August 2011

Source code license "cooling-off" clauses as possible (and unenforceable) non-compete covenants

Companies licensing out source code, particularly operating system or middleware platform code, are fond lately of inserting into the relevant licensing agreements a "cooling off" period during which employees of the licensee who accessed such code would be prohibited from being involved in projects concerning source code of competitive software. An example of such a clause follows:

Licensee shall ensure that any Licensee employee who has accessed the Licensed Software Source Code shall not be permitted to work on any project involving the development, evaluation, modification or use of software that is substantially similar in function and purpose to, or which is competitive with, the Licensed Software, during such employee's access to the Licensed Software Source Code and for a period from the date of such employee's last day of access, to one (1) year later.

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