California Supreme Court’s Rejection of Non-Statutory, Noncompetition Agreements Reinforces Criticality of Robust Intellectual Property Protections

September 08, 2008
In a decision that underscores the importance of maintaining intellectual property protections to prevent employees from taking valuable trade secrets and confidential information to the competition, the California Supreme Court in Edwards v. Arthur Andersen ruled that noncompetition provisions are invalid under California law unless they fall within one of the statutory exceptions relating to the dissolution of, or sale of, an interest in a business entity. The Edwards opinion is the first California Supreme Court opinion squarely addressing the ability of an employer to rely upon noncompetition agreements as a post-employment tool to restrict employees from subsequent, competitive employment. This update examines the ruling and its implications for companies with employees in California, and identifies practical ways companies can better protect these valuable assets.