In a posting a couple of months ago, I noted that IBM was suing a former employee — Joanne Olsen — for violated a one year noncompetition agreement when she took a senior position with Oracle. Today there is a story in the Wall Street Journal that notes that IBM dropped the suit in early July. Oracle had filed their own suit alleging unfair competition and seeking to move the case from New York to California. As I noted in my earlier posting, noncompete agreements are considered illegal in California under Business and Professions Code Section 16600.
The action by both companies raises an interesting question: are noncompete agreements dead? Are there better ways of protecting valuable information?
And what information is it that you are really trying to protect? As Alfred Marshall famously noted over 100 years ago:
When an industry has chosen a locality for itself, it is likely to stay there long; so great are the advantages which people following the same skilled trade get from near neighborhood to one another. The mysteries of the trade become no mysteries; but are as it were in the air, and children learn many of them unconsciously. Good work is appreciated, inventions and improvements in machinery, in processes and the general organization of the business have their merits promptly discussed; if one man starts a new idea, it is taken up by other and combined with suggestions of their own; and thus it becomes the source of further new ideas.
FYI – His earlier statement was this:
Where large masses of people are working at the same kind of trade, they educate one another. The skill and the taste required for their work are in the air, and children breathe them as they grow up. This is seen particularly in such manufactures as those of glass and pottery.
Again, each man profits by the ideas of his neighbors: he is stimulated by contact with those who are interested in his own pursuit to make new experiments; and each successful invention, whether it be a new machine, a new process, or a new way of organizing business, is likely when once started to spread and to be improved upon.
I would note the statement in the second version — “each man profits by the ideas of his neighbors.”
So the question still needs to be asked: what information are you protecting and what information should be protected — both for company profit and general economic growth?