Skip to main content

Non compete Clause without intellectual property to protect?

Austin, TX |

I was a partner in a new company however resigned before the company launched. Please read the following and reply is this would be enforceable if the company hasn't generated any customers (as they have not begun business) and there is not any particular intellectual property to protect.
"For a period of 2 years after th effective date of the agreement, (you) will not directly or indirectly engage in any business that competes with (us). THs covenant shall apply to the geographical area that includes all of the State of Texas. For a period of 2 years after the effective date of this agreement, you) will not direcly or indirectly solicit business from, or attempt to sell, license or provide the same or similar products or services as are now provided to, any customer or client of (us)."

+ Read More

Attorney answers 3

Posted

Presumably, the non-competition/solicitation agreement is governed by Texas law. Accordingly, you should not rely on anything in this posting, and should consult with the a qualified Texas attorney.

As a general statement, non-competes must be reasonable as to duration, geography and scope. Based on what you've provided, the feature that leaps out is the geographic area of Texas. Whether that is reasonable for your industry however is a question that I cannot answer.

You've also shared your perception that the company has not customers or IP to protect. Again, as a general statement, non-competes are recognized when a protectible interest is involved. Whether that is actually, and factually the case, and whether Texas law has been correctly stated here, however, are questions that I cannot answer.

You might want to consider consulting with an attorney for another reason. If you work elsewhere, the company might ask a court (successfully or unsuccessfully) to enjoin (order) you not to compete.

Good luck

Posted

You need to take the contract to a lawyer who has experience with Non-Competes in Texas. A fairly recent Texas Supreme Court opinion has made these easier to enforce that they previously were thought to be . There still are substantial defenses, but those are highly dependent on the specific facts of your situation. Whether or not there is any "intellectual property" to protect is not something that can just be "declared." A lawyer who works in this area of practice needs to evaluate what that company does (or was doing at the time you left) and what information the company had at the time and about what before you can come to that conclusion. There may be something as seemingly simple as specific business practices or methods that the company considers to be "trade secrets", or a potential customer list, and those might provide a sufficient basis for the Non-Compete. Whether the entire State of Texas is a sufficiently narrow geographic scope is certainly a question to be answered, but you should know that -- in Texas -- if a court decides that "all of Texas" is too broad, that court can effectively rewrite the contract and describe a smaller geographic area within which the Non-Compete is valid.

This really is an area where you need to hire a lawyer.

DISCLAIMER: The information provided in this post is general information only and is not intended to be, nor is it, specific legal advice for the facts cited or for any similar facts. The reader is encouraged to seek the assistance of a lawyer to assess the complete set of facts and provide legal advise thereon. This post does not establish any attorney/client relationship, either with the person who submitted the actual question or any other person.

Posted

We cannot answer you based on just the clause, we have to have the context. Generally 2 years would be considered a reasonable time period for a non-compete in most industries. If the company never launched the clause you quote has a defect in that there is NO business with which to compete but rather only potential business. The last clause has a defect in that NO services are now provided if the company never launched. Accordingly, which the clause might be enforceable, it does not appear to preclude anything. The devil is in the details so you need to see an attorney if your desire to is enforce this clause or if your desire is to avoid it. To be effective it needs to be altered significantly, and to be avoided safely the details of what pre-launch activities occurred and whether they fit the terms to the clause evaluated by a Texas business attorney.

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.

Can't find what you're looking for?

Post a free question on our public forum.

Ask a Question

- or -

Search for lawyers by reviews and ratings.

Find a Lawyer