Friday, January 4, 2013

Let's Start Year 5: Amazon.Com Loses Preliminary Fight Over Non-Compete Agreement

So 2013 starts, and what better way to kick off Year 5 of this blog than discussing's effort to enforce a non-compete against an executive who left for Google.

In mid-2012, Daniel Powers was terminated from his position with as a vice-president in Amazon Web Services. This is not the we all know and love. It was a segment that the retail consumer does not see and dealt with Amazon's effort to sell cloud computing services to businesses.

Powers, like most employees, signed a broad non-competition agreement that contained a number of restrictions. When Google hired him several months after his departure, it limited his job role to avoid any potential problems with Nonetheless, it seems clear he was providing cloud computing services to Google, even if the parties disputed whether Google's products actually competed with those offered by

After filed a preliminary injunction motion, a federal judge in Washington granted it very limited relief to enforce only that part of the contract that forbade Powers from working with's business customers. It did not enforce a broader non-compete restriction and found that had not submitted evidence to support an "inevitable disclosure" of trade secrets theory.

From my perspective, there are two interesting elements to this opinion.

First, the court specifically found that there was no evidence that Powers had intended to violate the customer non-solicitation covenant. Yet, it enforced it anyway by way of injunctive relief. This was a mistake. It is unclear to me how could establish a likelihood of success on this claim if there is no evidence of breach. The court's rationale was that Powers resisted the preliminary injunction motion, which suggests he might want to solicit his former business customers. But this proves too much, because any party could then go into court and base its request for an injunction solely on the fact that its opponent contests the motion.

Second, the court seemed to suggest that this non-solicitation covenant gave the protection it needed, and that a further ban on employment (the non-compete covenant) was not necessary. This is best summed up in the following passage:

"[Amazon's] ban on working with former customers serves to protect the goodwill it has built up with specific businesses. A general ban on Mr. Powers' competing against Amazon for other cloud computing customers is not a ban on unfair competition, it is a ban on competition generally."

When a business aims to protect customer goodwill, often times a general non-compete stretches too far. As the Powers court recognized, a customer non-solicitation is often the right fit to protect this interest.

The case is, Inc. v. Powers, C12-1911 (W.D. Wash.). A copy of the Order and Opinion on's preliminary injunction motion is contained below. v. Powers - Order

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