Alabama’s New Non-Compete Statute: Are You Ready For New Year’s Day?

Those involved in drafting, negotiating, or litigating covenants-not-to-compete in Alabama have long known that Alabama’s statute books seldom provide ready answers on this particular topic.  The text of current Alabama Code § 8-1-1, entitled “Contracts restraining business void; exceptions,” was — until this year — last amended in 1940.  This pocketoption text consists of three short paragraphs and does not delve into details.  As a practical matter, this has meant that, for the past 75 years, it has been up to Alabama courts to fill in the details.

This is about to change.  On June 11, 2015, Governor Bentley signed into law House Bill No. 352, entitled “Contracts, use of restrictive covenants clarified, Sec. 8-1-1 repealed.”  The new law comes into effect on January 1, 2016 and repeals all of current Alabama Code § 8-1-1.

At least in some respects, the provisions of the new law mirror what Alabama courts have already been doing.  This codification of previous court outcomes into Alabama’s statute books should help to provide clarity when drafting, negotiating, and litigating future agreements.  In other respects, though, the new statute innovates.  As a result, employers will want to pay close attention to the new law and make sure that their existing agreements comply with the law.

The old and new laws both begin by stating the general rule that contracts restraining anyone in the exercise of a lawful profession, trade, or business are void.  However, the new law now enumerates, in pocket option download pc detail, the exceptions to this general rule of voidness.

Section 1(b) of the new law lists, as exceptions, six categories of contracts that “are allowed to preserve a protectable interest.”  Of interest to employers, sub-items 1(b)(4) and 1(b)(5) include, within these exceptions, non-competition and non-solicitation agreements entered into between a “commercial entity” and an employee of that entity.  In other words, non-competition and non-solicitation agreements entered into as part of the employment relationship might be valid under Alabama law, but only if the agreements “preserve a protectable interest.”

Section 2(a) of the new law defines “protectable interests” so as to include not just “trade secrets,” but also “pricing information and methodology,” “customer lists,” “business models and data,” and “contacts with specific prospective or existing customers,” among others.  However, Section 2(b) says:  “Job skills in and of themselves, without more, are not protectable interests.”  As a result, employers seeking to enforce a non-competition or non-solicitation agreement will need to pay close attention to the list of “protectable interests” in Section 2(a).

For prohibitions on competition after the end of employment, the new law states that a restrictive covenant of “two years or less” in duration will be presumed reasonable.  This two-year period is, on the whole, consistent with Alabama court decisions over the past 75 years.  However, the new law then provides a shorter “presumptively reasonably” time-period (usually 18 months after the end of employment) for agreements prohibiting the solicitation of the employer’s customers.  These differing presumptions for non-competition and non-solicitation agreements are one of many reasons why Alabama employers may wish to review their non-competition and non-solicitation agreements for compliance with the new law.

New Year’s Day 2016 and Alabama’s new law are coming soon.  If you are an employer and have questions about how Alabama’s new law might impact a specific agreement your business uses, please feel free to contact a member of Burr & Forman’s “Non-Compete and Trade Secrets” team for additional information.

En Banc Federal Circuit Changes Standard for Using Functional Language in Patent Claims

Richard A. Williamson v. Citrix Online, LLC, et al. (No. 2013-1130)

35 U.S.C. § 112, para. 6 allows patent applicants to draft their claims in a way that recites a function to be performed, rather than by reciting a structure that performs the function.  Drafting claim limitations in this “means-plus-function” format, however, limits the scope of the limitation to only the structure, materials, or acts described in the specification as corresponding to the claimed function, and equivalents thereof.  See Slip Op. at 12.  Traditionally, using the term “means” in the claim limitation created a rebuttable presumption that the limitation should be treated as a means-plus-function limitation.  On the other hand, the absence of the term “means” created a rebuttable presumption that the claim limitation should not be treated as a means-plus-function limitation.  The presence or absence of the term “means” is not dispositive though, and courts generally look to “whether the words of the claim are understood by persons of ordinary skill in the art to have a sufficiently definite meaning as the name for structure.”  Slip Op. at 14.

Over the last decade, the Federal Circuit has raised the presumption that § 112, para. 6 does not apply when the word “means” is absent, noting that the presumption is “a strong one that is not readily overcome.”  Slip Op. at 14.  In 2011, the Federal Circuit went further, stating that the presumption that § 112, para. 6 does not apply is not overcome “without a showing that the limitation essentially is devoid of anything that can be construed as structure.”  Slip Op. at 15.  On June 16, 2015, the Federal Circuit, sitting en banc, reversed course, noting that the new standard is “whether the words of the claim are understood by persons of ordinary skill in the art to have a sufficiently definite meaning as the name for structure.”  Slip Op. at 16.  When a claim limitation lacks the word “means,” the presumption that § 112, para. 6 does not apply is overcome if the claim fails to “recite sufficiently definite structure” or recites “function without reciting sufficient structure for performing that function.”  Slip Op. at 16.

Applying this new standard, the Court affirmed the lower court’s ruling that a “distributed learning control module for receiving communications…” is subject to means-plus-function treatment.  The Court noted that “module” is simply a substitute for the word “means,” and does not connote sufficiently definite structure to preclude means-plus-function treatment.  Slip Op. at 17.  The Court further noted that although the claim term included the prefix “distributed learning control,” the prefix was not sufficient to impart sufficiently definite structure.  Slip Op. at 19.  The Court also rejected the testimony of the patentee’s expert that one skilled in the art would be able to program a computer to perform the recited function, finding that the ability to implement the recited function does not create structure where none is disclosed.  Slip Op. at 19.

Having determined that the “distributed learning control module” is a means-plus-function limitation, the Court then determined that the claim was indefinite because the specification did not disclose sufficient structure corresponding to the claimed function.  Specifically, the Court found that the specification did not disclose an algorithm, e.g. as a mathematical formula, in prose, or as a flowchart, that performs the function of the distributed learning control module.

This case serves as an important warning to patent applicants and practitioners regarding the use of functional claim language.  Practitioners wishing to avoid means-plus-function treatment should be careful to draft claims reciting clearly defined structure, and avoid using vague terms such as “module,” “unit,” “mechanism,” or “device.”  As a protective measure, practitioners should draft the specification to include a disclosure of any algorithms that may correspond to functions recited in the claims.  That way, even if the claim limitation is considered to be means-plus-function, the claim will not be invalid for failure to disclose sufficient structure.