Q I have been working for a consumer products company for the past 10 years. I always dreamed of starting my own company. I came up with what I think is a great idea for a new product. If I do launch this new product on my own, do I have to worry about any restrictions?
A The answer depends upon what restrictive agreements, if any, you have with your current employer, which may include agreements not to compete, not to solicit business, customers or other employees, nor to conduct personal business on employer time.
Non-compete and non-solicitation agreements typically run both during periods of employment and continue after employment is ended, whether voluntarily, involuntarily or because of ill health and/or retirement. Many of these extend for several years after employment ends and may be limited to local geographical areas, or can be national in scope. Sometimes these agreements are quite restrictive and can infringe on future employment or establishing one's own business.
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There have been cases in New Jersey, for example, where the court has revised over-restrictive agreements to make them more "reasonable." Some states consider such over-restrictive agreements invalid in their entirety. An attorney should always be consulted before an employee signs anything.
Many employers require other agreements, non-compete and non-solicitation ones aside, stating that if a new product is developed on company time and/or by an employee, it belongs to the employer.
If this is your case, you might want to consider negotiating some royalty arrangement or similar agreement. This is especially so if the development costs may be large and the product is patentable. The patent process can carry high costs.
Major advertising and production costs also might be incurred, plus liability insurance against consumer injury, all of which your employer may underwrite, and agree to share the profits.
According to attorney Walter LeVine of Florham Park, N.J., who has prepared and reviewed these agreements for employers and employees, "being candid protects your employment and avoids potential litigation expenses and loss of your product, if you are subject to this type of agreement."
If you have no agreements preventing you from going it alone, you might still want to negotiate some development and licensing arrangement with your employer to keep your costs low and maximize your profits.
Since every business arrangement is different, LeVine suggests you discuss your concerns with an attorney.