Neal Jagtap Wed, Jul 17, 2024, 11:57 PM
I can see why at an early stage founders wouldn't bother with this, but if you are going to sign an IP assignment for your tenure as an employee I'm not sure why you wouldn't also include customary non compete and confidentiality provisions in the same agreement. If you don't and you raise 6-12 months later I can a lack of such provisions raising eyebrows.
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Teddy Ellison Thu, Jul 18, 2024, 12:16 AM
During the term of their employment, absolutely. Post-term depends on jurisdiction but non-solicits much more common post-term than non-competes.
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Neal Jagtap Thu, Jul 18, 2024, 12:18 AM
Yup. @teddy is of course correct. Even inclusion of post term non-solicits can vary by state. If you are talking about these restrictions applying only during the term of employment I think it's a good idea to have them in place.
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Katharine Barreto Thu, Jul 18, 2024, 2:00 AM
The NVCA updated its model forms in April of this year to address the recent developments with respect to non-competes/solicits in the context of CIIAAs. Their explanatory footnote on CIIAAs now reads:
"Depending on the jurisdiction in which the Company is based, it may be appropriate to include a representation relating to customary non-solicitation language residing in the Company’s Confidential Information Agreement forms. However, if the Company is based in or has substantial operations in a state in which certain types of non-solicits (e.g., customer non-solicits or certain types of personnel-related non-solicits) may be unenforceable, such a representation would likely not be appropriate. In appropriate circumstances, consider adding the following representation: “If legally permissible, each current and former Key Employee has executed a non-solicitation agreement substantially in the form or forms made available to the Purchasers or their respective counsel.”"
Katharine Barreto Thu, Jul 18, 2024, 2:03 AM
So, basically what @teddy and @npjagtap already said 🙂
Neal Jagtap Thu, Jul 18, 2024, 2:04 AM
@brian-scherer Sounds like if your question is "should we bother putting these in founder employment agreements early on?" the answer is yes. Then you get around to determining what's legal and what isn't for your jurisdiction.
Brian Scherer Thu, Jul 18, 2024, 5:35 AM
Exactly @npjagtap Thank you everyone! Super helpful.
Muran Zhu Thu, Jul 18, 2024, 7:19 PM
Yes, if you can put it in PIIA or employment agreement early on, do that. Some clients try to do it when the employee/founder leaves and they run into consideration issues. When including non-compete/non-solicitation, I often include language such as this: If, at the time of enforcement of this Section x, a court or arbiter or arbiter shall hold that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances shall be substituted for the stated duration, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum period, scope and area permitted by law. This Section x shall survive the termination of this Employment Contract.
Dessi Fessenko Fri, Jul 19, 2024, 1:38 AM
You all would of course be aware of these developments but the FTC takes issues with non-competes in employment agreements in the recent guidelines below (although sued over its authority to issue them in the first place). The antitrust lawyer in me just mentioning in case relevant. :)
https://www.ftc.gov/news-events/news/press-releases/2024/04/ftc-announces-rule-banning-noncompetes
Cheers!
Dessi
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Attachments
Federal Trade Commission: FTC Announces Rule Banning Noncompetes
https://www.ftc.gov/news-events/news/press-releases/2024/04/ftc-announces-rule-banning-noncompetes