Articles Posted in Non-Compete Agreement / Covenant Not to Compete

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Uber settled its legal fight after being accused of plotting to steal self-driving technology, which is considered to be the way of the future. It took more than four days in court, which included arguments and testimony. An overall case worth stood at $245 million.  The settlement was mainly concerning the trade secrets. The case was between Google’s parent company, Alphabet, and could be considered one of the most intense legal fights of Silicon Valley. This is especially since it concerns a startup vs. one of the biggest technology giants’ parent. The overall potential of the industry is trillion-dollars that are predicted to transform transportation.

The case showcased what many in Silicon Valley normally struggle with: the sudden rise of start-ups, the workings of the rich companies, the rivalries, and competition for talent.  Continue reading

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When Google’s ride-sharing company, Waymo, sued Uber for using Waymo’s trade secrets, it used as evidence the lidar (light detection and ranging) sensor Uber was designing for its self-driving vehicles. Waymo saw the design by accident when the manufacturer (who was making the lidar systems for both Uber and Waymo) accidentally sent Waymo a mock-up of Uber’s lidar system. Although Uber claimed the design was fairly standard, Waymo alleged it was too similar to their own to be a coincidence.

According to Waymo, Uber allegedly obtained knowledge of Google’s self-driving trade secrets when they bought Otto, a self-driving truck company. Otto was founded by Anthony Levandowski, who used to work as an engineer for Google to develop their self-driving technology. Just a few months after he started Otto, his company was bought by Uber and Levandowski became an employee of Waymo’s competitor.

Waymo alleged files regarding their self-driving technology went missing from Google’s servers around the time Levandowski quit his job with Google. The fact that he started working for Uber a short time later, and that Uber’s self-driving technology looked suspiciously like their own, was enough to prompt Waymo to suspect that Levandowski leaving Google to start his own company, which was then bought by Uber, was all part of an elaborate plot for Uber to steal trade secrets from Google. Continue reading

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The already expensive battle to acquire engineers with knowledge and experience in the field of self-driving cars just cost Uber another estimated $245 million, not including the money they spent defending their legal battle against Waymo for a year before the parties agreed on a settlement.

As engineers get closer to developing the technology necessary to produce viable self-driving automobiles, it’s becoming increasingly clear that, not only is self-driving technology the future, it is going to be a very lucrative future. It has driven up the costs of engineers in the field to unprecedented heights, but Uber may have topped them all by spending $590 million to buy an entire self-driving truck company from Anthony Levandowski, a former Google engineer. The terms of the agreement were for Levandowski to receive an additional $250 million in Uber stock if Otto reached certain performance goals, but before that could happen, Levandowski was fired from Uber for refusing to cooperate in the investigation into the alleged stolen Google files.

Levandowski and Travis Kalanick, the founder and former CEO of Uber, had allegedly been hanging out and brainstorming ideas for self-driving technology even when Levandowski was still working for Google. Kalanick recently testified in court that he had wanted to hire Levandowski, but Levandowski wanted to break out on his own. Continue reading

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There’s nothing illegal about a high-level employee moving from one company to a competing company (especially in California, which bans non-compete agreements). But businesses do still have the right to protect their trade secrets and legitimate business interests in the form of confidential information, especially when it comes to experimental technology.

So although Anthony Levandowski was perfectly within his rights to quit his position developing self-driving technology at Waymo (a division of Google’s parent company, Alphabet) to go work for Uber to develop similar technology, that’s not what Levandowski wanted to do, according to Travis Kalanick’s testimony in a recent corporate lawsuit.

Kalanick, the founder and former CEO of Uber, recently testified in court that he regularly hosted what he called a “jam sesh” at his home. He would invite other Uber executives to his house and they would brainstorm business ideas together. Kalanick testified that Levandowski would sometimes attend these jam sessions while he was still employed by Google. Kalanick said he had wanted to hire Levandowski, but Levandowski wanted to break out on his own and form his own company. Kalanick then came up with a solution in which he could get Levandowski to work for him while still allowing Levandowski to feel as though he had the freedom he wanted. Continue reading

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While some federal courts have been making it easier for employers to use more expansive non-compete agreements to shackle their workers, some states are working to make it more difficult. California already has a blanket ban on non-compete agreements, including those signed in states where they are legal. Now Pennsylvania might be the next state to join California’s worker-friendly approach.

Pennsylvania’s legislators recently introduced a new house bill, titled the “Freedom to Work Act,” which would ban almost all non-compete agreements.

The proposed law, as it is currently written, is not quite as restrictive as California’s ban. Pennsylvania’s proposed Act defines a non-compete agreement as any agreement between an employer and their worker that is designed to prevent the worker from seeking employment with another company, although the Act would enforce non-compete agreements in certain situations, including the sale of a business or the dissolution of a partnership or LLC. The Act also would not apply to non-compete agreements in existence prior to the time the Act is made into law, although it would prohibit the renewal of any such agreements. Continue reading

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Many non-compete agreements are included in employment contracts merely as a precaution. While employers reserve the right to sue workers for violating any of the terms of their non-compete agreements, few companies actually follow through on the threat if/when an employee violates their contract.

