We are proud to announce our NEW community destination. Engage with resident experts and fellow entrepreneurs, and learn everything you need to start your business. Check out the new home of StartupNation Community at startupnation.mn.co

Does this non-compete sound fair? (exiting business)

AnonyMouseAnonyMouse subscriber Posts: 1
edited September 2008 in Business Planning
First, a little background. During the past 3 years my (one person) company (AnonyCompany) created a web site, did in-person marketing and online marketing for another very small company (SmallPesticideCompany). There are two products - one a consumer pesticide product, the other an industrial pesticide product. Patents have expired for one product, will soon expire for the other. Trademarks on both products were allowed to lapse a number of years ago by the trademark owner. !!!!
The other company refused to sign a contract with us at the start of the relationship. We may have offered an NDA but the other party never followed up with this. Over the past few months, both parties have agreed to end the business relationship. Things are in limbo right now, with the web site URLs registered (owned) by AnonyCompany and the other company owing us some money - in the low 5 figures. The owed amount is in escrow with the attorney of SmallPesticideCompany. Originally they expected us to hand over the URLs based on an oral agreement that we would be paid after doing so. They have now provided us with a written escrow agreement, which seems OK except this one provision:
"That AnonyCompany [and me personally] agrees not to establish any new websites relating in any way to the products that SmallPesticideCompany markets and sells and further agrees that it will not compete in any manner with SmallPesticideCompany and the products it markets and sells. "
We asked for the above to be changed to a 1 year non-compete. The lawyer counter-offered with a 25-year provision for the above clause. We are not receiving any compensation for the non-compete ...
My background is in engineering. I have no idea where my career could head next. SmallPesticideCompany targets 2 specific pests... if I were to invent an alternative device to target one of those pests, the above non-compete could possibly prevent me from going into business to manufacture and sell it.
The SmallPesticideCompany is probably concerned that we would go into business manufacturing a generic version of their existing product. At the moment, I have no interest in doing that. I am not privy to any confidential business processes...though the basic details of the manufacturing are in a published scientific paper (!!!)
I do not want to limit my options for the future, or put myself into a position where I would not be able to work as a pesticide engineer or pesticide marketing person if I decided to re-enter the workforce.
* Does anyone think the above non-compete is actually enforcable?
* Is it fair to expect me to not be an entrepreneur with respect to two specific pests, just because I marketed an existing product for 3 years?


  • Options
    vwebworldvwebworld subscriber Posts: 40
    So, Do I understand this to say... if you sign the non-complete you get paid and if you do not sign you do not get paid?
    If that is true then:
    (1) What does your original contract say about getting paid... assuming it can not be superseded except in writing (and accepted by both parties)?
       While the original contract is not signed... did both parties ask according to the contract`s terms? It then might be argued the terms of that contract govern your relationship... and govern payment and this non-compete agreement would only supersede the contract if you agree to it.
       If both parties did not following the terms of the original contract, what terms were followed - specifically around invoicing and payment? What correspondence was there about payment and transfer of the domain name?
    (2) Regardless of (1), what if you do not sign the non-compete... can you live with not getting paid?
    vwebworld9/6/2008 9:28 PM
  • Options
    AnonyMouseAnonyMouse subscriber Posts: 1
    The non-compete clause is in the escrow contract for transfer of the domain names.
    The transfer of the domain names was not specified in the (unsigned) contract from a few year ago. He did follow an agreement (non-signed) with respect to invoicing, until end of April when he told us the deal was off... the issue was probably our services were costing too much money. Most of the outstanding balance is from April (while the "non-signed agreement" was still in place) plus a few thousand in my time for May-August ... when he asked me to go to an hourly rate for my services. There are items which he agreed to by email (100+ hours of my time for X or Y) which have not been paid for...
    We can live without being paid, but the $$$ would be nice. The ex-business partner is a (retired) lawyer, so if we refused to transfer the domains there would eventually be some legal action on his part. The simplest way to get the $$$ would be to have "fair" terms in the escrow agreement for domain name transfer.AnonyMouse9/7/2008 11:12 AM
  • Options
    vwebworldvwebworld subscriber Posts: 40
    Another (nasty) option is to dismantle the website back to the point for which you have been paid... and walk. That may make you liable for a lost sales claim, so you`d want to provide notice.
    Also, since you control the domain... you have some leverage.
    When does the domain expire?  I would think if they want the domain, they need to come to your terms. If the domain is not due to expire for a few years, then there is not much pressure on them to do anything.
    If they have access to their hosting, they could just put up a new website and thus not worry if you will disassemble your work.
Sign In or Register to comment.