Opinion 1: Innovation Over Non-Competes
By Eric Esperne
Special to the Worcester Business Journal
If a consensus arose, it was that Massachusetts doesn’t package and sell itself enough to the next generation, and that the high rate of mergers and acquisitions doesn’t allow the Massachusetts tech industry to lay a foundation from which to build itself. Many differences between California and Massachusetts were also raised, like climate, numbers of engineering grads and non-compete agreements.
From The Blogosphere
Beginning with a December 2007 blog posting on techdirt.com, and continuing with a recent front page article in Mass High Tech, there is a renewed discourse about whether the two states’ differing laws on non-compete agreements create an inequity that draws tech talent and companies to the Gold Coast. For those who don’t already know, California law voids non-competes while in Massachusetts they are valid within limits.
Outlawing non-competes in the Bay State is highly controversial because the state is also trying to attract larger employers who, as a rule, use non-competes in their hiring practices. Those that are against outlawing non-competes make the points that these agreements are necessary to protect property and investment, and that Massachusetts courts don’t want to enforce them anyway.
The impact of non-compete agreements on business is mostly hidden but nevertheless very real and harmful. Non-competes are not about enforcement but about intimidation. And they provide a blunt, destructive weapon for keeping intellectual property out of the hands of others.
There are more honest and positive ways for companies to protect their interests without adding to the unemployment figures or killing innovation in American business. They are not necessarily expensive, can drive improvement in overall management, and work equally well for large and small companies.
Companies can start by writing employment contracts that agree to pay commissions to employees who find licensees for work-for-hire products and ideas.
The licensees receive the license grant from the employer as the employer’s intellectual property. In essence, the arrangement is a referral sales program with employees acting as the channel sales agents for their employer. This arrangement reduces the incentive to change jobs to secret away proprietary or confidential info, and it acknowledges the collaboration that goes on within technology communities, whether geographic or virtual, that is necessary to fuel economic growth.
Companies can also restructure employee compensation from a strict salary basis to a project completion basis. Employees receive a portion of their compensation at the end of the project, after the employer has had the opportunity to initiate procedures for establishing intellectual property protections and is in a position to go to market and exploit the work product. Non-competes become an issue mostly when an employer feels exposed because an employee is leaving before the product has been commercialized. Most employees depend on a regular pay check, so restructuring pay is best limited to higher compensation, key employees.
Eric Esperne is president of James River Consulting in Medway. He can be reached at eesperne@jamesriverllc.com.
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