What/whose Knowledge? Restraints of Trade and Concepts of Knowledge

By Arup, Christopher | Melbourne University Law Review, August 2012 | Go to article overview

What/whose Knowledge? Restraints of Trade and Concepts of Knowledge


Arup, Christopher, Melbourne University Law Review


[Where are the courts currently drawing the lines, between the employer's confidential information and connections with customers and the employee's own explicit, tacit and personal knowledge, when they are asked to enforce restraints of trade? As part of the new social economy, we see a temporal contradiction--between the desire for immediate control and the value of sharing knowledge. This article examines the concepts of knowledge the courts are using to distinguish claims and to fashion remedies. The assessment supports the primacy of this approach and recommends ways the courts should continue to refine and administer their concepts.]

CONTENTS

  I Introduction
      A The Interest in Restraints
      B Decision-Making Principles
      C The Role of Time
 II Concepts of Knowledge
      A Explicit, Tacit and Personal Knowledge
      B Production Knowledge
      C Customer Knowledge
III Production Knowledge in the Decisions
      A The Employer's Explicit Production Knowledge
      B The Employee's Explicit, Tacit and Personal Knowledge
      C The Reach of the Restraint
      D Remedies and the Role of Time
 IV Customer Knowledge in the Decisions
      A The Employer's Explicit Customer Knowledge
      B The Employee's Explicit, Tacit and Personal Knowledge
      C The Reach of the Restraint
      D Remedies and the Role of Time
  V Conclusions
 VI Appendix

I INTRODUCTION

A The Interest in Restraints

Australian law has long permitted employers to apply restraints of trade to their employees. Such restraints prevent the employee from working in competition with the employer, for a nominated period of time and within a particular geographic region, after the employee has left the employment. A common statement of principles will suggest that restraints are a strictly limited exception to a judicial policy of free trade. (1) Nonetheless, the restraints enter periods of intensity, such as in Australia now, and mutate with changes around them in economic value and social relations. Field work the author is undertaking with colleagues indicates that they are becoming more common as terms of employment contracts and in some jurisdictions they are being enforced vigorously with injunctions. (2) The decisions to enforce have serious impacts on the parties and they also have implications for the productive use of 'cognitive or non-material labour' in the new knowledge economies.

Decisions about restraints involve many considerations. One court in the United States described the law there as 'sea-vast and vacillating, overlapping and bewildering [from which one] can fish out of it any kind of strange support for anything, if he lives so long.' (3) This article endeavours to apply discipline to the law by making the focus the concepts of knowledge the courts are pursuing when they distinguish the employer's claims to confidential information and customer connection from the explicit, tacit and personal knowledge the employee remains free to use. (4) The endeavour has two goals.

The first is an old-fashioned legal interest in the decisions the courts are making. We know definition is important if the parties are to regulate their own relations and avoid costly disputes. These disputes end in the state supreme courts. While they are an interesting mixture of intellectual property and labour law, they tend to have a conceptual and practical life of their own. The second is a socio-legal interest in the shape decisions about restraints give to economic value and social relations. Restraints are a key point at which the law defines capital and labour. The original employer has legitimate claims to intellectual and social capital, but there are also benefits to be gained from the free circulation of labour (or human capital if you will) in network economies and the social accumulation of knowledge.

The study proceeds first by clearing the ground of other principles by which the courts might decide the enforceability of restraints.

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