By Andrew Knorpel on 4th June 2015
Last week Jawbone, a market leader in the fitness tracking device market, filed a suit against its larger rival Fitbit, in California, accusing Fitbit of poaching employees who took with them trade secrets costing it “hundreds of millions of dollars”.
Whilst the fierce battle of the fittest continues over the pond, over hundreds of millions of dollars, the issue of protecting business interests is a matter close to the heart of all businesses, no matter how large or in which industry.
This US story provides a timely reminder to employers, if there was a similar claim in the UK, much would depend on the documentation Jawbone had in place to protect its interests from predators. If documentation was not adequate, the claim would have no teeth.
Employees often leave employment with critical knowledge of technology, strategic information or key customer contacts. All of which are valuable to the employer and any competitor. Whilst employees are bound by an implied duty of confidentiality and fidelity during employment, this is protection is limited post termination. In order to prevent them from using key information after employment ends, businesses would be well advised to have adequate express contractual terms in the contracts of employment.
Types of restrictions include: clarity on ownership of intellectual property rights, garden leave clauses, non-solicitation of customers or employees, non-dealing and non-compete clauses.
To maximise the chance of enforceability when drafting restrictions, consider the following:
1. What interest is the business trying to protect – it must be one which is capable of being protected, such as trade secrets or trade connections;
2. Which individual(s) should be subject to the restriction – ensure the individual actually poses a risk to the business interest, their role in the organisation will be key;
3. How the protection is to be achieved – choose the correct type of restriction in view of the interest to be protected and the individual’s role, ensure the restriction is no wider than necessary.
4. Duration of the restriction – ensure it lasts no longer than necessary to achieve the protection.
If drafted correctly, the restrictions might deter employees from joining competitors, warn off potential new employers who face the risk of a claim against them or at the very least will provide a basis for negotiation on termination. In any event, employers should be asking themselves, how tight are their restrictions clauses and do they have the necessary bite if they need to fight.