How Noncompete Agreements Will Make Our Troops Less Safe

from the bad-news-for-everyone dept

Earlier this month, we wrote about the dangers of noncompete agreements and how they tend to slow innovation and hurt regions compared to those, such as California, that do not enforce noncompetes. Most of the research on noncompetes tends to compare Massachusetts, which enforces noncompetes, to California. And, in an unfortunate demonstration of the dangers of noncompetes, iRobot, a Massachusetts company has just forced a competitor completely out of business, and our troops may be less safe because of it. Many people know iRobot for the cute little Roomba vacuum cleaner robot, but the company's main line of business has always been selling robots to the military to help them locate and dispose of explosives. A new company sprang up recently, called Robotic FX, founded by a former iRobot employee. Robotic FX had just scored an army contract to make some similar robots. The competition would have been good for everyone. It would have pushed both companies to continue to innovate and make better, more efficient and more cost effective robots. Instead, iRobot sued and has forced Robotic FX completely out of business and banned its founder from working in the industry for five years. Here's a knowledgeable expert on robotics who can help make useful robots that will help keep our troops safer... and he's not allowed to work in the industry for five years. That doesn't seem like a good outcome for anyone... other than iRobot who can rest on its laurels rather than having to innovate in the face of competition. Update: Wanted to update this following some comments that suggest my summary was inaccurate. I apologize if it was not clear, so let me clarify here. The guy was accused of patent infringement and trade secret violations in what he was doing. That was the central part of the case. The "noncompete" wasn't specifically an agreement he signed, but it's a result of the lawsuit. I should have been clearer about the accusations of infringement, but I don't believe this changes the point of the post at all. It's still a case where a noncompete (created by the court, rather than as part of an employment agreement) is used to stifle competition. That there may have been patent infringement is somewhat meaningless to me, as should be clear from my other discussions on patents. Competition is competition -- and it would have driven better results, even if based on the same patents.


Reader Comments (rss)

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    identicon
    Anonymous Coward, Dec 28th, 2007 @ 11:22am

    Thats even better than "think of the children"

     

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    Warren, Dec 28th, 2007 @ 11:26am

    If the tech is that good then

    he can go to work directly for the government or military. They get to ignore those nice little laws about competition and patents when designing military hardware. I'm sure arrangements can be made to compensate him, perhaps not to his former level, but perhaps he can get a bit of pleasure taking iRobot down from inside the military-industrial establishment.

     

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      Anonymous Coward, Dec 28th, 2007 @ 11:54am

      Re: If the tech is that good then

      Except that whole thing of the military (and government in other areas) contracting out that sort of thing to 3rd parties.

      Man that just doesn't seem a safe idea.

      And man! There is a LOT wrong with the current system.

       

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    Danny, Dec 28th, 2007 @ 11:43am

    you left out a part

    Mike, your techdirt story says this is about non-competes. But the CNET story you site doesn't mention non-competes. It says that one US District Court ruled that the key employee stole trade secrets and another US District Court ruled Robotic FX deliberately infringed on patents.

    Now, perhaps you have legitimate issue with trade secret law or patent law (or the courts' determination of fact), but all of that is different from claiming this to be a non-complete issue.

     

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      Hulser, Dec 28th, 2007 @ 12:28pm

      Re: you left out a part

      Mike, after reading the CNet article, I have to say that it looks like Danny's comment is right. While Ahed is being banned from "competitive activities" for five years, based on my reading, this was a result of the settlement, not a pre-existing noncompete agreement.

      Are you saying that the charges of misuse of trade secrets and deliberately infringing on patents was based on the noncompete agreement? If not, I don't see how this is a noncompete issue, in spite of the fact that I think the overall point still stands that the result of this case could make our troops less safe,

       

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      Mike (profile), Dec 28th, 2007 @ 2:43pm

      Re: you left out a part

      Mike, your techdirt story says this is about non-competes. But the CNET story you site doesn't mention non-competes.

      Sorry. I have added an update to clarify.

       

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    Anonymous Coward, Dec 28th, 2007 @ 11:49am

    correction, not allowed to work inside the US for five years, if the expert moves abroad hes in the clear, until he moves back or is simply snatched from the streets.

    so here your non compete doesn't just harm innovation, it has the potential to benefit another country.

    way to go...

    if hes that good just bring him directly in as a DoD contractor and assign him where ever you want

     

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    Dan, Dec 28th, 2007 @ 12:07pm

    Non-Compete

    Why doesn't he incorporate in California or Canada and ignore the ruling?

