Non-Compete Agreement

Abstract: If you have employees who work with your trade secret(s), a written contract drafted by an attorney may reduce the risk of losing your property rights in the secret(s) if the employee leaves. Note, however, that some states (notably, California and Michigan) are less receptive to enforcing non-compete agreements than other states. A sample non-compete agreement is as follows:

This EMPLOYMENT AGREEMENT (the “Agreement”) is made this _____ day of _____ 2004 between Corporation, (the “Company”) and the undersigned employee (the “Employee”). In consideration of the mutual promises and agreements hereinafter set forth, Company and Employee agree as follows:

1. Term of Agreement. The term of this agreement shall commence on [STARTING DATE] and may be terminated by either party at any time and for any reason. Employee expressly understands and agrees that Employee’s employment is “AT WILL” and can be terminated by Employer at any time. Employee also expressly understands and agrees that some of the Employee’s duties and obligations as specified herein will remain in effect after the termination of the employment.

2. Employment. Company hereby employs, engages and hires Employee as [TITLE]. Employee hereby accepts and agrees to such hiring, engagement, and employment. Employee shall perform such duties as are customarily performed by one holding such position in other, same or similar businesses or enterprises as that engaged by Company, and shall also additionally render such other and unrelated services and duties as may be assigned by Company.

3. Best Efforts of Employee. Employee agrees to perform all of the duties that may be required of and from Employee pursuant to the expressed and implicit terms hereof faithfully, professionally, and to the best of Employee’s ability, experience and talents, and to the reasonable satisfaction of Company.

4. Compensation of Employee. Company shall pay Employee, and Employee shall accept from Company, in full payment for Employee’s services hereunder, compensation at the rate of $_______ per annum, payable in semi-monthly installments. Employee shall also be granted _ stock options under a Stock Option Plan established by the Board of Directors of Company. Such options shall vest over a three (3) year period beginning on Employee’s first date of employment with Company. To receive all stock options, Employee must remain employed by Company for full three (3) years. One third of the stock options shall vest on the first anniversary date of the employment. Thereafter, the stock options shall vest quarterly until the three year anniversary date of employment.

5. Benefits and Additional Compensation. Employee shall have the opportunity to participate in Company-sponsored benefits programs if and when they are established. In the event of illness, Company will pay Employee in accordance with section Compensation of Employee for the duration of the illness, provided that the illness does not exceed six months, which renders Employee unable to fulfill Employee’s duties to the satisfaction of Company. Any such illness exceeding six months shall be grounds for termination “for cause”. Compensation during illness may be reduced by any amount paid by State Disability or other insurance plans. The Employee will be able to participate in Research and Development Bonus Plans as established by the Board of Directors of Company.

6. Termination. Company may terminate Employee’s employment for any reason. Employee may terminate the employment for any reason. Upon termination, Employee will surrender any work product to Company and Company will pay Employee any compensation due and owing. Some obligations of Employee will remain in effect after the termination of the employment as specified in this Agreement.

7. Other employment. Employee shall devote substantially all of his time, attention, knowledge, and skills to the business and interests of Company, and Company shall be entitled to all of the benefits and profits arising from or incident to all work, services, and advice of Employee on behalf of Company. Employee shall not, during the term hereof, be interested directly or indirectly, in any manner, as partner, officer, director, stockholder, advisor, employee or, in any other capacity, in any other business similar to Company’s business or an allied trade. However, nothing herein contained shall be deemed to prevent or limit the right of Employee to invest in the capital stock or other securities of any corporation whose stock or securities are publicly owned or are regularly traded on any public exchange. Nor shall anything herein contained be deemed to prevent Employee from investing or limit Employee’s right to invest in real estate.

