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I have a general question in regards to my startup company/product and having to have individuals sign a NON COMPETE doc.

New Castle, IN |

Im also having them sign an nda( no this is not for VC's or Angel Investors). I want to specifically know about the geographical area description within a Non Compete Agreement. If Im going to be selling product internationally why would I allow competition to be in another state? Doesnt make since if the individuals closely worked with myself whom came up with everything the company involves.

Attorney Answers 5

  1. Non compete contracts are allowable but have to be reasonable. You really need the advise of a lawyer. For instance highly restrictive non compete contracts can be thrown out by a court.

  2. A non compete agreement is a voluntary restraint of trade that is not favored by courts. The geographic restriction cannot be wider than necessary to protect a legitimate business interest.

  3. It sounds to me that you are using a form that you found for a non-compete agreement to draft your own. This is a major blunder. Courts disfavor non-compete agreements and read them narrowly. This means that you can't possibly draft one yourself and expect it to be enforceable. You need to retain legal counsel to draft and negotiate this for you. Don't pretend you can do this yourself--your question on its face reveals that you can't.

    More generally, start-ups need to have adequate budgets for legal counsel, and if they don't then, in all candor, they are likely to fail. Many bright, creative entrepreneurs make the mistake of believing that they can get their businesses off the ground without retaining legal counsel. They often think they are smarter than the lawyers. This invariably is foolish--and wrong. There is nothing more important for any business than laying the proper legal foundation. Non-competition agreements are the tip of the iceberg of what you need. As I regularly tell my clients, if you are not ready to pay my law firm for our services, then you are not ready to operate your business, and your first priority should be fund-raising. You will find this out very quickly when you try to raise capital from investors---they won't take you seriously unless you identify the lawyers with whom you have relationships, show them the corporate documents they have prepared for your business, show them the intellectual property clearance/freedom-to-operate analyses you have procured from counsel, and show them what your lawyers have done to assist you in protecting your company's IP rights and licensing the IP rights that you invariably will need from others. You can kiss your start-up goodbye until you are ready to show investors this information---which means you need to retain IP and corporate lawyers.

  4. Their are various fields of restriction used in non-competes. It sounds like what you want is a "field of trade" restriction rather than a geographical restriction. For example if you are selling online internationally NEW CASTLE handbags made by a particular Italian leather maker, you might reasonably restrict individuals from selling NEW CASTLE handbags from that leather maker. But if you are selling soccer balls internationally, NO you can't reasonably restrict individuals from selling soccer balls internationally. If you try, your Non-Compete will be held unenforceable.

    Since you give no particulars, you need to see an IP attorney.

    And, it actually does make sense whether or not you came up with everything, as the law does not favor restricting people from earning a living doing what they do. Your non-compete must be limited in time, geography, subject matter and relation to your legitimate business interests.

    I am not your lawyer and you are not my client. Free advice here is without recourse and any reliance thereupon is at your sole risk. This is done without compensation as a free public service. I am licensed in IL, MO, TX and I am a Reg. Pat. Atty. so advice in any other jurisdiction is strictly general advice and should be confirmed with an attorney licensed in that jurisdiction.

  5. It sounds like you have a very specific legal question that is not really possible to address through avvo. Spending the money to hire an attorney now could save you a lot of money in the long run to protect your company/product.


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