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The Contract: Keeping secrets

 

The Contract: Agreements to keep company secrets
By Jane Black
May 22, 1997, 6 p.m. PT

Joe Programmer is a software engineer at a major Silicon Valley company, Silicon Computing. When he is hired, he signs the standard confidentiality agreements. Six months later, he decides to quit and work as a software engineer on a similar project for another high-tech firm, Valley Computing. Has Joe broken the law? Take a look at our hypothetical case study below, then cast your vote in the NEWS.COM Poll.

 
 

  Nondisclosure
Employee acknowledges and agrees that Confidential Information, including (i) source code and documentation for computer software and other trade secrets, work product, software, processes, analyses, or know-how of the company; (ii) marketing, advertising, pricing, strategic, and/or business plans; and (iii) financial statements and other information, is the sole and exclusive property of the company. Employee will not use any Confidential Information for his own benefit or disclose that information to a third party.

Joe agrees not to divulge information about company products, strategies, and finances while he works at the company or at another high-tech firm in the same field.
Lawyers say it would be difficult to prove that Joe is leaking information, unless there is hard evidence of copied files or source code. And most would not go to court without proof. Joe is obliged, however, to try to protect the trade secrets of Silicon Computing. Silicon Computing might claim "inevitable disclosure"--which means that, by the very nature of Joe's new job, he will reveal information that is considered secret. California law has not adopted this standard, although other states have it on their books.

 

 
  Copyrightable works
Employee hereby acknowledges and agrees that the Company is the copyright proprietor in all copyrightable works of every kind created and developed by the Employee, solely or jointly with others during his engagement with the Company. Employee will disclose promptly to the Company all programming or other business ideas or inventions received or made by Employee during his engagement and related in any way to the current or proposed businesses or activities of the company.

Any projects that Joe develops or is developing while working for Silicon Computing belong to the company, not Joe.
If, for example, Joe invented a software program while working at Silicon Computing, he could not continue developing it at his new job. Lawyers say that this also is hard to prove because competing companies often work on similar projects.

 

 
  Nonsolicitation
Employee hereby agrees that, upon termination of employment, Employee will in no way solicit, entice, or lure other Employees of the Company to aid with subsequent projects that may be in direct competition with the stated goals of the Company.

If Joe leaves a Silicon Computing, he cannot solicit any of his colleagues to go with him to his new employer.
This is to prevent so-called raids, which often occur when high-tech employees leave to start their own firms. However, employment lawyers say it is almost impossible to prove that employees are being solicited. Some companies are reportedly trying to change this by monitoring email and phone calls of past and present employees.

 

 
  Noncompete
Employee agrees that, during the period of employment by the Company and one year after, Employee will not engage in any business that involves (i) the development, design, implementation, or operation of comparable programs, (ii) the creation of content or services or advertising sales for a comparable program, (iii) any other business that competes with the business activities of the Company.

Joe promises not to collaborate on similar projects in a competing business for one year after he leaves Silicon Computing.
At least in California, this is primarily a scare tactic. California employment law places paramount importance on an employee's right to work and does not recognize these agreements. This is not necessarily true, however, in other states. Lawyers say that breach-of-contract cases are going to become more prevalent as California companies continue to look beyond the state's borders for high-tech help. 

 

poll Are these agreements fair to employees? How should companies protect their trade secrets? Click here to cast your vote in the NEWS.COM Poll.