As is obvious from our many posts on the subject, we here at IP Legal Forum are big fans of the show “Silicon Valley.” That said, its season finale could have used more Jared Dunn (can we give him a spin-off already?), as well as some legal real-talk, both of which I present to you now:
Hooli’s employment contract, including the clause assigning Hooli IP rights, is entirely unenforceable because of a bad non-compete clause.
Really? Standard “boilerplate” clauses in contracts are standard for a reason: they are often absolutely necessary. And one such necessary boilerplate provision is a saving/severability clause. This provision essentially says, “If any part of this contract is void or unenforceable under the law, that part can be ignored, but the rest of this contract is still enforceable and binding on the parties.” These clauses are ubiquitous, so I find it extremely difficult to believe that Hooli, with its huge team of lawyers, failed to insert a severability clause into its employment contracts. If the contract didn’t include the provision, it looks like Hooli needs to hire new counsel, and Hooli’s old counsel should contact their malpractice carriers. If Hooli’s employment contract did, in fact, include a severability provision and the arbitrator ignored it, well, this leads me to my next issue with this episode…
Arbitrators gonna arbitr-hate, and Hooli accepts that without pursuing any further litigation.
As Gavin Belson found out the hard way, even if you think your case is a slam dunk, the decision to submit a matter to binding arbitration is always a risky one, as you generally have no recourse if the arbitrator screws up; even if the arbitrator’s decision is factually or legally flawed. Unlike a bad decision by a judge or jury, an arbitrator’s decision is final and the courts will not second guess the decision unless (A) the arbitration agreement expressly permits it, or (B) extreme circumstance, like fraud or misconduct by the arbitrator. Not having read the arbitration agreement here, it’s hard to know whether Hooli could have persuaded the court to disregard or set aside the arbitrator’s decision. Maybe Gavin ultimately thought it would have been futile, but given his arrogance and deep pockets, I’m surprised he, or his lawyers, didn’t even try.
Lessons to be learned:
- Make sure your contracts include the necessary “boilerplate” language, especially a saving/severability clause.
- Final binding arbitration is almost always final and binding, so when you draft your contract, think long and hard about whether you are ready for that kind of commitment.