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Readers: Contracts go too far

Many workers say contracts involving trade secrets go too far and often create a backlash, according to a NEWS.COM Poll.

Many high-technology workers believe that employee contracts involving trade secrets go too far and often create a backlash against the companies that impose them, according to the latest NEWS.COM Poll.

In one instance, a reader resigned after his company was bought out and the new owners required that employees sign a "blatantly one-sided" contract.

"It held that the employer owned any intellectual property I created, whether done on my time or his, at home or at work, using my equipment or not, related to his business or not. Everything. If I wrote a novel, they owned it," this reader wrote. "While the company was willing to grant individual waivers for specific activities, they refused to change the contract for all employees. I did not wish to work for a company that considered me to be their indentured servant. Rather than sign, I left the company."

Such sentiments were reflected in several accounts volunteered in response to the informal survey, which kept the identification of all respondents and companies confidential. Although this scenario was the only one that ended in an employee's resignation over a contract, nearly all responses registered at least some concern about overly restrictive company agreements, and many expressed outrage.

More than two-thirds of respondents object to commonly used provisions designed to prevent employees from jumping ship to a rival company. Sixty-nine percent of readers said they believed it was unfair for companies to require such restrictions, known as "non-competition" clauses.

However, in spite of such objections, the vast majority of respondents say they have never breached contracts aimed at protecting company trade secrets, before or after they have left their jobs, in adherence to what are known as "non-disclosure" agreements. Eighty-two percent of respondents say they have not violated such provisions, though many also noted that such agreements were impossible to enforce anyway.

"It is common practice at high-tech companies to write overzealous employee agreements that basically say 'everything you do, even in your free time, belongs to the company,'" one reader wrote in. "This is hard to enforce, no doubt."

When companies do try to enforce such agreements after their workers leave, readers say, they often do so to intimidate the former employees or the new employers--even if they know their claims of contract violation are extremely difficult to prove. Attorneys say this is done to create a "chilling effect" to make employees think twice before putting themselves in potentially compromising situations.

"A former employer sued me for leaving the company and joining a 'competitor.' The new company was not in direct competition with the old one, but the old decided they would sue anyway," a reader recalled. "Companies can sue whether or not the suit is legitimate, and unfortunately, companies tend to have deeper pockets than individual employees. In my case, the sheer costs of hiring an attorney and defending the frivolous suit eventually forced me into bankruptcy, but I was able to retain my position."

Despite such risks, some employees simply ignore the agreements, instead exercising their own judgment in the knowledge that the contracts as written are often impossible to police or enforce.

"Yes, I have violated them! Sometimes the day after I was let go," one reader says of non-disclosure agreements he has signed. "I draw the line when government secrets are involved--for ethical reasons, mostly, and to stay out of trouble."

In some cases, readers say, the companies themselves are aware of former employees breaking their contracts but look the other way as long as they see no material threat.

"I am currently working in violation of non-compete and non-disclosure agreements with a Denver, Colorado, Web design firm. They are aware of the situation (as they gave my reference to my new employer) but have told me that the agreement only really matters if I am trying to steal their customers or their currently implemented sites."

But the threat of losing trade secrets is a real one, others say, and companies are justified in doing whatever they can to keep them.

"It's fair because it's a voluntary agreement," one respondent wrote. "This isn't some mythical 19th century (government-regulation created) sweatshop/child-labor industry where incredibly poor workers from a dying agricultural industry are flocking to dirty, cramped factories to work ninety hour weeks for pay which, though crappy, is more than they'd ever make as starving farm workers...No, it's a bunch of guys, like myself, who are in GREAT economic situations because we work in what may be the closest thing to a free market in history."

See the following page for readers' explanations of their votes. Following is a sample of reader responses to the NEWS.COM Poll. All names and companies were kept confidential.

Overzealous agreements
"It is common practice at high-tech companies to write overzealous employee agreements that basically say 'everything you do, even in your free time, belongs to the company.' This is hard to enforce, no doubt."

Violating provisions
"Yes I have violated them! Sometimes the day after I was let go. I draw the line when government secrets are involved--for ethical reasons, mostly, and to stay out of trouble."

Quitting over contract
"At a previous employer, there was a merger. While I was retained, the new owners presented an employment contract that I felt was blatantly one-sided. It held that the employer owned any intellectual property I created, whether done on my time or his, at home or at work, using my equipment or not, related to his business or not. Everything. If I wrote a novel, they owned it. While the company was willing to grant individual waivers for specific activities, they refused to change the contract for all employees. I did not wish to work for a company that considered me to be their indentured servant. Rather than sign, I left the company."

Industrial espionage
"Unknowingly violated the agreement while talking to a member of a consulting firm who was working for a competitor. Discussed our IS needs and what our solutions were, as well as personal opinions on custom database software. This conversation took place in a hotel bar lobby following a company meeting. The consultant claims that his presence was accidental. Our meeting was not public information; however, the consultant should have told me that he was working for a competitor after I told him I worked for a competing HMO. My company put me on the grill for this. I feel that it was industrial espionage."

Assembled from "prior art"
"I have written generic papers or proposals for SW development processes, CASE environments using third-party tools, and such that use public-domain (as they are in the literature) concepts or approaches. These papers or process models were frequently published within the company as confidential or proprietary documents. However, as they were never actually USED or implemented by the company, and were assembled from 'prior art,' I freely recycle them at subsequent jobs (with similar results)."

Problems with enforcement
"I was working on multimedia CD-ROM-based applications. Then I got an offer to work on MPEG-1 and VideoCDs. I clearly told my earlier employer that I could not abide by the contract as my area of interest was multimedia and that MPEG was the happening thing. After a lot of haggling and some consideration they let me go. Anyway, if Company A feels that Employee X will join B and spill the beans, you cannot avoid it."

Just don't steal customers...
"I am currently working in violation of non-compete and non-disclosure agreements with a Denver, Colorado, Web design firm. They are aware of the situation (as they gave my reference to my new employer) but have told me that the agreement only really matters if I am trying to steal their customers or their currently implemented sites."

"Ideas are money"
"In the burgeoning information industry, ideas are money, and often a company's only chance of success lies in its novel concept or model of something. Secrecy is as necessary to sustaining IT-related companies as money."

Review on a case-by-case basis
"The 'copyrightable works' part can be made more fair if the company agrees to review, on a case-by-case basis, any requests by employees to exclude some work done outside of their work hours and on their own machines (not the company's). The 'noncompete' part, however, is completely unfair, because it is too broad. But as you point out, California law does not recognize such agreements, so it's pretty moot there. What significant software-producing states would recognize such an agreement?

Workers not forced into jobs
"It's fair because it's a voluntary agreement. You aren't being forced to work there, any more than they're forced to hire you. Hell, these articles prove the point: There is no real unemployment among tech workers, and we make more than any other large industry's employees. So nobody can say, 'The mean ol' employer forced me to sign it, because otherwise I wouldn't be able to afford that operation for my sick grandmother, and I'd starve to death within fifteen minutes...' This isn't some mythical 19th century (government-regulation created) sweatshop/child-labor industry where incredibly poor workers from a dying agricultural industry are flocking to dirty, cramped factories to work ninety hour weeks for pay which, though crappy, is more than they'd ever make as starving farm workers...No, it's a bunch of guys, like myself, who are in GREAT economic situations because we work in what may be the closest thing to a free market in history."