8. Confidentiality.
(a) Definitions. “Proprietary Information” is all information and any idea whatever form, tangible or intangible, pertaining in any manner to the business of Company, or any of its Affiliates*, or its employees, clients, consultants, or business associates, which was produced by any employee or consultant of Company in the course of his or her employment or consulting relationship or otherwise produced or acquired by or on behalf of Company. All Proprietary Information not generally known outside of Company's organization, and all Proprietary Information so known only through improper means, shall be deemed “Confidential Information.” Confidential Information may be contained in oral communications, as well as in any tangible expressions referring or relating, but not limited to:

(1) formulas, research and development techniques, processes, trade secrets, computer programs, software, system architecture, hardware, electronic codes, mask works, inventions, innovations, patents, patent applications, discoveries, improvements, data, know-how, formats, test results, research projects, manuals, specifications, documentation, notes, industry contacts;

(2) information about costs, profits, markets, sales, contracts and lists of customers, and distributors;

(3) business, marketing, and strategic plans;

(4) forecasts, unpublished financial information, budgets, projections, and customer identities, characteristics and agreements; and

(5) employee personnel files and compensation information.

Confidential Information is to be broadly defined, and includes all information that has or could have commercial value or other utility in the business in which Company is engaged or contemplates engaging, and all information of which the unauthorized disclosure could be detrimental to the interests of Company, whether or not such information is identified as Confidential Information by Company.

(b) Existence of Confidential Information. The Company owns and has developed and compiled, and will develop and compile, certain trade secrets, proprietary techniques and other Confidential Information which have great value to its business. This Confidential Information includes not only information disclosed by Company to Employee, but also information developed or learned by Employee during the course of Employee’s employment with Company. All materials referring or relating to Confidential Information, any software, hardware, equipment or devices incorporating any Confidential Information are and shall remain the sole and exclusive property of Company, except as set forth in this Agreement. Employee shall have no interest in or rights to use or disclose Confidential Information.

(c) Protection of Confidential Information. Employee will not, directly or indirectly, use, make available, sell, disclose or otherwise communicate to any third party, other than in Employee’s assigned duties and for the benefit of Company with written consent of Company, any of Company's Confidential Information, either during or after Employee’s employment with Company. In the event Employee desires to publish the results of Employee’s work for Company through literature or speeches, Employee will submit such literature or speeches to the Board of Directors of Company at least 10 days before dissemination of such information for a determination of whether such disclosure may alter trade secret status, may be highly prejudicial to the interests of Company, or may constitute an invasion of its privacy. Employee agrees not to publish, disclose or otherwise disseminate such information without prior written approval of the Board of Directors of Company. Employee acknowledges that Employee is aware that the unauthorized disclosure of Confidential Information of Company may be highly prejudicial to its interests, an invasion of privacy, and an improper disclosure of trade secrets. Employee agrees that all Confidential Information made known to Employee during or after the employment is subject to this Agreement and will be received and held in confidence. Employee will take all necessary steps to prevent disclosure of Confidential Information to others and will not use or disclose Confidential Information except as set forth in this Agreement or with the express prior written consent of Company. Employee shall immediately notify Company of any actual or suspected unauthorized use or disclosure of Confidential Information, and shall cooperate with Company in obtaining injunctive or other equitable relief and in any suit for damages. If Employee receives a subpoena or other legal process seeking disclosure of Confidential Information, employee shall immediately notify Company and cooperate fully with Company in contesting such disclosure.

(d) Delivery of Confidential Information. Upon request or when Employee’s employment with Company terminates, Employee will immediately deliver to Company all copies of any and all materials and writings received from, created for, or belonging to Company including, but not limited to, those which relate to or contain Confidential Information.

(e) Location and Reproduction. Employee shall maintain at Employee’s work station and/or any other place under Employee’s control only such Confidential Information as Employee has a current “need to know.” Employee shall return to the appropriate person or location or otherwise properly dispose of Confidential Information once that need to know no longer exists. Employee shall not make copies of or otherwise reproduce Confidential Information unless there is a legitimate business need of Company for reproduction.

(f) Prior Actions and Knowledge. Employee represents and warrants that from the time of Employee’s first contact with Company Employee held in strict confidence all Confidential Information and have not disclosed any Confidential Information, directly or indirectly, to anyone outside Company, or used, copied, published, or summarized any Confidential information, except to the extent otherwise permitted in this Agreement.

(g) Third-Party Information. Employee acknowledges that Company has received and in the future will receive from third parties their confidential information subject to a duty on Company's part to maintain the confidentiality of such information and to use it only for certain limited purposes. Employee agrees that, during the employment and thereafter, Employee will hold all such confidential information in the strictest confidence and not to disclose or use it, except as necessary to perform Employee’s obligations hereunder and as is consistent with Company's agreement with such third parties.

