Your New Hire’s Non-Compete

For years you’ve admired your top competitor’s ability to create new products that have, much to your frustration, consistently outsold yours. Now one of the key members of your competitor’s product team is sitting in your office asking YOU for a job. As he describes to you how he thinks he can position your company for double-digit sales growth, you cannot help but think to yourself, “is this too good to be true?”.  Don’t let your excitement, however, blind you to one likely fact; buried somewhere at the headquarters of his current employer is a signed non-competition agreement (non-compete).

While your initial inclination toward this likely fact may be to believe what you don’t know can’t hurt you, this is one case where getting all of the facts out on the table is the best way to go. Proving your ignorance of the non-compete when faced with a lawsuit may be difficult at best. Further, whether or not you have actual knowledge of the non-compete or its terms, your prospective new hire is still very much subject to the agreement and may face legal action, including an injunction, if hired by you. As a result, you may lose your new star, and what you’ve invested in him, permanently or at least until the matter is sorted out.

Get the Facts, Then Protect Your Company

Before you hire anyone, and especially in cases where a person seeking employment with you comes from a direct competitor, make it a practice to determine if the person is bound by a non-compete or other restrictive agreements with his or her current employer. If they are, get a copy of the agreement and have legal counsel review it. Don’t just go by what the applicant tells you is in his or her agreement. Since he or she wants a job with you, the applicant is likely to minimize what is in the agreement and characterize it as ‘no big deal’.  Even the most honest and forthright applicant, however, is likely to forget key terms. Again, get the actual agreement and have it reviewed by counsel prior to going forward.

Find out from counsel whether the agreement is enforceable and just what it covers. You can then formulate a strategy for dealing with it. If your counsel determines that the new hire’s non-compete is at least somewhat enforceable and applicable to the hire’s new job, here are some steps you may wish to take to avoid or insulate your company from liability:

  • As a first step, ask counsel to revise the offer letter as necessary to advise the application to give ample notice at the prior employer, cooperate in the transition, avoid encouraging other employees or customers to leave with him or her, avoid taking or copying proprietary information, and otherwise adhere to the restrictive covenants in his or her agreement. These types of written statements and admonitions may prove helpful in side-stepping certain more serious legal claims, and may appease the prior employer just enough to sway them from bringing you into a suit in the first place.
  • Structure the terms and conditions of the new hire’s employment to avoid putting him or her in a position to violate the non-compete. For example, you may wish to structure his or her job in ways that make it less likely that he or she will be tempted to rely upon information or contacts from his or her prior job. You may also wish to forbid the employee from having any contact or involvement at all with customers of their former employer. Further, any devices he or she used while employed with the former employer (i.e. phones, laptops, tablets, etc.) should be examined to make sure they do not contain proprietary information or data of the former employer.  Finally, you may wish to avoid extending to him or her any pay incentives that would encourage violations, such as incentives for encouraging customers to switch from using the products of the prior employer. Once you’ve determined the appropriate limitations, document them and have the employee sign off on them as a means of insulating your company should legal action against the employee nevertheless occur.
  • Refuse any requests from the employee for a blanket indemnification agreement against violations of his or her non-compete. Such an agreement opens you and your company up to a lawsuit for tortious interference, which can carry punitive damages. And, it should go without saying, don’t offer to indemnify him or her either. In highly competitive/highly litigious industries, even the offer of such an indemnification agreement can be viewed as hostile and trigger legal action.
  • Direct communications from persons with the former employer to a person other than the new hire to avoid claims of solicitation. Ensure that the new hire’s communications to clients or customers of your company avoid disparaging the prior employer and don’t use any proprietary information protected under the non-compete. Also make sure that you document any unsolicited calls from customers of the prior employer to the new hire as proof that the calls did not violate the new hire’s agreement.

If, despite your company’s best efforts, it is discovered that the new hire has breached his or her former employer’s non-compete while in his or her new position with your company, swift action is necessary to insulate your company from liability.  Administrative leave for the new hire may be appropriate to avoid further breaches. Further, you may wish to initiate “clean room” procedures to make sure any information misappropriated from the prior employer is isolated and does not become part of your company’s products and processes.

