SAN FRANCISCO — Life sciences cloud computing company Veeva Systems Inc. has sued three rivals, claiming the noncompete agreements they force employees to sign violate California law.
The company’s lawyers, Chris Baker and Deborah Schwartz of Baker Curtis & Schwartz in San Francisco, filed a declaratory judgment lawsuit in Alameda County Superior Court Monday seeking a ruling that its competitors’ noncompete agreements illegally restrain trade in violation of California law. Veeva has taken a prominent, public stand against noncompete agreements in the life sciences industry, but the lawsuit seeks to put its rivals and their noncompete agreements on the defensive.
“Non-compete agreements are bad. These agreements limit employment opportunities. They suppress wages,” Veeva’s lawyers wrote. “They keep employees trapped in jobs they do not want, and they keep employees from fairly competing with their former employers,” they added.
The suit also challenges what it calls “overbroad confidentiality and non-disparagement agreements” at life science rivals Medidata Solutions Inc., IMS Software Services Ltd. and Sparta Systems Inc. Each provide technology services to life science companies.
More than half of Veeva’s 1,000-plus U.S.-based employees work in the company’s Pleasanton headquarters. The suit claims Medidata, IMS and Sparta all have California operations and customers, but ask employees to sign agreements that include clauses that violate of the state’s employee-friendly laws regarding worker mobility. The suit also claims Veeva’s rivals strategically target its employees for recruitment since they do not have noncompete clauses in their employment contracts. Veeva claims its competitors’ actions inflate its recruitment costs since it must indemnify new hires under California law against any legal challenges brought by their former employers.
While Veeva has sought to portray itself as a corporate advocate of employee mobility, its rivals claim Veeva is after their intellectual property. According to Monday’s complaint, Sparta obtained a temporary restraining order in New Jersey state court prohibiting an employee hired away by Veeva from providing certain services in California. Medidata also sued Veeva for trade secret theft in January in U.S. District Court for the Southern District of New York alongside five former employees who jumped ship to Veeva. Medidata is represented by Kirkland & Ellis.
Medidata spokesman Erik Snider said in an email statement that the company “supports employees’ rights to further their careers and build upon their experiences within the industry, but as stated in our lawsuit, the real issue is Veeva’s illegal targeting and unfair use of our trade secrets.”
“Theft of trade secrets, which is illegal across the United States, including in California, helps no one—employers or employees,” he said.
Representatives of IMS and Sparta didn’t respond to messages.
Ross Todd is bureau chief of The Recorder in San Francisco. He writes about litigation in the Bay Area and around California. Contact Ross at email@example.com. On Twitter: @Ross_Todd.