Keeping e-Secrets

Employees who have never known not to share intimate details of their personal lives on www.myspace.com and www.facebook.com may not realize that those rules must change when talking about their employers on blogs. While employee gossip has always been a part of human nature ' never more famously admonished against than in the catchphrase 'loose lips sink ships' during World War II ' technology has accelerated the speed and ease with which employee gossip can spread to competitors and wrongdoers, and perhaps has made it more difficult for employers to discover these threats. Even with the many blog search engines now available, what firm has the time or resources to devote to monitoring the blogosphere for references to itself or its products, and tracking down the often-anonymous posters? However strange it may seem to employers raised in a 'don't talk, don't tell' mentality, today's tech employees often need guidance ' and specific rules ' about what must be kept secret. (However, the 'News Alert' feature at Google News, or similar news search engines, using the 'comprehensive' setting, allows constant monitoring of online references to a firm ' provided that someone has the time to monitor the alerts, which can be set to arrive instantly, daily or weekly.)

All these secrets and risks have one thing in common: the employees, independent contractors and, perhaps most important, business partners to whom those secrets must be revealed so that they can do their jobs. For all of the technical innovation of today's vibrant e-commerce economy, that economy still depends on working with flesh-and-blood individuals as much as any business ever has. The tools that businesses have always used to protect key information (e.g., the confidentiality agreement ' a separate document, or a provision in an employee manual or code of conduct, along with non-competition agreements) remain as relevant today to keeping the secrets of e-commerce firms as they were to these firms' predecessors.

But the forms that e-commerce firms' lawyers have used without change since the forms were first typed on carbon paper and, later, transferred to magnetic tape, may require some tweaking to adapt to the virtual world.

Let's first consider the plain-vanilla standard confidentiality (or nondisclosure) agreement, ('NDA'). Businesses often hand out NDAs to prospective employees, existing employees and other parties the way that holiday paraders toss candy to children. In an economy that turns ideas into money, everyone wants to protect his or her ideas, as well as more 'common' secrets, like lists of customers or key suppliers. Even though prospective investors, business partners and employees all routinely get NDAs, signing one without reading it could be a mistake. The pressure to sign a 'standard' NDA, without negotiation, ignores the reality that NDAs are anything but 'standard.' With an online business that is totally transparent to competitors and criminals as well as to customers, no firm should falsely economize on legal review by signing a 'standard form' that doesn't protect those intangible assets ' nor should a firm use a venerable form that has not been updated since the invention of the cathode ray tube (remember when we talked about CRTs?).

Most important is that the naive belief that a firm will be protected if it insists on getting an NDA signed before a first meeting not only may not be good business, but also may not be legally necessary. For example, if a firm's information is truly secret (a chemical formula, for example, or a critical piece of coding or algorithm), then it should never be revealed until absolutely necessary. Business data that can't be protected by patent law often doesn't change hands in the sale of a firm until after funds are wired at closing. Even patent protection may not help against a firm that steals an idea, if the legal fees to fight the action are too much, particularly for a startup that is the victim of a large firm. Once a secret has been revealed in court, people other than the secret's owners may be able to reproduce the results legally.

How to Make a Secret Stay That Way

In practice, however, reputable investors (like venture funds) almost always refuse to sign NDAs. They see so many business plans that they can't risk being sued by someone they passed on if they later invest in a similar start-up. Entrepreneurs should instead investigate an investor's reputation and integrity in choosing with whom to do business. Of course, secrecy agreements still make sense with key employees, or when trading information with a firm in the same industry. But several key provisions can be tweaked to make an NDA favor the person disclosing information, or the person receiving it, depending on a company's needs. Firms disclosing information naturally prefer more protection for their proprietary information. Subtle legal 'presumptions' also make it easier to win in court if someone threatens to violate the NDA by stealing secrets. A rundown follows.

Who Already Knows, and What's Restricted?