To Sum it Up…

Employees from other companies in your industry can bring fresh perspectives, valuable skills, and otherwise be great additions to your company. Before proceeding, however, get the facts about any non-compete or other restrictive agreement between the employee and his prior company. Have legal counsel review the agreement and formulate strategies for protecting your company from liability.

For assistance, please feel free to contact The Lawson Firm.  We have years of experienced in providing counsel to companies concerning non-compete and other restrictive-covenant agreements.  We help companies identify potential liabilities and formulate strategies for managing them.♦

Contact The Lawson Firm

Related Information:

Are Your Trade Secrets Safe?

Is it Time to Update Your Company’s Non-Disclosure/Non-Compete Agreement?

Intellectual Property Protection

logoAttorney Advertising. The Lawson Firm, LLC (“TLF”) is a law firm providing legal counsel and value-added legal services to its business clients.  This article is intended to provide general information only and is not intended to provide solutions to specific issues. Readers are cautioned not to attempt to solve specific issues solely on the basis of the information contained in the article. TLF does not claim expertise in the laws of jurisdictions other than those in which our attorneys are licensed. Certification in any of the practice areas mentioned in this article, other than labor and employment law, is not available in Ohio.

© Copyright 2014-17. The Lawson Firm, LLC.

Trademark Basics: Questions and Answers

What is a Trademark?

A trademark (or for those which relate to a service, a “service mark”) is any word, phrase, design, picture, logo, symbol, or any combination of these used by a business to: (1) identify its goods and services; and (2) distinguish them from the goods and services offered and sold by other businesses. A trademark forms a part of your company’s valuable brand identity.  Registering your company’s trademarks provides it with certain benefits.

What is Registration and What Benefits Does it Provide?

A trademark is registered when it is filed with, and recorded by, the government.  Trademarks may be registered in the U.S. with the United States Patent and Trademark Office (USPTO) or with any of the 50 states.  In most cases, federal registration is recommended as it provides the broadest rights for your trademark.

Federal registration adds significant value to your company’s already valuable trademarks and carries with it several important benefits.  First, federal registration allows your company to sue in federal court for trademark infringement to recover lost profits, damages, and costs from an infringer and, under certain circumstances, treble (triple) damages and attorneys’ fees.  This is an important deterrent to would-be infringers.  Further, registration establishes the legal validity of your trademark, its ownership, and your company’s exclusive right to use the mark in commerce.  This, in turn, will allow you to monetize the value of the trademark through licensing and other means.  Finally, federal registration allows you and your business to proudly display the symbol “®” with the trademark.  This serves as universal notice of the trademark’s legal validity and identifies the mark as a valuable company asset.

In addition to the role they play in developing a powerful brand for your company, registered trademarks possess an economic value as well that can often be quantified and realized in a variety of ways.  Like any asset, trademarks may be sold for a price or used as collateral for asset-based business financing.  Perhaps the most common use, however, is licensing.  In a trademark licensing transaction, your company allows another company to use the trademark in marketing its own products and services in exchange for a royalty fee.  Trademark licensing has grown exponentially in the past decade and is no longer just for large corporations.  Even smaller or niche-market businesses with recognized products or services can benefit from trademark license agreements.  The advantage is two-fold: (1) increased revenues from the royalty payments under the agreement; and (2) wider exposure for your company’s brand.

The Lawson Firm, LLC (“TLF”) can help your company determine an appropriate valuation for its trademarks if it plans to sell, collateralize, or license them.  TLF can also assist with structuring the trademark licensing agreements themselves.  The first step, however, is to register your trademarks…

What does the Registration Process Involve?

As a first step, a TLF attorney will meet with you, either in person or over the phone, to review your trademark to determine if it may qualify for registration.  Not all trademarks qualify for registration.  There are a number of reasons why, and these will be discussed and explained to you as necessary during your initial meeting or call.  If it appears that your mark may be qualified for registration, TLF will then conduct a “trademark search”.  A trademark search will determine if your trademark, or one very similar to yours, is already being used by others in connection with the class or classes of products or services offered by your company.  Using a trademark that is the same as, or “confusingly similar” to, one already being used by another company will not only disqualify your trademark from registration, but it could also expose your company to liability for trademark infringement.

