A Random Walk through Silicon Valley: Non-Compete Agreements

Abstract

Companies in general become very protective of their technologies. They are concerned that their intellectual property, especially trade secrets, customer lists, goodwill, and so on could be compromised when employees depart to competitors or set up “competing shops” themselves. This fear has led to the proliferation of company/employee non-compete agreements. One of the exceptions to these protective agreements is the state of California—including Silicon Valley. California, to continue to spur technological development and economic growth, does not enforce non-compete agreements. A random walk through Silicon Valley can attest to the competitive environment that exists, possibly, in part, to unenforced non-compete agreements. This article examines the current state of play of non-compete agreements.

TOPICS: Private equity, legal/regulatory/public policy, manager selection, analysis of individual factors/risk premia