First, consider what information is secret. The disclosing party wants to protect everything possible, whether disclosed in writing (in due diligence, for example), or simply observed during a walk-through. In fact, some information, including trade secrets and customer data, can be protected only by an NDA. The recipient, in contrast, prefers to limit its obligations to a strictly defined list of information ' only what has been stamped or identified as 'confidential.' Next, what restrictions are imposed? As the name implies, an NDA prohibits disclosure to third parties. But it should also block the recipient itself from using information.

Make Claims Count

Of course, the ultimate test of an NDA occurs in court. A good NDA should quickly and inexpensively lead to a court order ' an injunction or temporary restraining order ' blocking use and disclosure of a company's proprietary information, if the recipient threatens to violate the NDA. To get that result, even a basic NDA must include the recipient's agreement (technically, an 'admission') that any violation will cause 'irreparable harm' that money damages cannot fix. Without that legal boilerplate, the owner of the information must persuade the court that it will suffer permanent harm, which may take time, if it can even be proven.

Select a Forum for Enforcement

A better NDA will pick the court in which the parties must contest any alleged violation. Small firms may concede defeat immediately if they cannot afford to hire counsel in a distant state or country. Non-lawyers may naively prefer short NDAs, which seem easier to get signed, but no one should eliminate these mandatory provisions, when a simple five-line sentence provides the crucial clause that courts require.

Also, consider how long the restrictions on disclosure should last. Firms disclosing information often want their protection to last forever, and many NDAs don't have a time limit. Yet, a court might consider such perpetual restrictions unreasonable, and so, it is certainly better to choose a lesser restriction that a firm can live with, rather than opening oneself to a court doing so in reforming an agreement that it has struck down.

Exceptions, Disclosures and Reasonableness

Information recipients also want to avoid restrictions on information they already know, discover independently or that has already become public (other than, of course, through disclosure by the recipient). Most confidentiality agreements contain such relatively standard exceptions, like for when disclosure is permitted by the recipient, or the 'Receiving Person,' notwithstanding the agreement to keep information shared by the 'Disclosing Person' confidential. For example, information already available to the public, or known by the Receiving Person at the time of disclosure by the Disclosing Person, is usually not treated as 'confidential.' Sometimes, the same treatment applies to information independently developed by the Receiving Person (as long as confidential information was not used), or received from a third party not subject to any confidentiality obligation. If a governmental authority compels the Receiving Person to disclose ' a subpoena, for example ' the confidentiality duty also may not apply. While it's unreasonable for firms disclosing information to oppose these common exceptions, a fair NDA should require written proof for a party to claim permission to disclose by relying on a specifically listed exception.

Evolving Privacy Law
Is Changing the Game

However, the recently emerging law of privacy for 'personally identifiable information' has added a new twist to the standard confidentiality exceptions. Certainly, no one would expect to get in trouble for disclosing information that has already become public. What harm could there be from opening the barn door, when the horse is already outside? But that paradox could occur due to the complex interplay of boilerplate NDAs and the emerging law of privacy and personally identifiable information such as medical records of employees, or Social Security information and credit history of employees or customers.

But what if a disclosure permitted by one of these exceptions contains personally identifiable information that has become public (such as through a security breach, or that is available in a public-records filing somewhere)? Even though the original Disclosing Person may have no claim against the Receiving Person for violation of the confidentiality agreement, paradoxically the Disclosing Person herself could be liable to a third party for a privacy-law violation, because of the Receiving Person's permitted disclosure.

Sheltering Against Falling Dominoes

To prevent this problem in situations where personally identifiable information must be exchanged, businesses should consider modifying standard confidentiality forms to create 'an exception to the exception.' Several of the standard 'permitted disclosures' should be subject to a 'privacy override' that prohibits disclosure of personally identifiable information, even when revealing such information might otherwise seem appropriate.

Dealing with Exes

But sometimes an NDA isn't enough to protect a firm's critical knowledge if the business isn't also protected against its former employees. Non-competition covenants are common in businesses where knowledge matters, whether high-tech or old-economy sales that depend on people knowing customers' needs. Typically, they impose restrictions that continue long after employment ' such as against working in the same field, and against contacting customers, prospects and fellow employees, in addition to continuing NDA obligations.