(h) Third Parties. Employee represents that the employment with Company does not and will not breach any agreements with or duties to a former employer or any other third party. Employee will not disclose to Company or use on its behalf any confidential information belonging to others and will not bring onto the premises of Company any confidential information belonging to any such party unless consented to in writing by such party.

(i) Duration of obligations. Employee’s obligations under Section 8. Confidentiality shall survive expiration or termination of this Agreement for any reason for a period of five (5) years after the date of expiration or termination.

9. Intellectual Property Rights.
(a) Definition. The term “Subject Ideas or Inventions” includes any and all ideas, processes, trademarks, service marks, inventions, designs, technologies, computer hardware or software, original works of authorship, formulas, discoveries, patents, copyrights, copyrightable work products, marketing and business ideas, and all improvements, know-how, data, rights, and claims related to the foregoing that, whether or not patentable, which are conceived, developed or created and which: (1) relate to Company's current or contemplated business or activities; (2) relate to Company's actual or demonstrably anticipated research or development; (3) result from any work performed by Employee for Company; (4) involve the use of Company's equipment, supplies, facilities or trade secrets; (5) result from or are suggested by any work done by Company or at Company's request, or any projects specifically assigned to Employee; or (6) result from Employee’s access to any of Company's memoranda, notes, records, drawings, sketches, models, maps, customer lists, research results, data, formulae, specifications, inventions, processes, equipment or other materials (collectively, “Company Materials”).

(b) Company Ownership. All right, title and interest in and to all Subject Ideas and Inventions, whether or not registered or registrable, patented or patentable shall be held and owned solely by Company, and where applicable, all Subject Ideas and Inventions shall be considered works made for hire. Employee shall mark all Subject Ideas and Inventions with Company's copyright or other proprietary notice as directed by Company and shall take all actions deemed necessary by Company to protect Company's rights therein. In the event that the Subject Ideas and Inventions shall be deemed not to constitute works made for hire, or in the event that Employee should otherwise, by operation of law, be deemed to retain any rights (whether moral rights or otherwise) to any Subject Ideas and Inventions, Employee hereby assigns and otherwise transfers and agrees to assign and otherwise transfer to Company, without further consideration, Employee’s entire right, title and interest in and to each and every such Subject Idea and Invention. Employee hereby waives any so-called “droit moral” rights, “moral rights of authors” and all other similar rights Employee may have in any Subject Ideas and Inventions, however denominated, throughout the world.

(c) Disclosure. Employee agrees to promptly disclose the details of any Subject Idea and Invention to an authorized representative of Company, and provide such representative with all information in Employee’s possession relative thereto including all possible applications for such Subject Idea and Invention.

(d) Company’s rights. Employee agrees that Company may apply for and receive a patent or patents, trademark or trademarks, copyright or copyrights for Subject Ideas and Inventions in its own name. Employee agrees that when requested, without charge to, but at the expense of Company, its successors, assigns and legal representatives, to execute all patent applications including, but not limited to, divisional applications, continuation applications, continued prosecution applications, continuation-in-part applications, substitute applications, renewal applications, reissue applications, reexaminations, all trademark registration and all original copyright registration. Employee agrees to execute all rightful oaths, assignments, powers of attorney, and other papers relating to patent applications, trademark registration and copyright registration. Employee agrees to communicate all facts known to Employee relating to said Subject Ideas and Inventions and the history thereof. In addition, Employee agrees to generally assist Company, its successors, assigns or representatives in securing and maintaining proper patent protection, trademark protection and copyright protection.

(e) California Labor Code (If Applicable). The foregoing agreements, covenants and assignments do not apply to Subject Ideas and Inventions that qualify for the protection of California Labor Code Section 2870, which provides:

(1) “Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer's equipment, supplies, facilities, or trade secret information except for those inventions that either:

a. Relate at the time of conception or reduction to practice of the invention to the employer's business, or actual or demonstrably anticipated research or development of the employer; or

b. Result from any work performed by the employee for the employer.

(2) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.”

