Here is an interesting story in today's Wall Street Journal -- IBM Sues To Block Oracle Management Hire. According to the story IBM claim that Joanne Olsen violated a one year noncompetition agreement when she took a senior position with Oracle. The suit was filed in New York.
As we noted in our report, Intangible Asset Monetization: The Promise and the Reality, FASB recognizes noncompete agreements as a marketing-related intangible asset. However, noncompete agreements are considered illegal in California under Business and Professions Code Section 16600. Agreements made in other states are also generally found to be unenforceable in California. Nevada, Arkansas, Washington, Montana, North Dakota, Minnesota, Wisconsin, Connecticut, West Virginia, and Oklahoma are also seen as jurisdictions that do not enforce these agreements. Other states usually apply a reasonableness test. I don't know about New York.
So this case could be an interesting case example of when is an intangible an asset. Is it still an asset if some courts say it is and other say it isn't?
And should IBM be required to book the value of the noncompete agreement? Under existing FASB rules, since it was an internally generated intangible, no. But what about the other way around. Does Oracle also have noncompete agreements -- especially with former Sun executives? Since Oracle's purchase of Sun presumably included those intangibles, are these supposed to be on Oracle's books?
More questions than answers.
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