     

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    Anonymous Coward, Dec 28th, 2007 @ 12:36pm

    The guy stole a bunch of information from iRobot. He was caught dumping a bunch of discs into other people's dumpsters after iRobot filed suit. I think you need to investigate a little more WHY iRobot filed suit against him, instead of jumping the gun to make a point you want to make.

    If its for military use, does that mean it should be legal? Should people working for Lockheed Martin be able to steal designs and start their own defense company up from lockheed martin's work?

     

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    BTR1701, Dec 28th, 2007 @ 12:40pm

    Non-competes

    So if California really doesn't enforce these things, then it should be a simple matter for the owner of Robotic FX to dissolve his company in Massachusetts and reincorporate in California, then carry on with business as usual.

     

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    isaac asimov, Dec 28th, 2007 @ 12:57pm

    I'm feeling a bit ripped off

    They had better not write a book about it.

     

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    dleather, Dec 28th, 2007 @ 1:21pm

    did he sign?

    Notwithstanding the confusion of whether this case is actually about a non-compete or not, but if it is wouldn't it be based on the fact that he would have willingly signed a non-compete agreement? If he read the agreement, understood it, and then signed it....where's the problem? If he didn't read or understand what he signed, well shame on him.

     

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    Anonymous Coward, Dec 28th, 2007 @ 1:25pm

    Wow - Really Messed This Up

    Reading the summary, one would think "Yeah - this Techdirt entry is spot on!" Then you go read the article and realize this Techdirt entry is flat out wrong, not just misleading, massaged by a spin-master, but wrong wrong wronggity wrong - absolutely brimming with wrongability.

    The Techdirt editors should correct this ASAP. Something that is so blatantly off the mark brings down the credibility of Techdirt. The guy stole trade secrets and intentionally infringed on patents. Patent system issues aside, this isn't about killing competition with a noncompete agreement, its about not letting competition be who can rape the innovator the hardest and fastest.

     

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      Mike (profile), Dec 28th, 2007 @ 2:46pm

      Re: Wow - Really Messed This Up

      Reading the summary, one would think "Yeah - this Techdirt entry is spot on!" Then you go read the article and realize this Techdirt entry is flat out wrong, not just misleading, massaged by a spin-master, but wrong wrong wronggity wrong - absolutely brimming with wrongability.

      I added an update. I disagree that it's "wrong." The point still stands. I'm sorry that I wasn't more clear in highlighting the key point, which was how the entire situation was anti-competitive.

       

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    Dr. Spin, Dec 28th, 2007 @ 2:09pm

    In other news...

    ...and soon we will all die at the hands of those piddly little easterner politically entrenched greedy states - You know who you are.

    That's right I'm talking to you Clinton, and your husband. We all know what you'll do to us again if given the chance.
    Step up and take responsibility, not credit, for the malice and hatred brought on us by your former administration.

    Oh sure, Bill could talk a good one, but we all know who was whispering to him in his sleep.

    Let's see what you were known for;

    Debauchery in the Military
    Porn on the *you-name-it*
    Deregulation leading to re-regulation
    Failure as a home maker and booty shaker

    So everyone that wants to see more goverment making more greedy laws, all from an east coast penthouse, support the damnocrats.

    Paid for by;
    Americans who buy stuff
    Companies who buy laws
    Politicians who buy votes

    Hmmm, sure seems to be alot of easterner tags in the Ohio Valley lately.

     

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    hjmiii, Dec 28th, 2007 @ 2:31pm

    Several Inaccuracies

    Not only is the issue not about noncompete agreements (the noncompete clause was part of the court settlement over patent infringement and trade secret misappropriation), the article also falsely claims that iRobot's "main line of business has always been selling robots to the military to help them locate and dispose of explosives." From the company's history it looks like they were kept afloat by DARPA grants for a few years, but the center of the company is their AI software that can be put to use in almost any robot. They started out with an extraterrestrial exploration bot, and the Roomba has quickly taken over as the chief enterprise of the company. They've sold over 2 million Roomba's but even with this army contract, only a few thousand packbots. Additionally the chief argument here relys on the assumption that Robotic FX was capable of innovation and competition in iRobot's market. When a judge has ruled that their business model was based on copying a design, not improving upon it, it doesn't seem to me that they would have pushed this industry anywhere but down. If Jameel Ahed wanted to innovate he could have done it at iRobot by introducing whatever cost cutting actions he found that allowed him to win the US Army contract. Instead it looks like he just got greedy, and by the description of his dumpster escapades, not very smart.

