When It Comes to Protecting Your Business, In a Sea of Change There Remain Steadfast Legal Mechanisms Which May Yet Work

By Andrew P. Botti

The recent activity in the Massachusetts House indicates that changes to the long-standing law of non-competes may be imminent. Despite what may occur on Beacon Hill, there remain a variety of ways that businesses may protect their proprietary information. Even before non-competes became fashionable, intellectual property rights were recognized and secured in the United States Constitution. Article I, Section 8, Clause 8 expressly provides: “The Congress shall have the Power …To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive right to their respective Writings and Discoveries.” Thus, both copyrights and rights to inventions are recognized as fundamental Constitutional concepts.

These Constitutional concerns are echoed in a variety of permissible contractual mechanism which may be employed for protection of intellectual property. There are several means by which businesses may protect their “property rights” outside of the confines of the non-compete context.

Confidentiality and Non-disclosure Agreements
These agreements prohibit present and former employees from disclosing confidential and proprietary business information which belongs to the company. There are no time limits required, and the proscribed activity and protected information may be broadly defined.

Non-solicitation/Non-interference Agreements
These covenants prohibit former employees from attempting to take business from their prior employer. They may cover present and prospective customers, as well as vendors and suppliers. The idea is to protect and preserve for the business its on-going business relationships, and customer good will. Non-solicitation agreements can also apply to employees to prohibit hiring away of key individuals, or entire departments, which sometimes happens.

Forfeiture Agreements
These agreements require that the employee forfeit certain future emoluments if the subject employee engages in proscribed activity. These future benefits may include deferred compensation, stock options and other like benefits. These agreements are often tied to non-competition covenants which call for forfeiture for engaging in competition with the employer.

Clawback Provisions
These call for the paying back of certain benefits already bestowed on the employee should the employee engage in the proscribed behavior. The prohibited behavior is often defined as competing with the former employer, but may involve other activities such as solicitation of customers.

Inventions Assignment Agreements
These stipulate that anything the employee may invent on company time automatically becomes the property of the company, and not the employee.

Return of Materials Agreement
These specify that the employee must return all company property upon cessation of employment.

What makes these agreements so efficacious is that they may be combined into a single document. And, each provision may be enforced in court via the equitable principle of specific performance. If a breach or threatened breach appears imminent, the employer may seek to enforce any one or all of the above-referenced agreements in order to protect its confidential business information and intellectual property.

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