If it is determined that your trademark may be used without exposing your company to liability for infringement, TLF will prepare and file a registration application.  You may be asked to supply a digital image of your mark along with sample products or ads showing how you are using it, or how you plan to use it, to sell your goods and services.

How Long does it take to Register a Trademark?

Each trademark application submitted to the USPTO must be reviewed by a trademark examiner.  Because hundreds of thousands of trademark registration applications are submitted to the USPTO each year, there is a long line of applications that must be reviewed. During 2016, the typical registration application took about 8-10 months to wind its way through the review process.  TLF uses application submission methods and procedures that typically result in less waiting time (and cost) than average.

What if the Trademark Belongs Another Company?

If a trademark search reveals that a similar mark is already being used by another company to sell the same class of goods or services as your mark, it is still possible that your company may go forward with using the mark under a co-existence agreement with the other company.  A co-existence agreement delineates the ways in which the owners of the two marks may use them simultaneously in the marketplace while avoiding the likelihood of confusion between them.

Alternatively, if it is determined that the trademark is registered to another company, but is not being actively used by that company, a proceeding may be brought to cancel the registration.  A successful cancellation challenge would pave the way to registration of the trademark by your company.

Can Our Trademark or Service Mark be Filed for Registration Before We Launch Our Product or Service?

Yes, a trademark or service mark may be filed for registration on what is known as an “Intent-to-Use” (ITU) basis.  This allows your company to initiate the registration process before the trademark or service mark is actually used in commerce.  To fully complete the registration process, however, it will be necessary to file a Statement of Use (SOU) providing proof that the trademark or service mark is actually being used in commerce.  The SOU must be filed within six months after the USPTO issues a Notice of Allowance for the mark.  The six-month period may be extended for up to an additional five, six-month periods.

Can the USPTO Refuse to Register Our Trademark?

Yes, in some cases the USPTO may refuse to register your company’s trademark.  They may view the mark as too similar to an existing mark, or as not eligible for registration for a variety of reasons.

It is also possible that another trademark owner will oppose your company’s mark.  In this case an opposition proceeding may take place during which both parties will be allowed to state their positions.  If either a USPTO refusal occurs, or an opposition proceeding is initiated by another trademark owner, TLF will discuss the matter with you, explain your options, and work with you to develop an appropriate strategy going forward.

To protect your valuable trademarks, please contact us to start the registration process.

Contact the Lawson Firm

Related Information

Trademark Registration and Protection

Intellectual Property Protection

Report Notes Trademark Counterfeiting Issues Remain

Attorney Advertising. The Lawson Firm, LLC (“TLF”) is a law firm providing legal counsel and value-added legal services to its business clients. This article is intended to provide general information only and is not intended to provide solutions to specific issues. Readers are cautioned not to attempt to solve specific issues solely on the basis of the information contained in the article. TLF does not claim expertise in the laws of jurisdictions other than those in which our attorneys are licensed. Certification in any of the practice areas mentioned in this article is not available in Ohio.

© Copyright 2016-17. The Lawson Firm, LLC. 

Insurance Code Provision Creates Revenue Opportunity for Service Businesses

A little known provision in the Ohio insurance code lights a path to an overlooked revenue opportunity for Ohio businesses that provide services to their customers for a fee.

Ohio Revised Code Section 3905.424 (a part of Ohio’s Insurance Producer’s Licensing Act) addresses customer fee waivers that may be sold by service companies.  The statute declares that such waivers are, “not insurance and the laws of this state relating to insurance shall not govern the sale or issuance of such a waiver.”  In other words, a service company may sell a waiver without having to be licensed to sell insurance and without having the waiver, and the fee charged for it, approved by the state.

