

CA State Supreme Court rejects noncompete clauses - iamelgringo
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/08/07/BAUH12716R.DTL&feed=rss.bayarea

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tptacek
This is good news.

Two thoughts:

(1) This may cause (stupid) companies to incorporate and operate out of other
areas, like Austin and Atlanta.

(2) Though other states haven't "rejected" noncompete clauses, they remain
notoriously hard to enforce; in jurisdictions like Massachusetts and Illinois,
your noncompete has to be specific to your role, tied to a "reasonable"
business concern, and exchanged for extra compensation, and the court can
"rewrite" the agreement from the bench before enforcing it.

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pfedor
Aren't pretty much all companies incorporated in Delaware anyway?

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tptacek
For purposes of noncompete, the jurisdictions that seem to matter are the
place you work from, and the place your employer operates out of.

 _I'm not a lawyer, I've only ever observed noncompete drama._

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byrneseyeview
_The ruling "advances the strong California policy favoring open competition
and employee freedom,"_

Wait, what? How does it favor 'employee freedom' to say that employees cannot
agree not to work for a competitor? Being able to make an enforceable promise
about your own future behavior is an important freedom -- some Game Theory
texts claim that the most crucial right we have is the right to be sued for
breaching a contract.

Noncompetes are probably, usually, a bad idea -- but banning them altogether
is far worse.

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neilk
You're invoking Game Theory, by which I gather that your objection is more
theoretical that practical.

I can't think of a single real-world situation that would be improved by
having noncompetes enforced. Can you?

Maybe they are a lot like software patents. There are a very few cases where
someone has created software that is a genuine advance, requiring rare skill
and talent and time investment -- but the overwhelming majority of patent
claims are totally invalid, hence they are a bad idea.

Maybe there's some imaginary noncompete agreement that would benefit the
parties to a contract or the general public, but in practice they are just
going to be used by institutions with greater legal resources to provide
leverage on with fewer such resources.

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byrneseyeview
_I can't think of a single real-world situation that would be improved by
having noncompetes enforced. Can you?_

XCo. is about two years ahead of the rest of the world in their widget
technology research. They'd like to hire a new product designer, but they know
that the information this designer would need to do his job is worth millions
to any XCo. competitor. They would like to hire someone they already know and
trust, but they've pretty much tapped out their immediate social network. So
they stipulate that if you work for XCo, you can't work for Y LLC or Z LP over
the next two years.

Or they could not hire someone.

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harshavr
This is an interesting example. But to take the question further, exactly what
choices do you allow an individual to trade away? As an extreme, will you
allow an individual to trade his life away(or as in The Merchant of Venice,
one pound of flesh), if it can be used in some way to obtain a better contract
from someone else? In the poorer parts of the world, people sometimes sell
themselves into slavery.

The options here are either A)the extreme position - an individual is free to
make any contract whatsoever and is henceforth bound by that contract(the
government is the enforcer), or B)there is a set of fundamental freedoms which
one can't freely trade away.

Are you advocating A or B? If B, one would need to find some basic principles
which determine what freedoms can't be given up voluntarily.

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byrneseyeview
I don't think you can properly claim to own your own life if you aren't able
to relinquish that ownership -- the obvious question is: if you don't own it,
who does?

I am advocating A), in the sense that I would prefer to be governed under a
judicial system that focuses on enforcing the promises I make, not making my
decisions for me. The nice thing is that B is a subset of A -- under A, I
could put some of my rights (the right to sell my life, the right to harm
myself, the right to agree not to take a job in the future) under the control
of a legal entity that prevented me from exercising it. Since anyone under A
can live as if they were under B, advocating B over A can have no effect but
to deprive people who _do_ prefer A of their freedom.

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harshavr
Your version of B is actually distinct because it still requires the
individual to explicitly limit his choices beforehand. It would still leave
open an option for the following to happen,

A farmer after a poor harvest faces the prospect of starving to death, goes to
a local landlord for money in exchange for which he becomes a bonded labourer
for life. The next season he tries to run away. But the government, which
operates under principle A, catches him and forces him to return to slavery. I
am uncomfortable with the government actually doing this and this is why i
reject A.

There is an argument made in the context of minimum wage that it actually
hurts the people whose work value is less than the minimum wage as employers
wont hire them anymore. I am not arguing for or against minimum wage, but want
to point out a counterargument which might work in the example given above.
When the landlord knows that if one person refuses slave labor in exchange for
money, he can hire some else. But with a law forbidding such contracts in
place, the landlord doesn't have this option. In effect, the law enhances the
bargaining power of the labourer by restricting his options.

In effect, this is the same as the as argument pointed out in the thread above
of there being a Prisoner's Dilemma.

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callmeed
I've done more than a few freelance jobs in CA where I was asked to sign a NC.
I always try to explain things to them.

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jcromartie
Now the question is: what constitutes a "trade secret?" Could one take what
they do in their current corporate job and turn it into a startup using some
of the (non-patented, general knowledge) techniques you learned on the job,
but using different technology? Say, to make a competing product to one that
you are currently working on?

Obviously the guys at Cuil did this. Are there other precedents?

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emmett
A trade secret is "a plan, process, tool, mechanism or compound which a
company desires to keep confidential as a competitive advantage."

By definition, trade secrets are not patented (that would be public exposure).
Also by definition, they are not general knowledge (they must be known only to
those inside the company). A trade secret from Google might be the exact set
of elements and weightings that go into the search algorithm.

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wastedbrains
I have always thought this was a horrible idea. If you work for years in some
specialty say machine learning. If you leave one job chances are you are still
going to work in that same specialty. NCs really ruin a persons options.

You shouldn't take any code, and if there was a particular area a past
employer was innovating in perhaps steer a bit clear of that specific thing.

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ckinnan
Summary: "As long as you don't steal trade secrets or confidential
information, you can do what you want."

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globalrev
Oh my god it is so incredibly offensive.

How can it be the land of freedom if something like this would have been ok?
It is f __ __*g absurd.

I'd rather die standing than live on my knees and I will fight this anti-
freedom bullshit til I die.

