Noncompetes that are tied to equity agremeents, rather than to employment contracts, are different, and often enforceable even in California (subject to various caveats, consult your lawyer, etc. etc.).

The paradigmatic case that California allows is: You own a restaurant that builds up a good reputation. You agree to sell it, with a condition in the sales terms that you won't open a competing restaurant within X miles for Y years. In large part what the buyer is buying here is your existing reputation and customer base, so you agree to a noncompete to facilitate selling these intangible items, which are more valuable if the buyer doesn't have to worry that you're going to sell the restaurant but then turn around and open a near-identical one to try to keep the customer base.

Can you add a value judgment for what you've stated? I did not include one in my comment, and you answered in legal terms without including a value judgment yourself. For example do you agree with the morality of your restaurant example?

Seems perfectly moral to me. It's conditions attached to the sale of a business and I would assume such clauses are pretty standard. If I sell a consulting business to you, you'd be pretty crazy not to have some anti-solicitation clause in the sale agreement.

If I did open up a competing restaurant next door as soon as the ink was dry on the sale agreement, I think it would be on you and your lawyer not to have covered that eventuality. (Though it would also be kind of sleazy of me IMO.)

That example is way off at one extreme end of the spectrum though. In reality, though, non-competes are far more often used to prevent people from jumping ship making LOB CRUD apps to making other LOB CRUD apps across the street for a $5K raise, or even leaving one sandwich shop to go work for another for a $1 hourly raise.

For every one possible situation in which non-competes might be good for employees, there are hundreds of situations in which they are outright bad.

Yes, I picked an example that is way off at one extreme end of the spectrum, but I did not offer my value judgment for that extreme example. What is your value judgment for that extreme example?

It sounds more like a case for contractual/IP law than for an employment non-compete. In other words, even in places where non-competes are illegal (like California), this issue can still be mitigated, so using them as an example to justify non-competes seems misguided.

Any such IP would have been assigned to the company you are forming; if the large corporation wants to use it, they need to aquire the IP or the company itself, in which you are part owner.

There's no need for a non-compete here.

There is no IP in the situation I have outlined. (I said this very specifically: "Your company doesn't have any assets or IP. ").

The cofounder doesn't need to bring anything with them to the company that wants to acquire them. I was super-clear on this point.

"Suppose that you meet a cofounder with a fantastic idea, that requires a modest amount of research."

This is IP.

I'm very sorry but this is simply not true. It's only IP if it's subject to copyright or patent protection AND in the latter case if your company is spending money on a patent strategy.

There's no IP from simply seeing if something works, if that is not subject to patent protection and you are not pursuing a patent strategy, and you don't bring any of it over with you to another company.

The know-how you acquire from having done it before (and which would make your cofounder likely to be hired away to compete with you) is also not "IP".

Quite simply I am asking you to assume the time you put into the joint project is not subject to patent protection and you are not pursuing a patent strategy, and to assume that there is no IP at the company that the cofounder would take with them.

Under this assumption (which is realistic) I asked you to make a judgment about the morality of the promise you solicit and receive from your cofounder not to go off and compete with you.

My question is quite narrowly phrased.

If the value comes not from the idea itself, but from the experience of having done it, your experience is just as valuable as your cofounder's. You have both done it once at this point, and if they leave, you/the startup retain ownership of all the work so far, which is a significant advantage.

I get what you're trying to sketch out, but it's a very very narrow "just so" scenario.

> It's only IP if it's subject to copyright or patent protection

Trade secret.

I didn't think about that. I don't know much about it and have never dealt with trade secrets. Isn't it close to a non-compete? How can a company know an employee isn't using their trade secrets at a competitor?

Trade secrets are managed state by state under the umbrella of the Uniform Trade Secrets Act. I don't think the legal question is how can they know but rather how much time is the perp going to face if the perp gets caught. Levandowski could be in line for serious prison time for theft of trade secrets from Google. Kalanick too.

http://www.nolo.com/legal-encyclopedia/california-trade-secr...

Hi, CalChris, thanks for your response. You sound like you know what you're talking about.

I wonder, could something very small be subject to trade secret protection? I'd like your take on the hypothetical written below, simply because it is so small.

I really hate using the example below but I think it's well-defined and wouldn't really be subject to any trade secret protection and I'd like your take. (I reread my example and imagined it from the perspective of a woman and I think I could have written the same thing so I think it's not a gender-biased example but I will attempt to redact it if anyone complains.)

So for the hypothetical: women and men use dating apps but when I tried it some time ago I was floored that the people I met with actually had met tons and tons and tons of people. (As opposed to entering a relationship after meeting a few people.) I thought, far more than the number of dates the people I interacted with in day-to-day life go on.

My personal conclusion was that there is a "dead sea" effect on dating sites where people who are actively looking and really looking for a relationship end up leaving (because they enter a relationship), whereas the people who have been on 45+ dates in the past 180 days via the app are (this is a judgment) are kind of wasting each other's time from my perspective, maybe don't really have any intention to enter a relationship: they're not "really" in the market. So they will report things like "I've met dozens of women/men" (if they are being honest) " but I haven't really found the right one." Whereas in the old days grandparents met based on just having anything in common and living on the same street. their standards weren't so high and they wouldn't date 50-70 people before finding someone.

So now let's suppose that I figured out that the way to quickly get people in relationships is if I only show new users to new users, and the "time-wasters" to each other. Then I can make my app the best way to get people into relationships very quickly (after meeting just 1-5 people), whereas ordinarily to get to those 1-5 people you have to work through 45 people who are clogging the site with 0.0% chance of entering a relationship. (Because of the dead-sea effect we posit.)

So meanwhile the time-wasters of both genders only see each other and go on hundreds of dates with other people who have no intention of being satisfied with them. I wouldn't let the time-wasters waste any of the "genuine relationship-seekers" time by being shown each other.

Okay, so let's suppose for the sake of argument that this is the magic holy grail and that this tiny little insight makes all the difference. Let's just posit it.

So I apply it in secret and this one neat trick makes it the best dating app on the planet. Okay, so my question is could something really, really tiny like this which is described in a few words and is a single metric only, be something that could be covered under "trade secret", assuming it falls short of patent protection?

My hunch would be no, because even if it's valuable, any other company could come up with it. What do you think? Please assume that my example is really true (it could be false.) I'm not that attached to this example and have no intention to test it or enter that market, so it's one I can gladly sacrifice for the sake of argument. Let's not argue about the merits of the example but simply assume it is true - that it's the entirety of our advantage and as soon as other sites figure it out, we are no longer competitive.

Would trade secret apply to something extremely tiny like this? Almost a casual observation? Thank you!

This sounds like a founders wet dream where the idea has all the value and the "code monkey" as you put it, just needs to implement it.

Cofounders are equal partners. Employers/employees, not so much. Employees rarely have significant negotiating power as peers do. It's a mistake to assume what's true in one context is true in all others.

The scope was the general labour market where established employers compete over a limited pool of eligible candidates.

If the other guy does not bring that much to the equation then it might be he was not that valuable after all.

Both guys lose if they need to duke out their differences in court, IMO.