The noncompete clause: A Massachusetts thing

People love to compare the business cultures of America's technology hubs, Massachusetts and California.

Boston-area employees are said to prefer the security of the established company and the steady paycheck. Employees in Silicon Valley, by contrast, are thought to be entrepreneurs at heart, forever burning to give their notice and cross the street to launch a start-up.

These images are stereotypes, of course. Yet many of those who have worked in both markets can recognize grains of truth.

Now a Boston lawyer is pointing to an overlooked factor in the perceived entrepreneurial gap between the two regions: noncompete clauses frequently found in Massachusetts employment contracts.

''From a competitive policy point of view, noncompete clauses are not that great," said Stephen Y. Chow, partner in the downtown law firm Perkins Smith & Cohen, which negotiates entry and exit contracts for many executives and managers. ''They can be a drag on the creation of new enterprises. With all the layoffs and the demise of the big companies, we need more entrepreneurship in this state."

Noncompete clauses are frequently shoehorned into the employment contracts of managerial and executive hires, ostensibly to protect a company's trade secrets or intellectual property. Over the past decade, and especially during the high-tech boom of the late 1990s, many employers sought to add language to broaden the definition of ''noncompete" to include more general know-how, enabling them to wield the clauses as leverage to blunt employee turnover and protect their own competitive position.

Chow cited an example: A Boston tour company sought to use a noncompete to keep a manager from defecting to a competitor, claiming his knowledge of a trolley car route was privileged information.

While this contract-language creep occurred on both coasts, the different way noncompetes are treated in the Massachusetts and California legal systems has made the clauses more effective and punitive here. California prohibits such clauses, except to protect trade secrets. In Massachusetts, courts rely on case law that enforces noncompete clauses to the extent they are deemed reasonable.

The distinction is subtle, but Chow sums it up as follows: ''In California, the presumption of the courts is that noncompetes are not enforceable," he said. ''Here the presumption is they are enforceable."

Chow, a patent attorney appointed by Governor Mitt Romney to the Massachusetts Uniform Law Commission, contends the bias in favor of enforcement bottles up talent in established companies and inhibits entrepreneurship. He thinks Massachusetts would be better off passing a law more in line with that of California. He has helped to draft a bill before the Legislature that would define trade secrets in a way that is uniform with 45 other states and the District of Columbia.

AnnaLee Saxenian, dean of the School of Information Management and Systems at the University of California at Berkeley and author of the ground-breaking 1994 book, ''Regional Advantage: Culture and Competition in Silicon Valley and Route 128," said the noncompete clause is one of many factors influencing the different cultures of the two high-tech centers. ''It's allowed people to move more freely here in California than they've been able to do in Massachusetts," she said.

Saxenian, who grew up in Concord and holds a doctorate in political science from MIT, argued the largest factor holding back Massachusetts in the 1980s and early '90s was the vertically integrated, inward-looking culture of big firms such as Data General Corp. and Digital Equipment Corp., which tended to ''trap technology and experience." Today, many of these companies have passed from the scene and their employees have gone on to seed scores of start-ups, noncompete clauses notwithstanding.

Still, a noncompete prohibition could be a spur to business formation, Saxenian agreed. ''If the legal system in Massachusetts changed, you could also see the culture change," she said. ''The legal system reinforces a historic conservative instinct."

Chow, for his part, said he feared established companies in Massachusetts might oppose change. And many of these companies, in fact, view the noncompete clause as another arrow in their quiver.

''Two of our most important assets are our technology and the people who work on that technology," said Anne Pace, spokeswoman at EMC Corp. in Hopkinton. ''We do use noncompete clauses to protect our innovation. We do not use them broadly. It's really only for a small level of employees -- somebody who obviously has a large amount of information that could be damaging if they went to the competition."

Robert Weisman can be reached at weisman@globe.com.