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.

A recent  episode of “Silicon Valley” was brought to you by the letters N-D-A.  The protagonists are seeking funding for their start-up, Pied Piper, and one of the potential investment groups starts asking curiously technical questions regarding how Pied Piper’s algorithm works.  Pied Piper’s developers are so flattered that somebody finally appreciates their genius that they fail to recognize that the investors aren’t conducting due diligence, the investors are trying to steal Pied Piper’s intellectual property.

Beware of TMI; don’t overshare without the protection of a nondisclosure agreement.  Nobody expects an investor to take a meeting, much less invest, without understanding the general nature of your start up.  But start-ups are often so hungry for investors that they provide too many details of their product or service, their business plans or other proprietary information without the protection of an NDA.

Under the Uniform Trade Secrets Act, there are two prongs to a trade secret:

(1) the information must provide the owner with independent economic value by not being generally known to the public or those in the relevant industry; and

(2) the owner must have taken reasonable efforts to keep the information secret.

A start-up that shares its proprietary information with a potential investor or partner without an NDA has blown the second prong by failing to take “reasonable steps.”  So even if the investor passes and doesn’t misappropriate your idea, evidence that you failed to obtain an NDA from the investor can and will be used against you if a third party, say a disgruntled employee, misappropriates your trade secret.

A potential investor or partner will respect you more if you act professional and insist on an NDA.