But one fitness company did decide to exercise its right to sue a former employee who allegedly violated the terms of his employment contract by starting his own club within three miles of the fitness club location he had been managing for his former employer.

The former employee, Jason Voges, started a fitness club of his own, Island Life Fitness, LLC. Voges founded the new club with his wife, Crystal, a few months after his employment with Anytime Fitness ended. Anytime Fitness, a franchise of Fitness Group, LLC, sued Voges, pointing out his contract allows him to seek employment with a rival fitness club ten miles away from any one of Fitness Group’s locations. Continue reading

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The battle to be the first self-driving car company has a new twist.

Waymo’s lawsuit against Uber for allegedly stealing trade secrets pertaining to its self-driving technology was supposed to go to trial earlier this month, but has been delayed as a result of new evidence against Uber.

While the two ride-hailing companies were preparing their cases and getting ready to argue their sides before a jury, Judge William Alsup had ordered an investigation into Uber by the Department of Justice (DOJ) – an investigation which recently turned up a letter that has the potential to do serious damage to Uber’s case.

The letter was written by an attorney representing Richard Jacobs, who used to work for Uber as part of their Marketplace Analytics (MA) team. According to the letter, which Jacobs approved at the time, it was sent, Uber allegedly used its MA team for the sole purpose of stealing trade secrets from Waymo, and possibly other competitors as well.

The DOJ also found that Uber had actively taken steps to hide this information from the court and other legal professionals.

The letter was part of a lawsuit between Jacobs and Uber, which has since been settled. When questioned about the letter on the stand, Jacobs denied parts of it, saying he reviewed the letter in haste when he was on vacation. Jacobs denied that Uber’s MA group existed in order to steal trade secrets, or that Waymo was a target, but he did confirm that Uber took steps to protect sensitive information and eliminate the possibility of a paper trail that might work against them later. Continue reading

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Being wise about knowing which clauses to include in a contract will help you in the long run.  This is for reason being that a contract that is not enforceable on some level could run the risks of becoming void and unenforceable.  In turn, that can cost business and profit.  The basic principles of materiality can change from year to year.  An awareness in advance can save.  We are here to help with the following list:

1. Non compete agreements are enforceable to the extent that a business interest is protected.

This has always been at the core of non compete interests.  Having been at the core, means it has also been subject to scrutiny.  There are plenty of court decisions that have considered this more closely which includes the fairness test as espoused in the case of  White v. Mederi Caretenders Visiting Services of Southeast Florida, LLC, Case No. SC16-28 (Fla. Sup. Ct., Sep. 14, 2017).  Is what the employer seeking to protect its investment or is it making it unfair for the employee to use information, relationships or resources that they acquired while employed by a former employer?  That is the question and agreements will be assessed on the management of their exploitative nature. 

2. Forum selection clauses are usually enforceable across the country.

Clauses that choose not to enforce another state’s law are generally enforceable unless the violation of public policy is at stake.  In the case of  Stone Surgical, LLC v. Stryker Corp., Case No. 16-1434 (6th Cir., May 24, 2017), an employee was subject to a non compete with Michigan choice of law and forum clause.  Enforceability of such clauses was challenged when that employee transitioned to work with a competitor of the other jurisdictional state of Louisiana.   It was noted on appeal at the federal level that Michigan law would favor such clauses. Continue reading

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An interesting recent employment law case in the United Kingdom illustrates why it is crucial for businesses to carefully draft non-compete agreements. In England as in the United States former employees can use overbroad wording to invalidate the entire covenant and circumvent otherwise valid provisions.

Mary-Caroline T. was an executive search agent and partner at Egon Zehnder Ltd. in the U.K., eventually rising to become co-global head of the financial services group. Her employment agreement provided that she not be “engaged, concerned with or interested in” a competing business of a similar nature for six months following separation from the company. The restriction was not limited geographically. Continue reading

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All contracts are subject to scrutiny before the law, especially when a dispute arises. Employment-employer disputes are no exception. Federal and state‑specific restrictions are
now facing employers who utilize non‑compete agreements and such agreements are able to be stricken for unrelated employment issues. This is since the Appellate Division of the New
Jersey Superior Court has provided a warning to an employer had no ability to prevent its former employee from working for its direct client despite the existence of a non‑compete
agreement expressly covering that client. This was of particular concern since the employee was not paid properly by the employer during her training period. It was because the
employment and non‑compete “agreements violated federal law, they were void and unenforceable.”

This brings to light notions such as the importance of fair and just contracts, as well as, the unconscionability. If ever a contract has an abuse of power or is in favor of one party over the
other, it will violate the law. The employers must take this into consideration when drafting terms and have them reviewed by attorneys who are familiar with restrictive covenants within
the scope of employment law. Continue reading