Courts Count Clauses

Although many people naively sign them because they believe that the law cannot prevent them from working, 'reasonable' non-competition covenants generally will stand up in court. Knowledge that an employee gained from employment ' at the employer's expense or from the employer's existing business ' should not later be used against the same employer for a competitor, if the employee or contractor signed a proper agreement not to use such knowledge or not to compete. Instead, courts will scrutinize any limit on future employment, regardless of length or scope. Forcing a person to work with only one employer, even for a short time, is too much like slavery and is contrary to our principles of freedom to work. To understand how to make such an agreement stand up in court, then, let's consider why a court might refuse to enforce a covenant not to compete.

Severance Benefits Establish
Importance and Reasonableness

Perhaps the best defense of the laid-off e-commerce employee is the simple fact that she was let go for reasons unrelated to her performance. Courts might not protect the employer's interest in a person it apparently didn't consider important enough to keep on the payroll. Well-advised employers, therefore, anticipate this argument by providing severance benefits to justify the non-competition period.

Courts will also check whether the restriction is reasonable compared to the benefits the employee got from the job, or that the contracting party got from the contract. A brief look at the factors affecting 'reasonableness' also provides a roadmap for the laid-off employee ' and prospective new employers ' to decide whether to fight, or to accept a job offer anyway. In turn, knowing how employees can escape a restrictive covenant helps employers request only reasonable ones, which will hold up in court when an ex-employee or contractor tries to compete.

Consider, for example: Did the employee really get any benefit for agreeing not to compete? It is certainly reasonable to require all new hires or new subcontractors to sign a non-competition covenant as a pre-condition of getting the job. A new employee, with no industry experience, shouldn't be able to quickly shop her training to another employer. But what if the position lasted only six months, as is possible in any fast-changing industry, and the prohibition on working in that sector extends for a year? Also, most courts won't consider a covenant 'reasonable' if an existing employee signed a covenant without getting something exceptional for it ' a significant raise or promotion, or additional benefits, for example.

Employment Restrictions
Must Address Real Harm

Another problem for employers occurs when the covenant limits employment that could not conceivably harm the employer or its business interests. Typically, this issue arises in geographic covenants. A truly local employer has no legitimate interests to protect with a national, or even state-wide, restriction. A tech employer, by contrast, might truly operate in a national market, so a court would give more latitude to a broad geographic restriction. In turn, however, it might permit only a narrow definition of the scope of prohibited activity, particularly where the nature of the business is in flux.

Restrictions Must Be Market-Relevant

Tech firms also face other market definitions more important than geography. A software developer experienced in database management for a consumer sales organization, for instance, should not pose any threat if she works with databases for business-to-business sales; the customers and markets are different, even if the products aren't. Wholesale or retail, client or server side, front-end or back-end ' any distinction that matters could be enough for a challenge.

Restrictions Must Not Be Unfairly Long

Employees also commonly attack the length of the restricted period, which is a tactic particularly applicable to rapidly changing technology industries. A restriction shouldn't outlast the expected life of technology. For example, a New York court voided a restriction of just one year as unreasonable, solely because the rapid changes in software design made the court consider that anything the employee learned would be out-of-date before the one-year covenant expired. Instead, many firms try to ensure that their covenants will appear reasonable to a court by limiting them to interests clearly worthy of protection, such as clients, customers and fellow employees. 'Non-solicitation' agreements bar an ex-employee from contacting persons with whom she worked, in contrast to broader 'non-competition' covenants that keep a person out of a line of business entirely.

Such limited agreements make sense to protect the employer during the time it takes a new rep to develop a relationship with the customer, or a new firm to take over the account. Not only are these almost always enforceable, but they cut off the departed individual's base of industry contacts, forcing her to start over if she wants to compete, or at least wait until the end of the restricted period.

