Tom works for a marketing company that handles online marketing campaigns. His company has a general marketing strategy that they utilize in their business to successfully attract clients and effectively market them. Tom is laid off by his company and goes into business for himself. He ends up building a successful company doing the same work as what his former company had been doing; online marketing. His former company becomes incredibly upset that their new competition is a former employee. However, the question is this: has Tom done anything wrong?
The answer could be yes or no, depending on several factors and the evidence presented if Tom is taken to court by his old company. The case would be a matter involving unfair competition if it was claimed that Tom unfairly used confidential information from his previous employer to unfairly compete against them.
How is ‘Unfair Competition’ Defined?
In our case with Tom, there are many different viewpoints based on the information provided, and often cases can be hard to define simply one way. One question, for example, might be that why should Tom have trouble going out and working for himself when he was laid off from his company through no decision of his own? The answer to this questions is that yes, Tom can in fact do that.
One of the clauses that is no longer enforceable in California is known as a “covenant not to compete” or a “non compete agreement”. California made these clauses no longer legally enforceable for many reasons. Some examples include protection of a free market and protecting individuals from being unable to find work or make work for themselves. It certainly wouldn’t be fair for Tom to never be able to enter into another position in his area of expertise simply because he used to work for another company in that field.
However, from the company’s perspective that laid him off, it also would not be fair for Tom to implement systems that were built based on knowledge of their company’s systems to either be similar to, better than, or structured to defeat their company’s systems. This would be a clear case of unfair competition, and is a case commonly taken to court in matters involving business litigation.
Another way to define unfair competition per California law, while somewhat generally, is simply any business operation that is “unfair” and operates similar to a monopoly, making it difficult for other businesses to compete or even exist in the first place. While there is not a great deal of guidance on this matter, generally unfair business practices once defined in court make sense for being questioned.
Additionally, no business should operate in a manner that intends to deceive the public for profit or operate in a manner that is unlawful or fraudulent. Operating a business outside regulations or lying about returns on investments or the company’s earnings would be examples of unlawful and fraudulent behavior. False advertising is another example of unfair competition, as it is an attempt to deceive the public about the company’s product.
There are a few stipulations of the California Unfair Competition Law that are worth considering. One interesting fact is that you cannot obtain money damages in the way of compensatory or punitive damages from taking the person to court. While you can receive injunctive relief or restitutionary disgorgement to restore money or property taken by means of an unfair competition law violation, that is the extent of the monetary damages you can receive.
For the most part, the party engaging in the unfair competition practice, if found guilty, simply has to cease the practice and adopt a new strategy for their business. In essence, the Unfair Competition Law in California is simply in place to stop a business from unfairly competing so that another business or enterprise can have a fair chance to compete.
It’s important to understand that while there are limitations to what can be sought in an unfair competition law case, it can still be particularly risky for a defendant. If the business practice is heavily relied on for the success of the company, having to change the process can be detrimental to the business if a legal, similar result producing alternative cannot be determined. Additionally, a plaintiff’s lawyer can petition the court for attorney fees not only on hours expended but also the supposed public benefit that has been achieved due to the lawsuit. This is why an unfair competition law case can be detrimental to the defendant in a case even if they cannot be sued for damages in addition to those directly caused by the unfair competition law violation.
If you are considering bringing an unfair competition law case to court, it is important to consult with an attorney as soon as possible about your options. While an unfair competition law case can be a waste of time in certain situations, there are many benefits that can be obtained from it for a competing business in other cases. Only a professional attorney can give you the best advice on how to proceed with your case.
Whether you are the plaintiff or defendant in an unfair competition law case, WB Law Group is able to assist you. Our law firm has years of experience dealing with business litigation matters including cases involving unfair competition. We are happy to review your case and advise you on how we can help and what to do next.
For questions, or to schedule a consultation, contact us today at 559.431.4888 (Fresno) or 619.399.7700 (San Diego).