(f) Burden of Proof. Employee understands that Employee bears the full burden of proving to Company that a Subject Idea and Invention qualifies fully under Section 2870.

(g) Maintenance of Records. Employee agrees to keep and maintain adequate and current written records of all Subject Ideas and Inventions and their development made by Employee (solely or jointly with others) during the term of employment with Company. These records will be in the form of notes, sketches, drawings, and any other format that may be specified by Company. These records will be available to and remain the sole property of Company at all times.

(h) Determination of Subject Ideas and Inventions. Employee further agrees that all information and records pertaining to any idea, process, trademark, service mark, invention, technology, computer hardware or software, original work of authorship, design, formula, discovery, patent, copyright, product, and all improvements, know-how, rights, and claims related to the foregoing (“Intellectual Property”), that Employee does not believe to be a Subject Idea or Invention, but that is conceived, developed, or reduced to practice by Company (alone by Employee or with others) during the Period of Employment and for one (1) year thereafter, shall be disclosed promptly by Employee to Company (such disclosure to be received in confidence). Company shall examine such information to determine if in fact the Intellectual Property is a Subject Idea or Invention subject to this Agreement.

(g) Access. Because of the difficulty of establishing when any Subject Ideas or Inventions are first conceived by Employee, or whether it results from Employee’s access to Confidential Information or Company Materials, Employee agrees that any Subject Idea and Invention shall, among other circumstances, be deemed to have resulted from Employee’s access to Company Materials if: (1) it grew out of or resulted from Employee’s work with Company or is related to the business of Company, and (2) it is made, used, sold, exploited or reduced to practice, or an application for patent, trademark, copyright or other proprietary protection is filed thereon, by Employee or with Employee’s significant aid, within one year after termination of the Period of Employment.

(h) Assistance. Employee further agrees to assist Company in every proper way (but at Company's expense) to obtain and from time to time enforce patents, copyrights or other rights or registrations on said Subject Ideas and Inventions in any and all countries, and to that end Employee will execute all documents necessary:

(1) to apply for, obtain and vest in the name of Company alone (unless Company otherwise directs) letters patent, copyrights or other analogous protection in any country throughout the world and when so obtained or vested to renew and restore the same; and

(2) to defend any opposition proceedings in respect of such applications and any opposition proceedings or petitions or applications for revocation of such letters patent, copyright or other analogous protection; and

(3) to cooperate with Company (but at Company's expense) in any enforcement or infringement proceeding on such letters patent, copyright or other analogous protection.

(i) Authorization to Company. In the event Company is unable, after reasonable effort, to secure Employee’s signature on any patent, copyright or other analogous protection relating to a Subject Idea and Invention, whether because of Employee’s physical or mental incapacity or for any other reason whatsoever, Employee hereby irrevocably designates and appoints Company and its duly authorized officers and agents as Employee’s agent and attorney-in-fact, to act for and on Employee’s behalf and to execute and file any such application, applications or other documents and to do all other lawfully permitted acts to further the prosecution, issuance, and enforcement of letters patent, copyright or other analogous rights or protections thereon with the same legal force and effect as if executed by Employee. Employee’s obligation to assist Company in obtaining and enforcing patents and copyrights for Subject Ideas and Inventions in any and all countries shall continue beyond the termination of my relationship with Company, but Company shall compensate me at a reasonable rate after such termination for time actually spent by me at Company's request on such assistance.

(j) Exhibit. Employee acknowledges that there are no currently existing ideas, processes, inventions, discoveries, marketing or business ideas or improvements which Employee desire to exclude from the operation of this Agreement. To the best of Employee’s knowledge, there is no other contract to assign inventions, trademarks, copyrights, ideas, processes, discoveries or other intellectual property that is now in existence between Employee and any other person (including any business or governmental entity).

(i) Prior Inventions. Employee shall provide Company with a copy of all patents, if any, that Employee owns or has a right to license. Employee shall notify Company about all pending patent applications invented by Employee or assigned to Employee obtained prior to commencement of employment with Company.

(j) No Use of Name. Employee shall not at any time use Company's name or any Company trademark(s) or trade name(s) in any advertising or publicity without the prior written consent of Company.

