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Noncompete agreements prominent in “cloud” company disputes

It hardly seems surprising that litigation – quickly and routinely triggered – features notably in the so-called “cloud” business.

Commercial-world references to the cloud can pertain to matters spanning computing, marketing, varying applications, storage and additional concerns. The cloud universe is diverse, dynamic and growing, and it makes sense that rivals’ disputes sometimes end up in court.

They often end up before a judge in some state court. That has been prominently noted by many industry commentators recently, especially in the wake of a lawsuit filed last month by cloud Giant Amazon against a former top-tier employee.

What do many recent cloud-linked complaints allege?

Companies like Amazon, Microsoft and IBM have been busy asserting in various courts that select ex-employees have shipped out to competitors while possessing valuable inside information. The businesses contend that ruinous harm is a given for them if their former workers aren’t at least temporarily barred from linking up their rivals.

That bar spells central subject matter in noncompete agreements those entities sign with such workers. Those contracts typically impose restrictions (e.g., no working with X company for one year; no employment commenced in any similar company operating in the same state), which ex-employees often – and sometimes – seek to enforce aggressively.

Will a court enforce a noncompete agreement?

The short answer to the above question, applicable to outcomes in New York courts and those of many other states: Maybe.

Maybe not, though. Increasingly, judges across the country are evaluating such contracts with exacting scrutiny that presumptively favors employees over the companies they have left. To pass judicial muster, a noncompete must be carefully drafted and reasonably tailored in terms of time, geography and other relevant factors.

It is important to note that noncompete clauses or contracts still play a critically important role for many employers and that they do continue to be enforced when reasonable.