Be Careful How You Word Things

When contracting with another firm in the same line of business, it's also reasonable ' and important ' to protect against losing employees, but it makes a difference which side a party is on. A covenant against soliciting the disclosing firm's employees doesn't help if the employee contacts the other firm herself, unlike a covenant against hiring. In the e-commerce marketplace, where 'there's no there there' except for information, protecting the information's many forms is critical. Consequently, any e-commerce job interview or sales call should resemble the Beatles' classic lyrics: 'Listen: Do you want to know a secret; do you promise not to tell?' ' albeit in the less melodious form of an NDA and non-competition agreement. Such forms will certainly use boilerplate, updated for the e-commerce economy with boilerplate filigree that even Lennon and McCartney couldn't harmonize. But it will certainly produce a different sort of tune in the hands of a skilled trial lawyer using it to enforce the agreement's protection (especially if the employee didn't covertly walk out the door with all those secrets downloaded onto her iPod).

Stanley P. Jaskiewicz, a business lawyer, helps clients solve e-commerce, corporate, contract and technology-law problems, and is a member of e-Commerce Law & Strategy's Board of Editors. He can be reached at the Philadelphia law firm of Spector Gadon & Rosen P.C., at [email protected], or at 215-241-8866.

What secrets could an e-commerce firm have? An online business is exactly that: online, always, and always available to anyone with an Internet connection. Inventory, pricing and marketing are all on the Web site for anyone to see ' whether a potential customer, or a potential or actual competitor.

Yet, as with their bricks-and-mortar counterparts, the story of how an e-business gets online hides many secrets. Just as the success of retail behemoths may lie in wringing costs out of the supply chain ' by getting the best deals from suppliers, and cutting logistics costs ranging from inbound shipping to even the shortest storage to quick distribution ' e-commerce firms face the same challenges to distinguish themselves from competitors worldwide. Some online firms may even have truly proprietary technology. Similarly, the e-analog to the real-estate-bound business of real-world stores is the effort required to find the best locations to attract customers in the always-evolving world of marketing online, whether sophisticated search-engine advertising and linking strategies are being used, or if the business is simply selecting and defending a good domain name.

In fact, e-commerce and tech firms face constant threats to secrecy and challenges unheard of by their real-world predecessors. Today, for example, businesses that work with data about individuals, whether that data is a record of credit-card transactions or is housed in more complex medical databases, must comply with complex burdens to maintain the confidentiality of the people to whom the data pertains. As the many recent headlines about privacy breaches reveal, protecting against the risk ' and cost ' of worldwide criminals' vigilance to gain instant access to that data must be as much a part of any e-commerce firm's business plan as its marketing strategy.

Loose Lips and Keyboards
Sink More Than Ships

Employees who have never known not to share intimate details of their personal lives on www.myspace.com and www.facebook.com may not realize that those rules must change when talking about their employers on blogs. While employee gossip has always been a part of human nature ' never more famously admonished against than in the catchphrase 'loose lips sink ships' during World War II ' technology has accelerated the speed and ease with which employee gossip can spread to competitors and wrongdoers, and perhaps has made it more difficult for employers to discover these threats. Even with the many blog search engines now available, what firm has the time or resources to devote to monitoring the blogosphere for references to itself or its products, and tracking down the often-anonymous posters? However strange it may seem to employers raised in a 'don't talk, don't tell' mentality, today's tech employees often need guidance ' and specific rules ' about what must be kept secret. (However, the 'News Alert' feature at Google News, or similar news search engines, using the 'comprehensive' setting, allows constant monitoring of online references to a firm ' provided that someone has the time to monitor the alerts, which can be set to arrive instantly, daily or weekly.)

All these secrets and risks have one thing in common: the employees, independent contractors and, perhaps most important, business partners to whom those secrets must be revealed so that they can do their jobs. For all of the technical innovation of today's vibrant e-commerce economy, that economy still depends on working with flesh-and-blood individuals as much as any business ever has. The tools that businesses have always used to protect key information (e.g., the confidentiality agreement ' a separate document, or a provision in an employee manual or code of conduct, along with non-competition agreements) remain as relevant today to keeping the secrets of e-commerce firms as they were to these firms' predecessors.