10. Competitive Activity. Employee agrees that during Employee’s employment and for a period of one (1) year after termination of the Period of Employment, without Company's express written consent, Employee shall not, directly or indirectly, (i) employ, solicit for employment, or recommend for employment any person employed by Company (or any Affiliate); and (ii) engage in any present or contemplated business activity that is or may be competitive with Company (or any Affiliate) in any state where Company conducts its business, unless Employee can prove that any action taken in contravention of this subsection (ii) was done without the use in any way of Confidential Information. Employee acknowledges that pursuit of such activities will necessarily involve the use, disclosure or misappropriation of Confidential Information.

11. Representations and Warranties. Employee represents and warrants (i) that Employee has no obligations, legal or otherwise, inconsistent with the terms of this Agreement or with undertaking a relationship with Company; (ii) that the performance of the services called for by this Agreement do not and will not violate any applicable law, rule or regulation or any proprietary or other right of any third party; (iii) that Employee will not use in the performance of responsibilities for Company any materials or documents of a former employer; and (iv) that Employee has not entered into or will not enter into any agreement (whether oral or written) in conflict with this Agreement.

12. Termination Obligations.
(a) Upon the termination of relationship with Company or promptly upon Company's request, Employee shall surrender to Company all equipment, tangible Proprietary Information, documents, books, notebooks, records, reports, notes, memoranda, drawings, sketches, models, maps, contracts, lists, computer disks (and other computer-generated files and data), any other data and records of any kind, and copies thereof (collectively, “Company Records”), created on any medium and furnished to, obtained by, or prepared by Employee in the course of or incident to Employee’s employment, that are in Employee’s possession or under Employee’s control.

(b) Employee’s representations, warranties, and obligations contained in this Agreement shall survive the termination of the employment.

(c) Following any termination of employment, Employee will fully cooperate with Company in all matters relating to Employee’s continuing obligations under this Agreement.

(d) In the event that Employee leaves the employ of Company Employee hereby grants consent to notification by Company to Employee’s new employer about Employee’s rights and obligations under this Agreement.

(e) Upon termination of the employment, Employee hereby agrees to execute a Certificate acknowledging compliance with this Agreement in the form reasonably provided by Company.

13. Injunctive Relief. Employee acknowledges that failure to carry out any obligation under this Agreement, or a breach by Employee of any provision herein, will constitute immediate and irreparable damage to Company, which cannot be fully and adequately compensated in money damages and which will warrant preliminary and other injunctive relief, an order for specific performance, and other equitable relief. Employee further agrees that no bond or other security shall be required in obtaining such equitable relief and Employee hereby consents to the issuance of such injunction and to the ordering of specific performance. Employee also understand that other action may be taken and remedies enforced against Employee.

14. General.
(a) Modification. No modification of this Agreement shall be valid unless made in writing that explicitly refers to the amendments of this Agreement and is signed by both parties.

(b) Binding Effect. This Agreement shall be binding upon Employee, Employee’s heirs, executors, assigns and administrators and is for the benefit of Company and its successors and assigns.

(c) Governing Law. This Agreement shall be construed in accordance with, and all actions arising under or in connection therewith shall be governed by, the internal laws of the State of California. Any disputes between the parties with respect to this Agreement shall be settled by binding arbitration in the county of Santa Clara, State of California, in accordance with Judicial Arbitration and mediation Service (“JAMS”) (or similar mediation service of a similar national scope if JAMS no longer exists.) Each party shall pay in equal proportion of the cost of the mediator’s services, in advance upon request by the mediator of any party. The party requesting the arbitration shall be the plaintiff and the other party shall be the defendant. The parties waive any other venue to which either party may be entitled by domicile or otherwise.

(d) Integration. This Agreement sets forth the parties' mutual rights and obligations with respect to proprietary information, prohibited competition, and intellectual property. It is intended to be the final, complete, and exclusive statement of the terms of the parties' agreements regarding these subjects. This Agreement supersedes all other prior and contemporaneous agreements and statements on these subjects, and it may not be contradicted by evidence of any prior or contemporaneous statements or agreements. To the extent that the practices, policies, or procedures of Company, now or in the future, apply to Employee and are inconsistent with the terms of this Agreement, the provisions of this Agreement shall control unless changed in writing by Company.

