California Court Of Appeal Doubts Viability Of "Trade Secrets" Exception For Covenants Not To Compete

In Pacesetter, Inc. v. Biosense Webster, Inc., the California Court of Appeal for the Second Appellate District found that a non-competition clause contained in Biosense Webster, Inc.’s (“Biosense”) Employee Secrecy, Non-Competition and Non-Solicitation Agreements (“Agreements”) was void as a matter of law under Section 16600 of the California Business and Professions Code (“Code”)(California's prohibition against restraint of trade) and that its use violated Section 17200 of the Code (California’s Unfair Competition Law). Biosense attempted to argue that the non-competition clause was enforceable because it fell under the so-called trade secret exception to covenants not to compete. This argument was rejected by the court, however, because the clause was not narrowly tailored to protect trade secrets.

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