Non-Compete Agreements Protecting Trade Secrets

Trade secrets, by definition, provide a competitive advantage. They provide an economic benefit to a company and are not disclosed to others because those others may develop competing products or services. However, trade secrets and sensitive business information must be disclosed to specific employees and other companies in order for a company to conduct business.

When employees who have access to your trade secrets leave, they may take your secret and use it for personal gain by starting a competing business or working for a competitor who uses your secret.

To protect their trade secrets from being misappropriated by the competition, many businesses use carefully drafted non-compete agreements in conjunction with a non-disclosure agreement. A non-compete agreement's purpose is to prevent unfair competition.

A non-compete agreement is one in which an employee promises not to work for direct competitors of the employer after leaving the company for a set period of time. This means that competitors will not have access to the confidential information you disclose to an employee for a set period of time, allowing you to capitalise on the economic benefits of your trade secret.

Non-compete agreements can be enforced in most states, but it is important to understand that courts place a high value on an individual's right to work. Each state has its own set of laws that govern when they can be enforced. If your company is based in California, you should be aware that the state has a well-established public policy in favour of open competition and has enacted legislation that presumptively nullifies non-compete agreements except in very limited circumstances.