By Stephen M. Fronk and Thomas A. Magnani
How does an employer with California employees navigate the tension between an employer’s legitimate desire to protect intellectual property created by former employees based on the employer’s trade secrets and California’s strong public policy favoring employee mobility and disfavoring non-compete agreements? As demonstrated by a recent decision by a federal court in California, the answer is “with great caution.” Failure to strike the right balance may subject the employer to serious consequences.
The court’s order, in Applied Materials, Inc. v. Advanced Micro- Fabrication Equipment (Shanghai) Co.,1 voided a provision in the standard employment contract of a California employer that purported to assign to the employer rights in inventions created by its employees after their period of employment. The court found the provision void even as to inventions related to work performed by the employees for the former employer. Moreover, the court’s order subjects the employer to liability for unfair competition under California law as a result of including the unenforceable provision in its standard employment contracts.
The case concerned a dispute between Applied Materials, Inc. (“Applied”), a public California-based...