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Hi,
I worked for a financial firm from 1994-2003. I was originally hired to
do reception and customer service [I had just graduated from college].
During my time there, I taught myself to develop windows and web
applications. I had an interesting idea for a software application and built
it using computers purchased with my own money. Some of the work was done on
company time, but much was done on my own time.
The application continued to grow in sophistication and eventually
became the back office platform for this financial firm. I had no problem
with the fact that my company claimed ownership of the software since I was
verbally promised part ownership in the firm. Unfortunately for me, that
never happened. Instead, the role of "partner" went to someone else and I
was left out in the cold. In 2003, I left the company in disgust and started
my own software development company.
The financial firm, however, was in somewhat of a bind. You see, I am
the sole person capable of running and maintaining the software. I agreed to
continue maintaining the software for this company for an annual fee. The
company insisted that I sign an agreement prohibiting me from working with
competitors for as long as I was consulting with that firm and for one YEAR
thereafter. Furthermore, I was prevented from sharing "trade secrets".
I was contacted recently by a group of companies who compete with my
original employer. They are willing to pay me a great deal of money to
develop similar software for their companies. Let's say that I decided to do
business with them AFTER terminating my relationship with the first company.
First of all, I'd like to ask: Can I ignore the "1 year" clause and work
for a competitor immediately? According to some research I've done on
Google, I'm thinking the answer is "yes" since non-competes are <apparently>
not
enforceable here in California.
But here's the sticky part: Although I can terminate my consulting
agreement with the first company, my non-compete agreement prevents me from
sharing "trade secrets." Does my inability to share "trade secrets" prevent
me from designing software for competing financial firms? Note that I will
NOT be soliciting employees from the original firm. I will NOT be using
their customer lists. I will NOT be using any of the original code that was
developed for that company. All software will be developed from scratch. The
software is based upon financial formulas that have been around for
many years(profit/loss, ROR, margin risk, various risk measures). There are
no proprietary formulas that couldn't be found in any financial book in a
Barnes & Noble store. The software is based on common Microsoft technologies
that are explained in countless books. Could this type of knowledge possibly
be considered a "trade secret" given that it is so public?
Am I setting myself up for a lawsuit by working for competing companies?
Again, let me emphasize that I would be terminating my relationship with the
first company BEFORE beginning work with these competitors.
Thanks...
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"Nick Stokes, CSI" <boggle@jackson.bone> wrote in
misc.legal.moderated:
I worked for a financial firm from 1994-2003.
(developed software application)
Some of the work was done on
company time, but much was done on my own time.
Most "professional staff" are considered to be working for the
company when they develop something, even on their own time, if it
relates to their employer's operations or line of business. The fact
that yours was partly on company time reinforces that even more: the
original application almost certainly belongs to the company.
I had no problem
with the fact that my company claimed ownership of the software since I was
verbally promised part ownership in the firm. Unfortunately for me, that
never happened.
Oral promises aren't worth the paper they're written on.
I agreed to
continue maintaining the software for this company for an annual fee. The
company insisted that I sign an agreement prohibiting me from working with
competitors for as long as I was consulting with that firm and for one YEAR
thereafter. Furthermore, I was prevented from sharing "trade secrets".
I was contacted recently by a group of companies who compete with my
original employer. They are willing to pay me a great deal of money to
develop similar software for their companies. Let's say that I decided to do
business with them AFTER terminating my relationship with the first company.
Your relationship with the first company does not end when you
abrogate the agreement -- it ends a year after you stop consulting.
That is the agreement you signed.
First of all, I'd like to ask: Can I ignore the "1 year" clause and work for a competitor immediately? According to some research I've done on Google, I'm thinking the answer is "yes" since non-competes are <apparently> not enforceable here in California.
agreement. But you are an independent contractor, and the rules are
different. I'm sure at least some business agreements not to compete
are fully enforceable; you'd need to show yours to a local lawyer to
know.
But here's the sticky part: Although I can terminate my consulting
agreement with the first company, my non-compete agreement prevents me from
sharing "trade secrets." Does my inability to share "trade secrets" prevent
me from designing software for competing financial firms? ... The
software is based upon financial formulas that have been around for
many years(profit/loss, ROR, margin risk, various risk measures). There are
no proprietary formulas that couldn't be found in any financial book in a
Barnes & Noble store. The software is based on common Microsoft technologies
that are explained in countless books. Could this type of knowledge possibly
be considered a "trade secret" given that it is so public?
Probably not. A trade secret is something that is (a) secret and (b)
directly related to one particular company. General financial
formulas ail both of those tests.
Am I setting myself up for a lawsuit by working for competing companies?
Very possibly. I wouldn't worry much about the trade-secret aspect;
just be very sure that you don't use anything about the old company
that you learned through your employee or contractor relationship.
Also be sure to document your sources for the formulas and
techniques you use, because it's quite possible the company will
sue, just out of anger.
But I would worry much more about that non-compete agreement. Since
you have to see a lawyer about that, you can get advice on trade
secrets at the same time.
Again, let me emphasize that I would be terminating my relationship with the
first company BEFORE beginning work with these competitors.
Not quite true. You'd be terminating the active part of it (and your
income). But your stated obligation runs for a year after that
point. The company has a right to insist, in court, that you honor
that obligation. Get a competent lawyer's advice about how likely it
is that a judge will agree.
--
If you e-mail me from a fake address, your fingers will drop off.
I am not a lawyer; this is not legal advice. When you read anything
legal on the net, always verify it on your own, in light of your
particular circumstances. You may also need to consult a lawyer.
Stan Brown, Oak Road Systems, Tompkins County, New York, USA
http://OakRoadSystems.com
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Nick Stokes, CSI wrote:
I worked for a financial firm from 1994-2003. I was originally
hired to do reception and customer service [I had just
graduated from college]. During my time there, I taught myself
to develop windows and web applications. I had an interesting
idea for a software application and built it using computers
purchased with my own money. Some of the work was done on
company time, but much was done on my own time.
I won't respond to your whole message, because it's long and has a lot
of facts that need to be considered.
I will say, however, that the basic rule on non-competes is in
Business and Professions Code Section 16600, which says,
"Except as provided in this chapter, every contract by which anyone is
restrained from engaging in a lawful profession, trade, or business of
any kind is to that extent void."
The exceptions in sections 16601 and 16602 basically allow
non-competes for anyone who was an owner of a significant portion of
the business, and sells his share in the business.
As far as confidential information, I don't think that building
something similar to what you did for someone else is a trade secret.
In some circumstances it can be (e.g. when a salesman compiles a
client list while employed by a company, the list may be a trade
secret, and it belongs to the company, not the employee).
You really need to take the entire story and all relevant documents to
a local lawyer who knows about this kind of thing.
Stu
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Stan Brown wrote:
"Nick Stokes, CSI" <boggle@jackson.bone> wrote in
misc.legal.moderated:
I had no problem
with the fact that my company claimed ownership of the software since I was
verbally promised part ownership in the firm. Unfortunately for me, that
never happened.
Oral promises aren't worth the paper they're written on.
Actually, not entirely true. But, if contrary to written
contracts, or not covered in written contracts which are
exclusive and cover the matter, true.
(I have nothing to add to the legal aspects of
the non-compete agreement, except that I've come
to the conclusion, as noted by another poster,
that non-compete agreements are illegal in California,
no matter how structured.)
--
This account is subject to a persistent MS Blaster and SWEN attack.
I think I've got the problem resolved, but, if you E-mail me
and it bounces, a second try might work.
However, please reply in newsgroup.
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