Non-Compete Agreement and Forming Company in Direct Competition
I worked for a company that developed software where I was solely responsible for the design and implementation of one large component of their product. I signed a non-compete agreement mid-employment that restricts me from competing for 1 year’s time. I have left that company and I am looking into forming my own company to build a product that is *very* similar (in structure and look) to the component that I developed for my former employer. I am developing it from scratch however, since I was the original architect the products will end up being conceptually identical (implementation will be slightly different). My product and company wouldn't be marketable until well after the end of my non-compete agreement and my market could be focused so that I don’t compete directly....however I am very concerned about the similarity between the 2 products. Is the similarity of the two products a non-compete issue or is there some other area/problem I should be looking into?
1 answer | asked Jun 25, 2002 8:31 PM [EST] | applies to Ohio
Answers (1)
Your situation has copyright and possibly patent implications. The code that you wrote is almost certainly subject to a copyright that your former employer owns. If so, you cannot use any of the code that you created for your former employer's product.
Although you may plan to write entirely new and original code, and thereby avoid reproducing or copying any of the old code, you will have a factual issue as to whether or not you really did so. Thus, if your former employer wants to challenge you, it will be able to do so. Under copyright law, if your employer registered its copyright, you could be liable for $20,000 to $150,000 in penalties.
If your code is truly unique, you may still have a patent problem if your employer applied for and obtained a patent on your work. You therefore need to find out if a patent exists on all the code you created.
The good news is that a non-compete appears not to be a problem, so long as you do not market or sell your code during the non-compete period. Unless your non-compete agreement bars your development of a competing product, I would be surprised if it prevented you from writing the code.
At bottom, you should consult with a good intellectual property attorney to formulate a business plan that your former employer cannot challenge. Once you do, be sure to consult with an accountant about how to set up a business and whether you should incorporate.
I wish you the best of luck. My brother left Motorola about 12 years ago to do something similar to what you are about to do. He maintained good ties with everybody, stayed on the right side of relevant legal issues and now lives in a beautiful Santa Barbara mountainside home.
Regards,
Neil.
posted by Neil Klingshirn | Jun 26, 2002 12:11 PM [EST]
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