etc. Ever go on vacation and forget all about a task when you got back? That's your goal - delay until a bigger problem occupies their energy.
For extra credit, try to keep your manager out of the loop as much as possible. Everybody hates HR, so give him an excuse to avoid them. If he reminds you, nags you, whatever, your reply is "oh, yeah, I said I'd do that. I'll get back to HR directly, thanks." Now he doesn't have to deal with HR, he's happy - and forgets about it that much more quickly. You've taken an uncomfortable chore - hassling you - off his plate.
Sure, it's the Coward's Way Out - but in a modern Dilbert-ean office, it works surprisingly well.
I don't think your example is relevant to most U.S. readers. In Canada (and most other civilized countries) workers actually have some rights regarding recourse for termination and unfair labor practices. In my state (Massachusetts) pretty much the only rights you have are these:
... That's pretty much it.
1) Timely payment of wages (enforceable by the Attorney General, as well as your own lawyer for triple damages)
2) Minimum wage ($8 as of the first of the year, still a fucking joke)
3) The right to take a twelve week leave without pay for childbirth/adoption
4) The right to quit a job without notice
5)
No right to severance, regardless of length of employ. No right to appeal a termination. No right to notice of a termination. Around here they don't even have to give a reason for firing you. They can just tell you some day "You're fired, get out" without any further information. I actually had someone tell me "We don't have to tell you" when I asked why I was being let go. Your ex-employer can also fight your unemployment claim for no reason whatsoever other than it makes their unemployment insurance premiums go up.
As far as IP goes, everything you produce during your employ belongs to the employer if they so choose. Sure, you can fight it (and they may not have a right to it, depending on the interpretation of the applicable law) but lawyers are expensive.
Even employment contracts that give you more rights than the law requires are unenforceable in this state. At-will employment trumps all of them. Your employer basically has impunity to screw you 17 ways without so much as buying you a drink first.
Never underestimate the power of stupid people in large groups.
The username "Lena" is kind of a tipoff, y'know. This is why I have my gender in my signature - but then you get people who don't read signatures, and when I post something particularly girly assume I'm a very effeminate man or something. It does get grating.
Warning: Apple/Nintendo fangirl. Likes her electronics cute & cuddly. May be rabid.
It's considered normal for an employee to demand one-to-two years of severance for every year of non-compete. I'd say counter offer, and if there are any questions, remind them of the realities. Asking you to not have income after your employment ends is, of course, intrinsically unreasonable. A family's gotta eat. These things started off in executive space, where the extra severance for the non-compete is just par for the course. You should, as part of your counter offer, request the severance should your employment end for any reason, including if you quit. They can then counter offer themselves. Just see how much they value your non-competition.
This is exactly what I would do when faced with a post-termination non-compete. If you're a software person, you could take the year off to write some kind of big open source project or some such, to keep yourself current....
C//
and if its multi-page, what stops them from replacing a page with strikeouts with a copy of the original page without strikeouts. or a different page altogether.
Yep, me too, several times. One actually tried to grab everything I'd ever program (I was a programmer) _forever_ .. in that particular area of programming. Forever. Yeah, right, fat chance. I responded with my own nondisclosure agreement (very limited, very much to the point), and several insults about lawyers. The decision makers were embarrassed at the horribleness of their boilerplate employment and nondisclosure agreements, and ended up rewriting them all.