Canned knowledge: Non-compete agreements and labor mobility of highly skilled employees in innovation industries

Corporations increasingly rely on intellectual property law in order to exploit the commercial value of information. Not all information assets, however, are subject to copyright and patent protection. Valuable information assets also exist in the form of what might be termed human capital, that is to say, the knowledge of highly skilled employees. At issue is the extent to which corporations may assert rights to control these information assets once an employee has left the firm, particularly when the employee is now working for a firm’s competitor.

While corporations may argue that their investment in human capital should be protected, efforts to exercise exclusive control following termination significantly affects labour mobility. Nor is the concern limited to that of the terminated employee; a number of commentators have argued that the labour mobility of highly skilled employees is an important component of regional economic development in high technology industries.

Building on commentary derived from law, management science and economics, this workshop analyses the manner in which these competing interests play out in the context of non-competition clauses in employment agreements. Some commentators have drawn a direct connection between the judicial interpretation and enforcement of non-compete clauses and the success of regional innovation clusters such as Silicon Valley. When such clauses are not enforced, information is able to circulate freely amongst related and competing firms, thus leading to higher levels of innovation. Others argue that failing to enforce such clauses leads to underinvestment in innovation industries, as firms will be unable to prevent competitors from benefiting from the public goods nature of information assets not otherwise protected by copyrights or patents.

Of particular interest is the interaction of employment law in this area and the law of confidential information. Specifically, should questions of enforcement take into account the specific characteristics of the contested information asset, such that non-competition agreements should be enforced in circumstances where the contested asset is confidential information?

While non-enforcement of non-competition clauses may indeed promote increased innovation and protect important public and private interests in labour mobility, protection of confidentiality and the relationship of trust through which such confidences are communicated is a compelling argument for enforcement. Some are convinced, although it remains to be demonstrated, that courts do indeed favor the enforcement of non-competition clauses when former employees have left the firm with knowledge of confidential information or trade secrets. In such cases, breach of the contractual obligation is linked to fault or tortious conduct. However, what constitutes "confidential information" in the age of information-based economy presents a difficult definitional exercise; how are courts to disaggregate complex informational practices in order to distinguish between information “owned” by the employer and information embodied in the employee?

AGENDA

Please see the CIPP's website for the latest schedule.

Registration: $35 (free for students and members of the McGill community). Use the registration form [.pdf] to sign up.

This activity is worth 4 hours of Mandatory Continuing Legal Education, as accredited by the Barreau du Québec