74 N.Y.U. L. Rev. 575 (1999)
The Legal Infrastructure of High Technology Industrial Districts: Silicon Valley, Route 128, and Covenants Not to Compete

handle is hein.journals/nylr74 and id is 589 raw text is: NEW YORK UNIVERSITY
LAW REVIEW

VOLUME 74                        JUNE 1999                         NUMBER 3
THE LEGAL INFRASTRUCTURE OF HIGH
TECHNOLOGY INDUSTRIAL DISTRICTS:
SILICON VALLEY, ROUTE 128, AND
COVENANTS NOT TO COMPETE
RONALD J. GII.SON*
In recent years, scholars and policymakers have rediscovered the concept of indus-
trial districts-spatial concentrations offirms in the same industry or related indus-
tries. In this Article, Professor Gilson examines te relationship between high-
technology industrial districts and legal infrastructure by comparing the legal re-
gimes of California's Silicon Valley and Massachusetts's Route 128. He contends
that legal rides governing evmployee mobility influence the dynamics of high ted-
nology industrial districts by either encouraging rapid employee movement between
employers and to startups, as in Silicon Valley, or discouraging such movement, as
in Route 128. Because California does not enforce post-employment covenants not
to compete high technology firms in Silicon Valley gain from knowledge spillovers
between finns. These knowledge spillovers have allowed Silicon Valley firms to
thrive while Route 128 firms have deteriorated. Professor Gilson concludes with
three cautionary notes. Firs4 the success of Silicon Valley firms suggests that per
capita firm value will be greater where intellectual property protection is somewhat
diluted, in contrast to tie traditional law and economics prescription that empha-
sizes fidl protection of intellectual property. Second, the doctrine of inevitable dis-
closure, as developed in recent trade secret cases, threatens to undermine the
advantages conferred by Calfornia's legal regime and should be considered with
* Charles J. Meyers Professor of Law and Business, Stanford University; Marc & Eva
Stem Professor of Law and Business, Columbia University. I am grateful to Stanford Law
School and the Columbia University School of Law/Sloane Foundation Project on Corpo-
rate Governance for financial support, and to the Rockefeller Foundation, whose award of
a residency at the Bellagio Study and Conference Center so greatly contributed to the
completion of this Article. I also am grateful to Brian Hicks, Margaret McGinnis, Laura
Menninger, Alex Gould, and Maria Ginzburg for their research assistance, and especially
to Sean O'Connor for his outstanding assistance in constructing the history of the Califor-
nia law on restraints of trade. Joseph Bankman, Victor Goldberg, Jeffrey Gordon, Alan
Hyde, Sam Issacharoff, Michael Klausner, Josh Lerner, Lance Liebman, and participants at
workshops at the University of California at Berkeley, University of Chicago, Columbia
University, New York University, Stanford University, and University of Virginia Law
Schools, the School of International and Public Affairs at Columbia University, and the
Stanford Graduate School of Business provided helpful comments on an earlier draft.
575

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