Are non-compete agreements enforceable in the video game industry?

Non-compete agreements restrict employees from being able to go to work for competitors after leaving an employer, willingly or unwillingly. They are a standard practice across the board in the video game industry and are intended to offer protection for game developers, but are they enforceable? 

The short answer? Yes, for the most part. But, it depends.

Some states limit the enforceability of non-compete agreements, particularly in fields like medicine, where states deem the work that physicians do is vitally important and should not be restricted.

In California, non-compete agreements are almost never enforceable in the context of a regular employee. In fact, California will also strike down provisions like client/customer nonsolicitation provisions where they impede on the ability of the employee to make a living and are not designed first and foremost to protect confidential or trade secret information of the employer.

But ultimately, most states enforce non-compete agreements to some degree. 

A non-compete agreement’s enforceability can be tested by the following questions

  1. Was there “consideration” for the employee? In other words, did the employee receive something in exchange for the agreement?
  2. How long will the restriction be in effect and is that length of time reasonable? 
  3. What distance does the restriction cover and is that territory reasonable? 
  4. Is the protection given to the employer overall fair? 
  5. Can the employee find gainful employment if the restriction is enforced?
  6. How much does the non-compete interfere with public interest? 

Non-compete agreements are controversial to individual employees in a couple of ways: they limit the individual from being able to seek gainful employment in their field and they also restrict market competition. Thus, states are more likely to enforce non-competes in contexts other than in the case of individual employment. For example, where a business is sold and the buyer insists the seller stay out of the field for a period of time. Or where a group defects and appears to not just compete, but potentially also use confidential information of the employer. For example, three former employees who had worked on Guitar Hero and Guitar Hero II left Activision to start their own game studio. A demo of their product had elements of Guitar Hero in it. Activision sued, and the former employees consented to stop their work on this project.