Amazon vs. Google: A “Non-Compete” Competition

Shining a spotlight on non-compete agreements, Amazon is suing former Amazon employee (now Google Employee) Zoltan Szabadi for his alleged violation of his non-compete agreement with Amazon.  The lawsuit will be closely followed by the tech industry as Amazon and other large companies seek to ascertain the acceptable scope of limiting their employee’s ability to work in the same industry with competing organizations.

Mr. Szabadi originally led Amazon’s Strategic Alliances Emerging Partners unit.  He was responsible for finding partners that market Amazon’s cloud and present services for it.  Early this May, however, Mr. Szabadi transferred to Google to perform the same occupational services for Google’s cloud computing division. Szabadi now works for Google’s Cloud Platform.  The Google Cloud Platform enables developers to construct, experiment, and organize applications on Google’s infrastructure.

Now Amazon seeks to restrain Szabadi from working with its competitor because Szabadi was significantly engaged with the promotion of Amazon’s cloud computing business to its partners and resellers.  According to the lawsuit, Szabadi played an integral and direct part in developing Amazon’s business plan.  He also was apparently the first point of contact for major partners considering working with Amazon.  Amazon argues that the non-compete agreement protects the company from this unfair competitive disadvantage.

The case against Szabadi parallels Amazon’s 2012 suit against Daniel Powers.  Powers was a former Amazon Web Services vice president who joined Google as their director of cloud platform sales.  The federal judge declined to enforce the full reach of the non-compete agreement between Powers and Amazon.  While Amazon’s non-compete provision limited Powers from “any activity that directly or indirectly supports any aspect of Google’s cloud computing business that competes with Amazon’s cloud computing business” for 18 months after departing Amazon, the federal judge narrowed the limitation to just 9 months–which just so happened to directly align with the length of Google’s own, contractually imposed restrictions on Powers.

Since the Powers case, Amazon has been experimenting with the legal limits of non-compete agreements.  Amazon now seeks to prevent Szabadi “from engaging in any activities that directly or indirectly support any aspect of Google’s cloud computing business with partners or resellers.”  On June 27, Amazon strategically filed the suit in Kling County Superior Court in Seattle, home to Microsoft and Amazon.  Whereas California has frequently held non-compete clauses invalid, Seattle courts have –like in the Powers case–generally permitted “reasonable” non-compete agreements.

Amazon contends that Google’s restriction on Szabadi’s employment does not satisfy the terms in the Amazon employment agreement, even though the company required Szabadi to agree not to solicit business from Amazon customers and not to recruit Amazon employees for six months after joining Google.  While the lawsuit is ongoing and no result is clear, regardless of the outcome of the case, the decision is sure to shape the legal landscape for non-compete agreements in the near future.