     

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    Matt C., Dec 29th, 2007 @ 1:13pm

    Mike - Your problem seems to be with the apparently paradoxical nature of our patent system.

    Patent laws provide a temporary monopoly to an inventor (or a non-competition agreement as against the world, as you phrase it) in order to promote the progress of science by permitting the inventor alone to reap the rewards of his invention, thus "enabl[ing] firms to increase their expected profits from investments in research and development, thus fostering innovation that would not occur but for the prospect of a patent."

    In the case you're talking about, a former employee both violated the patent laws and misappropriated trade secrets, and for these reasons, was driven out of business. Though this is anticompetitive in the short run, preservation of the patent system promotes competition in the long run.

    At least, that's the most commonly offered justification - and I believe it, if only because the existence of our patent system has coincided with the rapid advancement of technology in America.

     

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      Mike (profile), Dec 30th, 2007 @ 12:13pm

      Re:

      I believe it, if only because the existence of our patent system has coincided with the rapid advancement of technology in America.

      Don't confuse correlation with causation. Take a look at the research of Levine & Boldrin, Moser, and Schiff and you'll begin to realize that there's almost no evidence that a patent system increases innovation. In fact, there's plenty of evidence to the contrary. A patent system does *consolidate* the lead of companies already leading in a space by giving them a way to protect that lead from competition.

      But there's little evidence that it actually creates the incentives to create new innovations.

      You can see Levine and Boldrin's book on the subject here: http://levine.sscnet.ucla.edu/general/intellectual/againstnew.htm

      which points to plenty of additional evidence showing the lack of impact from patent systems on encouraging innovation and highlights many of the negative impacts from it.

       

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        Matt C, Dec 30th, 2007 @ 1:25pm

        Re: Re:

        Mike -

        I realized the weakness of the correlation statement that you responded to after I had posted it (i.e., once it was too late to remove).

        Thank you for pointing me to the Levine & Boldrin book.

         

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    Anonymous Coward, Dec 30th, 2007 @ 9:55am

    I don't get it - how is it "competitive" to steal someone else's idea and go build the same thing they do?

    Seems the definition of "competitive" or "competition" in the business world is "who can make it the cheapest" regardless of the validity of any patents or trade secrets.

    We may not like the patent system around here on Techdirt, but it sure seems to me this is not one of those patents that everyone agrees should be thrown out or that litigation was rushed to beat a patent review that was going to invalidate the patent. Further, while there may be an argument that the inclusion of the "noncompete" in the settlement is overreaching by iRobot, it seems to me Robotic FX gave iRobot all the ammunition needed to shove this down Robotic FX's throat. Let's not forget this is a SETTLEMENT between the parties in litigation (after rulings that showed iRobot was going to spank FX) and that the only "court imposition" is the fact that the Court needs to approve it and it will then have the force of an injunction/judgment against FX.

    I've read the summary, the cnet article, Mike's explanations AND the docs at xconomy.com (including the settlement papers signed by everyone but the judge) and the noncompete stuff is so minor compared to the real issues here, I agree the summary is so seriously misleading that I feel it is wrong.

    Differing opinions I guess. Since so much of the Techdirt postings are good and quality work, this is just an anomaly in my book. Interesting reading even so - thanks for bringing it to our attention Mike!

     

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    Steve, Jan 3rd, 2008 @ 12:18pm

    Article is wrong

    Sorry for being blunt, but unlike your usual concise & correct articles, this one is incorrect.
    When I read this article, I knew I had seen the case mentioned elsewhere. I found the link here: http://www.masslawblog.com/?p=141

    The country suffers no harm, and the man gets what he deserved. I'm all for patent reform, and getting rid of non-competes, but the system worked EXACTLY like it was supposed to here.

    If you read the PDF (linked at the bottom of the blog article), you'll see that the government had no problem with either companies robot, and the only reason Robotics FX won the contract was that their bid was lower: $285 million vs. $286 million.

    I definitely feel like this article needs another update, at the very least the article title.

    Thanks!

     

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    Mike D, Jan 4th, 2008 @ 12:05pm

    Article is completely false - shame on you

    The whole point of this article is false. The supposed "competitor" Robotics FX stole every single idea the company was based on directly from iRobot.

    Robotics FX's ability to actually fulfill the contract was extremely unlikely, as it appears to have been a shell company run out of the guy's father's basement. There is no loss of competition or innovation here.

    Your update to the article doesn't help. The point of the non-compete wasn't to prevent competition but rather to prevent further theft of the iRobot IP. There was no competition to start with, since Robotic FX was founded solely on iRobot technology.

     

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