“Google this!,” says PayPal

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While everyone else gets their information by googling it, how does Google get its information? Well, according to Pay Pal, it steals it.

Just two days ago (Friday, May 27, 2011 – for those reading this some other time), Google (in conjunction with MasterCard, Citigroup, Sprint, and First Data) announced a new service by which people can use their mobile phones as credit cards.  See Reuters here.

Later that same day, PayPal reportedly sued Google (and two former PayPal employees, Osama Bedier and Stephanie Tilenius) in Califorina, alleging (among other things – as is customary) that Google acquired PayPal’s trade secrets relating to its mobile phone payment service, and that Google did this by hiring these two individuals. See LA Times here. The case (complaint here) also accuses one of the employees of breaching an anti-piracy agreement.

The case – if it goes anywhere – raises some interesting issues at the intersection of employee mobility and right to work on the one hand and the right to protect trade secrets on the other hand. In particular, while in many states, this would be a relatively straight-forward case for PayPal, in California, which has a strong public policy favoring employee mobility and the right to work, it will be a rare test of how the California courts balance these two important policies – especially following the California Supreme Court’s 2008 seminal case on restrictive covenants such as the anti-piracy agreement involved here (Edwards v. Arthur Andersen).

Stay tuned!

Shareholder Noncompetes in France

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Big happenings in France (well… in the world of noncompetes, anyway).

In France, noncompetes arising our of an employment relationship are similar to those in other European countries that enforce noncompetes. They must be limited in time, space, and scope; necessary to protect a legitimate business interest; and supported by consideration (generally, a significant percentage of gross compensation) – during the restricted period. (This type of noncompete is frequently referred to as a “garden leave” agreement.)

According to a detailed article by Jérôme Bignon of Bignon Lebray in Lexology, on March 15, 2011, the French Supreme Court expanded application of these requirements beyond noncompetes arising from an employment relationship to noncompetes arising from a shareholder agreement. Specifically, the case involved an employee who was bound by a noncompete as part of a shareholder agreement, rather than simply as part of his employment agreement. The court treated the noncompete in the shareholder agreement in the way that it would have treated the noncompete had it arisen solely in a standard employment arrangement.

Mr. Bignon questions whether this decision heralds tighter controls on the use of noncompetes in France. The real test will come when the court is called upon to apply these requirements to a noncompete arising from the sale of a business.

Georgia Noncompete Statute At Last

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After months of confusion, it is now official: Georgia has a new – and valid – noncompete law. The law will apply only to noncompete agreements entered into on or after May 11, 2011, and will permit Georgia courts to reform overly broad noncompete agreements to make them more reasonable, and therefore enforceable. (Previously, the courts were constrained to tossing out the entire agreement if found to be unenforceable in any respect.)

So, what should you do? If you’re an employer, review your existing agreements and determine whether it is advisable to enter into a new one. (It likely is.) If you’re an employee, you should think long and hard about whether you want to sign on to a new noncompete. Either way – employer or employee – you should speak to counsel familiar with this specialized area of law.

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