The Wrong Tool for the Job: The IP Problem with Noncompetition Agreements

摘要

This Article argues that employee noncompetition agreements ought to be unenforceable. It begins by recognizing that there is momentum for change in the law of noncompetes: a number of states and the American Law Institute (ALI) are in the process of reconsidering noncompete doctrine, and recent empirical studies provide evidence as to the mostly negative effects of the agreements. Existing critiques have focused on the problematic nature of noncompetes within the employment relationship. This Article synthesizes those critiques, adding support from empirical studies, and then examines noncompetes from a new perspective.Commentators have neither recognized nor evaluated the role noncompetes play in the intellectual property (IP) system. Upon closer examination, it becomes clear that the primary justification put forth in support of noncompetes is an IP justification: the arguments in favor of enforcement of the agreements revolve around the need to protect intangibles and the need to provide incentives for invention and investment. The IP justification is pervasive and rhetorically powerful but ultimately flawed. First, trade secret and other IP protections are intentionally limited to provide a certain amount of, but not too much, protection. Allowing enforcement of noncompetes in order to protect IP thus interferes with the contours of IP protection. Second, even to the extent that IP law is insufficient—that is, unintentionally limited—noncompetes are not the right tool for the IP job. A prohibition on the enforcement of noncompetes would thus serve a channeling function, directing efforts to protect intangibles to the IP regimes and encouraging the development of the appropriate IP balance, which is, of course, a work in progress.