Non-Compete & Unfair Competition

Non-Compete & Unfair Competition

Non-competition agreements, unfair competition and false advertising in California.

The proprietary, confidential information, trade secrets and other information of a business are often its most valuable assets.  Thus, despite all efforts by a business to protect this information, such as by non-disclosure agreements, employment contracts or monitored or restricted access, this information remains a target of competitors or disgruntled employees.   If someone has stolen or is improperly using your trade secrets or other confidential information, the business litigation attorneys of Brown & Charbonneau, LLP can help.

Non-competition agreements are unenforceable in California except in extremely limited circumstances.  Business owners who want to protect their organizations’ interests and employees who want to protect their rights need to understand the strict rules for non-compete agreements and explore alternate solutions for preventing unfair competition and protecting trade secrets.  In most cases, immediate court action is required to obtain temporary restraining orders, injunctions and receivers.

The related issues of trade secrets, unfair competition and non-solicitation agreements must also be understood so that the business owner’s rights are protected regarding proprietary and trade secret information, confidential information, and key employees.

Brown & Charbonneau, LLP attorneys have over 75 years of combined experience and have a deep understanding of laws in California related to unfair competition. We can work with individuals and businesses to protect their legal interests within the bounds of the law.  Call today to schedule a consultation and learn more about how our Irvine, CA business lawyers can help you.

California Laws on Non-Compete Agreements

The California Business and Professions Code section 16600 states: “Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.”

This statute prohibits non-compete agreements except in very limited cases, such as where the good will of a business is sold or a business owner sells all interests in the business. The exception allowing non-competes in the case of business owners exists so that the owner of a company may not sell his business and then form a new company and immediately begin soliciting his old customers.

Because non-compete agreements are generally considered invalid and unenforceable under California law, companies operating in California will face more challenges protecting their proprietary information.  However, this does not mean you have no options for protecting the financial interests of your business.

Employees are still limited by laws protecting trade secrets and are not permitted to provide proprietary information to a competitor or engage in other types of unfair competition with a former employer such as using proprietary information to illegally solicit customers.  However, business enterprises will need an attorney who has an in-depth understanding of laws protecting fair competition in the state in order to make the legal system work for them.

Unfair Business Practices

Laws proscribing unfair competition and unfair business practices are intended to protect rival competitors and consumers.  “Unfair competition” is defined in section 17200 of the CA Business and Professions Code as encompassing any one of the following five types of business “wrongs”:

(1) an “unlawful” business act or practice;

(2) an “unfair” business act or practice;

(3) a “fraudulent” business act or practice;

(4) “unfair, deceptive, untrue or misleading advertising”; and

(5) any act prohibited by sections 17500- 17577.5.

With respect to the terms “act” and “practice,” the statute thus far has been construed to encompass most conduct; even a one-time act has been deemed sufficient to allege a Section 17200 claim.

False Advertising

Business & Professions Code section (§) 17500 renders it “unlawful for any person, firm [or other party] to make or disseminate before the public any statement which is untrue or misleading” in connection with the sale or lease of goods or services. This prohibition against false advertising is buttressed by § 17200 (discussed above), which expressly includes violations of § 17500 within its definitional language. Consequently, a false or misleading statement may trigger the remedies of both § 17200 and § 17500, including their separate civil penalties.

The elements of a § 17500 violation are:

(1) an advertisement;

(2) disseminated in connection with the sale or lease of property or services;

(3) which is false or misleading; and

(4) which the disseminator knows, or should know, has the tendency/capacity to mislead.

Neither intent to deceive, actual deception, reasonable reliance, injury, nor damage allegations are required. Cmte. on Children’s Television, Inc., 35 Cal. 3d at 210-11.

Trade Secrets in California

The trade secrets of a business are protected by California statute.  Trade secrets are information of a business that derives economic value from not being generally known to the public or to other persons who can obtain economic value from its disclosure, and is subject of reasonable efforts by the business to maintain its secrecy.  Trade secrets may include customer lists, formulas, patterns, techniques and programs.  Because information can lose trade secret status it is important to have an Irvine trade secret lawyer help you navigate this complex field of the law.

Misappropriation of trade secrets is prohibited by statute and generally requires wrongful conduct in connection with the acquisition of the trade secret information.  Additionally, California law sets forth the exact requirements to make a misappropriation claim.  Remedies for misappropriation of trade secrets may include injunctions, monetary damages, punitive damages, and an award of reasonable attorney fees and costs.

Getting Help Protecting Your Business in California

Brown & Charbonneau, LLP knows the laws on unfair competition, non-compete agreements and trade secrets inside and out. Our attorneys can help you to:

  • Take aggressive legal action to protect your company information and assets.
  • Take legal action if laws protecting trade secrets are being violated and harming your business.
  • Take legal action against other businesses and employees who are engaging in unfair competition
  • Negotiate, draft and enforce non-compete and non-solicitation agreements among business owners and for the sale/ acquisition of a new business enterprise.
  • Institute the necessary safeguards in your business to protect valuable information and assets.
  • Draft non-disclosure agreements and other contracts to protect trade secrets.

It is possible to seek an injunction or other equitable remedies if your business is harmed by a violation of trade secret laws.  You may also use the civil court system to recover punitive damages when your organization’s financial interests are affected by unfair competition.

Brown & Charbonneau, LLP represents individuals as well as large and small businesses.  We provide comprehensive advice on protecting yourself from unfair competition and on using the court system to take action when your business interests have been harmed.  Call today at 714-505-3000 or contact us online to schedule a consultation and learn more about how we can help you.