Are AWES engineers being sterilised?

AWES is a small developing industry.
We have few small businesses working on competing designs.
The businesses work on fairly similar and transferable technologies.

Yet,
Some engineers in AWES have to sign Non-Compete Clauses.

I’ve asked engineers who worked in other AWES companies to come work with me. They can’t. They’re threatened with enforcement of law originating at their first AWES companies.

Discuss

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Come on 11 views and no replies.
The silence is deafening.
Is AWES going to be sterilised by this behaviour?

Is a Non-Compete clause legal in an EU funded science R&D venture?
How can that possibly be productive?

As I see it, we have a choice.
It’s one planet.
Cooperate or die.

Was this the vision you started with for AWES?
Repeated R&D wasting time for everyone… Nobody surely wants that.

Someone please explain in real terms Non-Compete Clause WTF?
I’m prepared to let W&I break the terms of these ridiculous and surely unenforceable contracts

A. Consistency with EU regulation

Article 101 paragraph 1 of the Treaty on the Functioning of the European Union (TFEU) prohibits agreements with the purpose to restrict competition within the internal market. Post-term non-compete clauses prevent access to the market for former network distributors. Consequently, post-term non-compete clauses should be prohibited in distribution contracts.

However, article 101 paragraph 3 of the TFEU defines the conditions under which article 101 paragraph 1 of the TFEU is not applicable.

Thus, post-term non-compete clauses are considered valid according to certain conditions that are presented in the EU Regulation of April 20, 2010. Article 5.3 of this Regulation provides for the application of article 101 paragraph 3 of the TFEU to categories of vertical agreements. They mainly concern franchise agreements. In this instance, the conditions of validity for post-term non-compete clauses are the following:

  • Firstly, the clauses must relate to goods or services;
  • Secondly, they must be limited to the premises and territory from which the distributor has operated during the contract period;
  • Thirdly, their duration must be limited to a period of one year after termination of the agreement;
  • Fourthly, they must necessarily be implemented to protect the know-how transferred by the supplier to the distributor.

When the conditions of the EU Regulation are not fulfilled, the post-term non-compete clause could be held invalid. However, the Guidelines on Vertical Restraints allow some individual exceptions based on specific circumstances. Post-term non-compete clauses will be reviewed on a case-by-case basis to determine whether they constitute a restriction of competition.

Some AWE companies are not nationals of the European Union. Affected companies may fear disclosure of their secrets. It would be easy to avoid these problems by classifying the AWE methods concerned. For example a company doing the yo-yo system could allow its employees to work for organizations targeted on other methods such as TRPT, fly-gen and so on.

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This paper


Seems to follow to a conclusion it’s own initial hypothesis that

Consistent with this evidence, I propose
that in regions in which such non-competes are enforced more strictly, firms likely undertake
riskier R&D paths, implying a higher likelihood of achieving extremely valuable inventions
(i.e., technological breakthroughs), but also a higher probability of failure. I also propose that
non-compete enforcement affects the direction of research efforts, inducing firms to
undertake projects in new technological areas. I predict these effects because non-compete
contracts reduce outbound mobility and knowledge leakages to competitors. As a result, a
stronger enforcement of non-competes makes high-risk R&D projects relatively more
valuable than low-risk ones.

Concludes with

DISCUSSION AND CONCLUSIONS
While previous research has extensively studied the implications of non-compete agreements
for regional growth and performance, far less is known about the impact of such contracts on
firms’ strategies. This study investigates the impact of non-competition agreements on the
type of R&D activity undertaken by companies. I showed that in areas where non-compete
agreements are enforced more strictly, the likelihood that corporate inventions will be
explorative and path-breaking is greater. However, I also have found that a greater
probability of achieving great inventive successes is accompanied by a greater probability of
extremely poor outcomes.

But oddly also in our case…

This work accordingly offers several key contributions to prior literature. First, I
provide relevant insights into how the strategy and competitive advantage of firms depends
on the institutional environment in which they are embedded (see also Ingram and Silverman
2002; Furman 2003). With regard to innovative performance, Hall and Soskice (2001)
suggest that in liberal market economies (e.g., U.S., U.K.), due to more labor turnover
companies innovate more radically than they do in coordinated-market countries (e.g.,
Germany, France), where firms instead specialize in incremental, less risky innovation.
However, this study provides evidence that in regions where non-competes are enforced more
strictly, and thus mobility is limited, corporate inventions actually tend to be radical and pathbreaking.

Second, this study offers interesting findings for entrepreneurship literature, which
previously has considered non-competition agreements mainly as barriers to the formation of
new companies, seemingly decreasing technological variety and risk-taking in a region. My
28
study suggests that the strong appropriability regime determined by non-competes stimulate
corporate entrepreneurship, inducing managers to experiment and explore risky and
potentially path-breaking technological solutions.

I’d take that with a grain of salt. Sure their employer might have a non-compete clause but you’re not a competing company. You’re probably in a different country, targeting a different niche, working on a different technology, far from market entry, and even after market entry you’re not going to significantly impact any of your would be competitors. It’s up to the employer to enforce the clause or not. I don’t think an employer would really veto an employee asking them to work on your product. I think it’s more likely they just didn’t ask, or perhaps that the employer didn’t know who you are.

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Well dead companies can’t sue anyone.^^

Hope you don’t mind me taking that whole post as a full on insult @Windy_Skies

I’m guessing you take the above as an insult. Second point, I don’t see how another low volume producer of wind turbines or solar installations would significantly impact a hypothetical company (in another country). First point, you’re on a long and perilous journey. I don’t think you’re near the end of it.

So they don’t want to pay for patents? Going for secrecy in stead?

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Both: quite often patents do not correspond to what is really developed, hence the need for secrecy.

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I wont try to substantiate my view on this other than: I dont think its ok to prevent people from working in competing AWE. To be clear one should expect any such person to try really hard not to share any specific knowhow from the first company. Anyways right now Im not sure if any company has valuable knowhow, until they can demonstrate useful operation. Until that point its just someones «great» idea…

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