A person helps a start-up develop a product then leaves the start-up. He/she was never an equity holder. During the 2 year non-compete period with previous client/employer, this person starts developing their own version (no copying of any kind) and announces on their website that their product will be available after a certain date, which is the date the non-compete has expired.

The previous client issues a cease and desist letter to the person to step developing their own product regardless of that fact that it is not released and wont be released till after the non-compete has expired.

Is person in violation of their non-compete for simply announcing their own product and when it will be available? In other words can the standard non compete prevent that person from continuing to develop and announce their product in the meantime?

The product is software. The person will actually be posting their version online for free and not actually selling it.

State is AZ. Section is as follows

Covenant Not To Compete:

During the term of this Agreement and for a period expiring two (2) years after the termination of this Agreement for any reason, Contractor covenants and agrees that Contractor will not:

a. Hire, offer to hire, entice away or in any other manner persuade or attempt to persuade any officer, employee or agent of Moron-Company or any of its affiliates to alter or discontinue a relationship with Moron-Company or to do any act that is inconsistent with the interests of Moron-Company or its affiliates;

b. Directly or indirectly solicit, have contact for purposes of selling any products and/or services to (except on behalf of Moron-Company), divert, or take away any customers of Moron-Company or any of its affiliates; or

c. Directly or indirectly solicit, divert, or in any other manner persuade or attempt to persuade any supplier of Moron-Company or any of its affiliates to alter or discontinue its relationship with Moron-Company or any of its affiliates.

d. For the purposes of this Section 4, businesses that are deemed to compete with Moron-Company include, without limitation, businesses engaged in IT system sales, integration, consulting, application development, maintenance and hosting. Competition also includes any additional goods or services that Moron-Company provides its customer(s), including goods and services that Moron-Company offers or prepares to offer in the future while Contractor is employed with Moron-Company. Notwithstanding Contractor's obligations under this Section 7, Contractor will be entitled to own, as a passive investor, up to five percent (5%) of any publicly traded company without violating this provision.

e. Moron-Company and Contractor agree that: this provision does not impose an undue hardship on Contractor and is not injurious to the public; that this provision is necessary to protect the business of Moron-Company and its affiliates, including their trade secrets; the nature of Contractor's responsibilities with Moron-Company under this Agreement require Contractor to have access to and develop confidential information which is valuable and confidential to all of the Business; the scope of this Section 7 is reasonable in terms of length of time and geographic scope; and adequate consideration supports this Section 7, including consideration herein.

  • What jurisdiction?
    – Andrew
    Jun 26 '20 at 19:01
  • Also, do you have more specifics on the non-compete clause signed?
    – Andrew
    Jun 26 '20 at 19:03
  • @Andrew .. Posted. The key thing is in point "b" where it says "purposes of selling any products and/or services" - person simply wishes to participate in free open source software initiatives already available to the public and will not be selling the software.
    – StartupGuy
    Jun 26 '20 at 19:17
  • 1
    Not to comment on anything other than this specific line: "and announces on their website that their product will be available after a certain date", I would be able to make a pretty decent argument that publicly advertising a competing product before the termination of the non-compete is "diverting" customers. E.g., if the customer puts off upgrading / purchasing, that is likely a diversion, which even if the sale happens after the date, the diversion happens during the Noncompete.
    – Andrew
    Jun 27 '20 at 2:24
  • 1
    The agreement does not seem to prevent you from "developing". However it does prevent you from "announcing" since that's clearly soliciting existing or potential customers. Whether it's enforceable depends a lot on your local situation. Non-competes are treated VERY differently by different states and courts. Ask a local laywer
    – Hilmar
    Jun 27 '20 at 12:00

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