Non-competition agreements occupy a peculiar position in the legal landscape. They are not, strictly speaking, intellectual property instruments — no statute classifies them as such. Yet they function as one of the most powerful mechanisms for controlling the flow of knowledge between firms. David Levine argued that non-competes should be analyzed through the same framework used to evaluate patents, trade secrets, and copyrights: as regulatory tools that restrict the use of information in exchange for some purported benefit.
The IP Framework Applied to Non-Competes
The central insight was that non-compete agreements share structural features with traditional IP rights. Both grant a form of exclusivity. Both impose costs on third parties. And both are justified by their proponents as necessary to encourage investment — in the case of non-competes, investment in employee training and the development of proprietary knowledge. The question Levine posed is whether the restriction is proportionate to the interest being protected.
Traditional IP instruments have built-in limitations. Patents expire after twenty years. Copyrights eventually enter the public domain. Trade secret protection ends when the information becomes generally known. Non-competes, by contrast, restrict a person’s ability to work in their field for a specified period, often without the same scrutiny applied to other forms of knowledge regulation.
The California Exception
California’s near-total prohibition of non-compete agreements provided a natural experiment. If non-competes were truly necessary to protect employer investments, California’s technology sector should have suffered from chronic underinvestment in employee development. The opposite proved true. Researchers including AnnaLee Saxenian had documented how the free movement of talent in Silicon Valley created dense knowledge networks that accelerated innovation far beyond what occurred in regions with strict non-compete enforcement, such as Boston’s Route 128 corridor.
Enforceability Across States
At the time of publication, state approaches to non-compete enforcement varied dramatically. Some states applied a “blue pencil” doctrine, narrowing overbroad agreements rather than voiding them. Others followed the “red pencil” approach, striking down any agreement that exceeded reasonable limits. A handful of states, following California’s lead, prohibited the agreements outright for most workers. This patchwork created significant uncertainty for technology companies operating across state lines, particularly regarding employees who handled sensitive trade secrets or proprietary technical knowledge.
Implications for the Technology Sector
The technology industry presented the starkest case study. Software engineers, data scientists, and product managers accumulate general skills and industry knowledge that employers frequently attempt to restrict through non-compete agreements. Levine argued that this practice was particularly difficult to justify under an IP framework because the knowledge at issue was often not protectable as a trade secret — it was the employee’s own expertise, developed through their labor.
The article drew parallels to the patent privateering model described by Ewing and Feldman. In both cases, legal instruments designed for one purpose were being deployed strategically to restrict competition in ways that the original framework did not contemplate.
Legislative and Regulatory Developments
Since publication, the debate over non-competes has intensified considerably. The Federal Trade Commission proposed a nationwide ban on most non-compete clauses in 2023, estimating that such a ban would increase new business formation by 2.7 percent and raise worker earnings by nearly $300 billion per year. Several states have enacted partial restrictions, particularly for low-wage workers. The conversation Levine helped frame — that non-competes are a form of IP regulation and should be subjected to the same cost-benefit analysis — has become central to this ongoing policy debate.
Frequently Asked Questions
Are non-compete agreements enforceable in California?
No. California Business and Professions Code Section 16600 broadly prohibits non-compete agreements. This policy is widely credited with facilitating the rapid employee mobility that fueled Silicon Valley’s growth.
How do non-compete covenants relate to intellectual property law?
Non-competes function as a de facto form of IP protection by restricting an employee’s ability to use their knowledge and skills at a competing firm. Unlike patents or trade secrets, which protect specific information, non-competes impose broad restrictions on the employee themselves.
What did the FTC propose regarding non-compete agreements?
In January 2023, the FTC proposed a rule to ban most non-compete clauses nationwide, arguing they suppress wages, reduce innovation, and limit worker mobility. The proposal cited research showing that states without enforceable non-competes saw higher rates of startup formation and patent filings.
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