Under the statute, waivers are defined as agreements, “…between a service provider and the service provider’s customer under which the service provider agrees, in return for a specified charge payable by the customer to the service provider, to waive all or a portion of the customer’s financial obligation to the service provider for charges incurred during a defined period and upon the occurrence of a qualifying event.”  The term “service provider” is defined as, “…any public or private provider of services, including, but not limited to…” utility companies, cable companies, and other communications companies as further defined in the statute.  This broad, non-exclusive definition opens the door to the sale of waivers by a wide variety of companies including:

  • as mentioned in the statute, utility companies (i.e. electricity, gas, water, wastewater, solid waste collection, or similar utilities), cable and other communications companies; and
  • any other business that charges customers for services provided under a long-term or extended term contract, such as services under:
    • computer service or IT agreements;
    • accounting, payroll, or other financial services contracts;
    • other business outsourcing agreements (such as agreements providing for back-office services, call center services, or other administrative services);
    • extended service maintenance agreements;
    • heating and cooling system maintenance agreements;
    • cleaning, landscaping, and other building maintenance agreements; or
    • yard service or other extended home service agreements.

The statute goes on to state that waivers may be sold as separate contracts or as part of a “larger agreement“, such as the main service contract between the service provider and the customer.

While technically not insurance, waivers act as insurance in the sense that they are triggered by certain losses or occurrences, described under the statute as “qualifying events”.  Under the statute, “a ‘qualifying event’ may include the customer’s call to active military service, involuntary
unemployment, death, disability, hospitalization, marriage, divorce, evacuation, displacement due to a natural disaster or other cause, qualification for family leave, or similar occurrence
“.  In order to avoid triggering an unintentionally large volume of waiver claims, service companies offering waivers should be particularly careful and specific when defining “qualifying events”.  For example, with respect to hospitalization, how long must the customer be hospitalized before a waiver will be provided? 24 hours? 48 hours? Similarly, for waivers triggered by disability, is there a waiting period (such as under disability insurance) before a waiver is provided? If so, how long is the waiting period? 15 days? 30 days? What about injuries incurred intentionally or while committing a crime?  Are those covered by the waiver?  Companies selling, or planning to sell, customer fee waivers would be wise to have them drafted by an attorney experienced with creating insurance and warranty products.

In sum, services companies in Ohio have the opportunity to earn additional revenue through the sale of customer fee waivers.  Utilities, communications companies, and other companies providing services to their customers for a charge can benefit through the sale of waivers without subjecting themselves to laws and rules applicable to insurance companies or producers.  A thorough and professionally drafted waiver contract is necessary, however, to help ensure the profitability of such products.

The Lawson Firm, LLC has decades of experience drafting insurance and related products, such as service contract guarantees, contract waivers, warranties, and similar products.  We work with clients to help them create and implement products that minimize exposure to unintended claims consequences and help ensure profitability. If you would like to speak with an attorney about your company’s service contract guarantee or customer fee waiver program, please feel free to contact us.♦  

Scott Lawson – Profile

Attorney Advertising. The Lawson Firm, LLC (“TLF”) is a law firm providing legal counsel and value-added legal services to its business clients. Further information about TLF may be found at  This article is intended to provide general information only and is not intended to provide solutions to specific issues. Readers are cautioned not to attempt to solve specific issues solely on the basis of the information contained in the article. TLF does not claim expertise in the laws of jurisdictions other than those in which our attorneys are licensed. Certification in any of the practice areas mentioned in this article is not available in Ohio.

© 2017.  The Lawson Firm, LLC.

NAIC Adopts New Cybersecurity “Roadmap”

In December, the NAIC’s Executive Committee/Plenary adopted a new consumer bill of rights document entitled, “NAIC Roadmap for Cybersecurity Consumer Protections”.  This new document is the latest version of the NAIC’s consumer bill of rights concerning cybersecurity and is intended to comprehensively describe, “the protections the NAIC believes consumers are entitled to from insurance companies, agents and other businesses when Continue reading

Preparing for a Data Security Breach

As last year’s cyber attack on Anthem and other recent large-scale hacking incidents illustrate, few events can put your company’s entire reputation on the line more readily than a data security breach.  A company’s first line of defense, of course, is to ensure that its data security measures are as strong and as up-to-date as possible.  Insurers must be proactive in this regard.  It is imperative that Continue reading