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Intellectual Property and Commercial Court


2014 Min Ying Su Zi No. 2

Decision No. 2014 Min Ying Su Zi No. 2
Date October 31, 2014
Decision Highlight

A.“The exception in Article 111 of Civil Code does not mean that it is applicable in every circumstance where the prestation is divisible. ( “If a part of a juridical act is void, the whole juridical act is void; however, if the juridical act could exist excluding the void part, the other part remains valid.” Article 111 of Civil Code.) To make the determination with regard to the applicability of the exception, the court should, based on the principle of good faith, considers factors including the juridical act as a whole, the real intent of contracting parties, any business customs, and other specific circumstances. Only when the court determines that to maintain the validity of the other part of the juridical act was not contradictory to the contractual purpose of parties, should the exception be applicable. (Supreme Court No. 1986-Tai-Shan-Tzu-2610, Supreme Court No. 2002-Tai-Shan-Tzu-821.)”

B.Plaintiff belongs to ○○ enterprise who hired many employees. The contract in suit was signed by employees who undertook the confidential obligations. However, employees from different departments of the enterprise were required to sign the contract which was printed and drafted in advance. It does create overbroad restrictions among the signed employees. Holding all non-compete clauses void not only contradicts to the business operations in modern high-tech industry, but also contradicts to the true intent of the contracting parties. To address this issue, the “blue pencil principle" is developed under the U.S. law. The principle provides that if a court could easily discern unreasonable provisions from the reasonable, such unreasonable portions are void, while the other portions remain enforceable. Some states have adopted the principle. In Germany, there is no express provision that regulates non-compete clause after the termination of employment. On Sept. 13, 1969, the Federal Labour Court of Germany ruled in a judgment that Section 74 and 75 of the Commercial Code regarding the limitations of competition between merchants are applicable to general labors. In Germany, Section 74 of the Commercial Code stipulates that “(1) an agreement between the principal and the trade assistants, the assistants for the period after termination of employment in its commercial activity is limited (non-competition), requires the written form and handing a signed by the principal, containing the provisions of the agreed document to the agents.” “(2) the non-compete obligation is binding only if the principal is obliged to pay compensation, which reached at least half of the contractual services in respect of the trade assistants last for every year of the ban for the duration of the ban.” The blue pencil principle is also adopted in the code, which excludes the invalidated portions from the non-competition clause without affecting other provisions. However, it needs to be consistent with the prohibitory provisions of standard form contract under Section 307 (3) of the German Civil Code, and the scope agreed upon should be definite to the leaving employee (See Wendi S. Lazar & Gary R. Siniscalco, Restrictive Covenants and Trade Secrets in Employment law An international Survey VolumeⅠ,p. 17-50). Accordingly, Article 111 of Civil Code is applicable in the present case. The application here does not violate the trend of the non-compete clause.


Non-compete clause, Blue pencil principle

Relevant statutes Article 10, Article 12 of Trade Secrets Act, Article 111, Article 247-1, Subparagraph 3 & 4 of Civil Act
  • Release Date:2020-11-13
  • Update:2020-12-07