But the forms that e-commerce firms' lawyers have used without change since the forms were first typed on carbon paper and, later, transferred to magnetic tape, may require some tweaking to adapt to the virtual world.

Let's first consider the plain-vanilla standard confidentiality (or nondisclosure) agreement, ('NDA'). Businesses often hand out NDAs to prospective employees, existing employees and other parties the way that holiday paraders toss candy to children. In an economy that turns ideas into money, everyone wants to protect his or her ideas, as well as more 'common' secrets, like lists of customers or key suppliers. Even though prospective investors, business partners and employees all routinely get NDAs, signing one without reading it could be a mistake. The pressure to sign a 'standard' NDA, without negotiation, ignores the reality that NDAs are anything but 'standard.' With an online business that is totally transparent to competitors and criminals as well as to customers, no firm should falsely economize on legal review by signing a 'standard form' that doesn't protect those intangible assets ' nor should a firm use a venerable form that has not been updated since the invention of the cathode ray tube (remember when we talked about CRTs?).

Most important is that the naive belief that a firm will be protected if it insists on getting an NDA signed before a first meeting not only may not be good business, but also may not be legally necessary. For example, if a firm's information is truly secret (a chemical formula, for example, or a critical piece of coding or algorithm), then it should never be revealed until absolutely necessary. Business data that can't be protected by patent law often doesn't change hands in the sale of a firm until after funds are wired at closing. Even patent protection may not help against a firm that steals an idea, if the legal fees to fight the action are too much, particularly for a startup that is the victim of a large firm. Once a secret has been revealed in court, people other than the secret's owners may be able to reproduce the results legally.

How to Make a Secret Stay That Way

In practice, however, reputable investors (like venture funds) almost always refuse to sign NDAs. They see so many business plans that they can't risk being sued by someone they passed on if they later invest in a similar start-up. Entrepreneurs should instead investigate an investor's reputation and integrity in choosing with whom to do business. Of course, secrecy agreements still make sense with key employees, or when trading information with a firm in the same industry. But several key provisions can be tweaked to make an NDA favor the person disclosing information, or the person receiving it, depending on a company's needs. Firms disclosing information naturally prefer more protection for their proprietary information. Subtle legal 'presumptions' also make it easier to win in court if someone threatens to violate the NDA by stealing secrets. A rundown follows.

Who Already Knows, and What's Restricted?

First, consider what information is secret. The disclosing party wants to protect everything possible, whether disclosed in writing (in due diligence, for example), or simply observed during a walk-through. In fact, some information, including trade secrets and customer data, can be protected only by an NDA. The recipient, in contrast, prefers to limit its obligations to a strictly defined list of information ' only what has been stamped or identified as 'confidential.' Next, what restrictions are imposed? As the name implies, an NDA prohibits disclosure to third parties. But it should also block the recipient itself from using information.

Make Claims Count

Of course, the ultimate test of an NDA occurs in court. A good NDA should quickly and inexpensively lead to a court order ' an injunction or temporary restraining order ' blocking use and disclosure of a company's proprietary information, if the recipient threatens to violate the NDA. To get that result, even a basic NDA must include the recipient's agreement (technically, an 'admission') that any violation will cause 'irreparable harm' that money damages cannot fix. Without that legal boilerplate, the owner of the information must persuade the court that it will suffer permanent harm, which may take time, if it can even be proven.

Select a Forum for Enforcement

A better NDA will pick the court in which the parties must contest any alleged violation. Small firms may concede defeat immediately if they cannot afford to hire counsel in a distant state or country. Non-lawyers may naively prefer short NDAs, which seem easier to get signed, but no one should eliminate these mandatory provisions, when a simple five-line sentence provides the crucial clause that courts require.

