Editor’s note: This story has been updated with a statement from Amazon.
The former executive at Amazon Web Services who was barred from working at Bellevue, Wash-based Smartsheet is back on the job after the legal matter was resolved today.
GeekWire first reported on Amazon’s lawsuit, which alleged that Gene Farrell violated a non-compete agreement when the former Vice President at Amazon Web Services joined Smartsheet earlier this month. On June 12, a King County Superior Court Commissioner sided with Amazon in the first hearing on the matter, granting a temporary restraining order that prevented Farrell from working at Smartsheet, a heavily-funded maker of online collaborative work tools.
Amazon released the following statement, noting that it reached an agreement with Farrell, following the temporary restraining order:
We try to be very thoughtful about how we deal with our non-compete agreements. We work hard to find a resolution that both protects Amazon and enables employees to take new jobs – it’s rare that we have to ask a court to step in. In this particular instance, we were forced to resolve in court. Once we prevailed in court, we were able to reach an agreement with Smartsheet that placed temporary restrictions on the scope of Gene’s role at Smartsheet consistent with his agreement with Amazon.
With the agreement in place, Amazon dropped the suit. A hearing had been scheduled for Friday, but that is no longer occurring. Other than noting “temporary restrictions” placed on Farrell, which were described by both Amazon and Smartsheet in statements, the two sides did not describe terms of the settlement.
“The dispute between Gene Farrell and Amazon has been resolved based on temporary restrictions on the scope of Gene’s role at Smartsheet consistent with his agreement with Amazon,” Smartsheet wrote in a statement provided to GeekWire. “We are pleased to have Gene back on the team as we continue to focus on serving our customers and growing our business.”
The Amazon lawsuit stirred outrage among some in the startup community who felt Amazon was bullying a smaller company, possibly stifling the free-flowing movement of talent that helps foster the innovation economy in the Seattle area. Madrona Venture Group’s Matt McIlwain, an early investor in Smartsheet, said that the suit was baffling because Amazon does not have a product on the market that competes directly with Smartsheet. Redacted portions of Amazon’s suit hinted at plans to launch a competing product.
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“This feels more like a general bullying behavior that you usually see from legacy ‘Day Two’ companies,” said McIlwain, making references to Amazon founder Jeff Bezos’ common refrain that it’s still “Day One” at the entrepreneurial company. McIlwain called the lawsuit against Smartsheet “random” and “inconsistent.”
“He cannot possibly forget everything he knows about AWS’s products and plans while he is working to develop products for its competitor,” Amazon wrote in its lawsuit. In its initial motion for a temporary restraining order, Amazon called Farrell’s move to Smartsheet “unthinkable.”
In court filings, Farrell — who was named senior vice president of product at Smartsheet in early June — argued that being prohibited from working at Smartsheet would cause “substantial injury to me and my family,” as he was the sole income earner for his family.
Non-compete agreements are legal in Washington state, ruffling the feathers of many in the startup ranks who believe they are used as a weapon by larger companies to stifle innovators from leaving their jobs. Last year, an attempt was made to pass legislation that would have banned non-compete agreements in Washington state, but the bill stalled after business groups opposed the bill.
Amazon has enforced non-compete agreements in the past in an effort to stop key staffers from taking their talents to other companies. In 2014, the company sued a former Amazon Web Services strategic partnerships manager, Zoltan Szabadi, after he took a job at Google Cloud Platform. In 2012, it also sued former Amazon Web Services vice president, Daniel Powers, who joined Google as the search giant’s director of cloud platform sales. That case was transferred to federal court in Seattle, where a judge declined to enforce the most sweeping provisions of Amazon’s non-compete agreement.
But other key executives have moved on to other employment without issue, as was the case last year when former AWS executive Adam Selipsky was named CEO of Tableau Software.
That inconsistency in enforcing non-competes has created confusion about the company’s strategy in dealing with employees who leave for new jobs. In fact, AWS CEO Andy Jassy allegedly told Farrell in a meeting on May 17 that he makes decisions about non-compete agreements on a “case-by-case basis.”
Smartsheet CEO Mark Mader previously told GeekWire that he felt as if Amazon was being “selective” in targeting Farrell.
Editor’s note: GeekWire reporter Nat Levy contributed to this report.