New York company seeks to enforce non-compete in California

Some states enforce non-compete agreements, whereby employees agree not to compete with their employer for a period of time or share trade secrets after leaving the company. California is not a state that enforces such agreements, but New York is.

A California company and a New York company are currently engaged in a legal battle over non-compete issues, and the case relates to matters we recently discussed in our post, "Avoiding conflict-of-law disputes with choice-of-law provisions." With choice of law in mind, let's consider the ongoing dispute between California-based AppDynamics and New York-based CA Technologies.

AppDynamics was founded by a former CA employee in 2008. The companies are fighting over application monitoring (APM) software that CA claims was developed by AppDynamics founders while they were CA employees. The employees had reportedly signed non-compete agreements while working for Wily Technologies, which was acquired by CA in 2006. CA claims to be "successor-in-interest" to those non-compete agreements.

However, a court in New York already threw out a patent infringement lawsuit brought by CA against AppDynamics, which then brought its own claim in California in an attempt to show that CA's claims have no merit. CA countered with a complaint in California on July 21, alleging that the AppDynamics executives violated non-compete agreements and misused CA's intellectual property.

The AppDynamics founders say that CA's most recent complaint falls outside of California's statute of limitations and should be thrown out. AppDynamics also noted that the employment agreements in question don't comply with California public policy.

This volley of claims and counterclaims illustrates the kind of situation that companies want to avoid if possible. To that effect, businesses can ensure that appropriate provisions are included in all contracts and agreements.

Source: Forbes, "CA Sues AppDynamics, Alleging Misuse Of CA's Intellectual Property," Peter Cohan, July 22, 2014

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