Also, consider how long the restrictions on disclosure should last. Firms disclosing information often want their protection to last forever, and many NDAs don't have a time limit. Yet, a court might consider such perpetual restrictions unreasonable, and so, it is certainly better to choose a lesser restriction that a firm can live with, rather than opening oneself to a court doing so in reforming an agreement that it has struck down.

Exceptions, Disclosures and Reasonableness

Information recipients also want to avoid restrictions on information they already know, discover independently or that has already become public (other than, of course, through disclosure by the recipient). Most confidentiality agreements contain such relatively standard exceptions, like for when disclosure is permitted by the recipient, or the 'Receiving Person,' notwithstanding the agreement to keep information shared by the 'Disclosing Person' confidential. For example, information already available to the public, or known by the Receiving Person at the time of disclosure by the Disclosing Person, is usually not treated as 'confidential.' Sometimes, the same treatment applies to information independently developed by the Receiving Person (as long as confidential information was not used), or received from a third party not subject to any confidentiality obligation. If a governmental authority compels the Receiving Person to disclose ' a subpoena, for example ' the confidentiality duty also may not apply. While it's unreasonable for firms disclosing information to oppose these common exceptions, a fair NDA should require written proof for a party to claim permission to disclose by relying on a specifically listed exception.

Evolving Privacy Law
Is Changing the Game

However, the recently emerging law of privacy for 'personally identifiable information' has added a new twist to the standard confidentiality exceptions. Certainly, no one would expect to get in trouble for disclosing information that has already become public. What harm could there be from opening the barn door, when the horse is already outside? But that paradox could occur due to the complex interplay of boilerplate NDAs and the emerging law of privacy and personally identifiable information such as medical records of employees, or Social Security information and credit history of employees or customers.

But what if a disclosure permitted by one of these exceptions contains personally identifiable information that has become public (such as through a security breach, or that is available in a public-records filing somewhere)? Even though the original Disclosing Person may have no claim against the Receiving Person for violation of the confidentiality agreement, paradoxically the Disclosing Person herself could be liable to a third party for a privacy-law violation, because of the Receiving Person's permitted disclosure.

Sheltering Against Falling Dominoes

To prevent this problem in situations where personally identifiable information must be exchanged, businesses should consider modifying standard confidentiality forms to create 'an exception to the exception.' Several of the standard 'permitted disclosures' should be subject to a 'privacy override' that prohibits disclosure of personally identifiable information, even when revealing such information might otherwise seem appropriate.

Dealing with Exes

But sometimes an NDA isn't enough to protect a firm's critical knowledge if the business isn't also protected against its former employees. Non-competition covenants are common in businesses where knowledge matters, whether high-tech or old-economy sales that depend on people knowing customers' needs. Typically, they impose restrictions that continue long after employment ' such as against working in the same field, and against contacting customers, prospects and fellow employees, in addition to continuing NDA obligations.

Courts Count Clauses

Although many people naively sign them because they believe that the law cannot prevent them from working, 'reasonable' non-competition covenants generally will stand up in court. Knowledge that an employee gained from employment ' at the employer's expense or from the employer's existing business ' should not later be used against the same employer for a competitor, if the employee or contractor signed a proper agreement not to use such knowledge or not to compete. Instead, courts will scrutinize any limit on future employment, regardless of length or scope. Forcing a person to work with only one employer, even for a short time, is too much like slavery and is contrary to our principles of freedom to work. To understand how to make such an agreement stand up in court, then, let's consider why a court might refuse to enforce a covenant not to compete.

Severance Benefits Establish
Importance and Reasonableness

Perhaps the best defense of the laid-off e-commerce employee is the simple fact that she was let go for reasons unrelated to her performance. Courts might not protect the employer's interest in a person it apparently didn't consider important enough to keep on the payroll. Well-advised employers, therefore, anticipate this argument by providing severance benefits to justify the non-competition period.