(f) Construction. This Agreement shall be construed as a whole, according to its fair meaning, and not in favor of or against any party. By way of example and not limitation, this Agreement shall not be construed against the party responsible for any language in this Agreement. The headings of the paragraphs hereof are inserted for convenience only, and do not constitute part of and shall not be used to interpret this Agreement.

(g) Attorneys' Fees. Should either Employee or Company, or any heir, personal representative, successor or permitted assign of either party, resort to legal proceedings to enforce this Agreement, the prevailing party (as defined in California statutory law) in such legal proceeding shall be awarded, in addition to such other relief as may be granted, attorneys' fees and costs incurred in connection with such proceeding.

(h) Severability. If any term, provision, covenant or condition of this Agreement, or the application thereof to any person, place or circumstance, shall be held to be invalid, unenforceable or void, the remainder of this Agreement and such term, provision, covenant or condition as applied to other persons, places and circumstances shall remain in full force and effect.

(i) Rights Cumulative. The rights and remedies provided by this Agreement are cumulative, and the exercise of any right or remedy by either Company or Employee (or by that party's successor), whether pursuant hereto, to any other agreement, or to law, shall not preclude or waive that party's right to exercise any or all other rights and remedies. No waiver shall be construed as a waiver of any succeeding breach, whether or not of the same or a different term or condition. This Agreement will inure to the benefit of Company and its successors and assigns.

(j) Nonwaiver. The failure of either Company or Employee, whether purposeful or otherwise, to exercise in any instance any right, power or privilege under this Agreement or under law shall not constitute a waiver of any other right, power or privilege, nor of the same right, power or privilege in any other instance. Any waiver by Company or by Employee must be in writing and signed by either Employee, if Employee is seeking to waive any of the rights under this Agreement, or by an officer of Company (other than Employee) or some other person duly authorized by Company.

(k) Notices. Any notice, request, consent or approval required or permitted to be given under this Agreement or pursuant to law shall be sufficient if it is in writing, and if and when it is hand delivered or sent by regular mail, with postage prepaid, to Employee’s residence (as noted in Company's records), or to Company's principal office, as the case may be.

(l) Date of Effectiveness. This Agreement shall be deemed effective as of the commencement of Employee’s employment with Company.

(m) Agreement to Perform Necessary Acts. Employee agrees to perform any further acts and execute and deliver any documents that may be reasonably necessary to carry out the provisions of this Agreement.

(n) Assignment. This Agreement, or any right or interest under this Agreement shall not be assigned, nor shall any work or obligation to be performed under this Agreement be delegated, voluntarily, by operation of law or otherwise, without the parties’ prior written consent. Any attempted assignment in contravention of this Section (n) shall be void and ineffective. The terms of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the permitted respective successors and assigns of the parties hereto.

(o) Compliance with Law. Employee agrees to abide by all federal, state, and local laws, ordinances and regulations.

(p) Employee Acknowledgment. Employee acknowledges that Employee has had the opportunity to consult legal counsel in regard to this Agreement, that Employee has read and understands this Agreement, that Employee is fully aware of its legal effect, and that Employee has entered into it freely and voluntarily and based on Employee’s own judgment and not on any representations or promises other than those contained in this Agreement.

(q) Counterparts. This Agreement may be signed in counterparts, which together shall constitute one agreement. If this Agreement is signed in counterparts, no signatory hereto shall be bound until both parties named below have duly executed, or caused to be duly executed, a counterpart of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date set forth below.

CAUTION: THIS AGREEMENT CREATES IMPORTANT OBLIGATIONS OF TRUST AND AFFECTS THE EMPLOYEE'S RIGHTS TO INVENTIONS AND OTHER INTELLECTUAL PROPERTY THE EMPLOYEE MAY DEVELOP DURING HIS OR HER EMPLOYMENT.
Dated: ________

Employee Signature __________________________
Printed Name of Employee: __________________________

Corporation
By:
Name:_________________________
Title:__________________________

Chilling Effects Clearinghouse - www.chillingeffects.org

Chilling Effects Clearinghouse page printed from: https://www.chillingeffects.org/tradesecret/resource.cgi?ResourceID=90