Yes, a noncompete agreement is potentially a way for a business to protect its intellectual property. These agreements are often put in place to protect IP and trade secrets.
In many cases, there are certain types of sensitive information that employees must learn in order to do their jobs properly, but the owner of the company wants to ensure that this information does not go to the competition when an employee moves on. A noncompete agreement may state that they cannot work for the direct competition in a certain area and for a specific amount of time, reducing concerns about the former employee taking trade secrets with them.
Often, noncompete agreements will also state that employees cannot start a competing business. So an employee cannot take a job with the sole purpose of learning trade secrets and processes, only to quit and start another company that does the exact same thing.
Are there other options?
Yes. Although noncompete agreements can help with IP issues, other steps can be taken. If a business has the correct copyrights, patents and trademarks in place, even if an employee moves to the competition, they are prevented from using that intellectual property. Only the parent company is allowed to do so.
For example, a soft drink manufacturer may have a patented recipe. Even if employees have to learn part of the recipe, the competition is still prohibited from infringing on that patent.
This helps to demonstrate how multiple layers of IP protection may need to be used and why it is so important for business owners to understand exactly what legal steps to take.