Courts will also check whether the restriction is reasonable compared to the benefits the employee got from the job, or that the contracting party got from the contract. A brief look at the factors affecting 'reasonableness' also provides a roadmap for the laid-off employee ' and prospective new employers ' to decide whether to fight, or to accept a job offer anyway. In turn, knowing how employees can escape a restrictive covenant helps employers request only reasonable ones, which will hold up in court when an ex-employee or contractor tries to compete.

Consider, for example: Did the employee really get any benefit for agreeing not to compete? It is certainly reasonable to require all new hires or new subcontractors to sign a non-competition covenant as a pre-condition of getting the job. A new employee, with no industry experience, shouldn't be able to quickly shop her training to another employer. But what if the position lasted only six months, as is possible in any fast-changing industry, and the prohibition on working in that sector extends for a year? Also, most courts won't consider a covenant 'reasonable' if an existing employee signed a covenant without getting something exceptional for it ' a significant raise or promotion, or additional benefits, for example.

Employment Restrictions
Must Address Real Harm

Another problem for employers occurs when the covenant limits employment that could not conceivably harm the employer or its business interests. Typically, this issue arises in geographic covenants. A truly local employer has no legitimate interests to protect with a national, or even state-wide, restriction. A tech employer, by contrast, might truly operate in a national market, so a court would give more latitude to a broad geographic restriction. In turn, however, it might permit only a narrow definition of the scope of prohibited activity, particularly where the nature of the business is in flux.

Restrictions Must Be Market-Relevant

Tech firms also face other market definitions more important than geography. A software developer experienced in database management for a consumer sales organization, for instance, should not pose any threat if she works with databases for business-to-business sales; the customers and markets are different, even if the products aren't. Wholesale or retail, client or server side, front-end or back-end ' any distinction that matters could be enough for a challenge.

Restrictions Must Not Be Unfairly Long

Employees also commonly attack the length of the restricted period, which is a tactic particularly applicable to rapidly changing technology industries. A restriction shouldn't outlast the expected life of technology. For example, a New York court voided a restriction of just one year as unreasonable, solely because the rapid changes in software design made the court consider that anything the employee learned would be out-of-date before the one-year covenant expired. Instead, many firms try to ensure that their covenants will appear reasonable to a court by limiting them to interests clearly worthy of protection, such as clients, customers and fellow employees. 'Non-solicitation' agreements bar an ex-employee from contacting persons with whom she worked, in contrast to broader 'non-competition' covenants that keep a person out of a line of business entirely.

Such limited agreements make sense to protect the employer during the time it takes a new rep to develop a relationship with the customer, or a new firm to take over the account. Not only are these almost always enforceable, but they cut off the departed individual's base of industry contacts, forcing her to start over if she wants to compete, or at least wait until the end of the restricted period.

Be Careful How You Word Things

When contracting with another firm in the same line of business, it's also reasonable ' and important ' to protect against losing employees, but it makes a difference which side a party is on. A covenant against soliciting the disclosing firm's employees doesn't help if the employee contacts the other firm herself, unlike a covenant against hiring. In the e-commerce marketplace, where 'there's no there there' except for information, protecting the information's many forms is critical. Consequently, any e-commerce job interview or sales call should resemble the Beatles' classic lyrics: 'Listen: Do you want to know a secret; do you promise not to tell?' ' albeit in the less melodious form of an NDA and non-competition agreement. Such forms will certainly use boilerplate, updated for the e-commerce economy with boilerplate filigree that even Lennon and McCartney couldn't harmonize. But it will certainly produce a different sort of tune in the hands of a skilled trial lawyer using it to enforce the agreement's protection (especially if the employee didn't covertly walk out the door with all those secrets downloaded onto her iPod).

Stanley P. Jaskiewicz, a business lawyer, helps clients solve e-commerce, corporate, contract and technology-law problems, and is a member of e-Commerce Law & Strategy's Board of Editors. He can be reached at the Philadelphia law firm of Spector Gadon & Rosen P.C., at [email protected], or at 215-241-8866.