THE ETHICAL DIMENSION Should companies or any subsidiaries affiliated with CCI be subject to the covenant not to compete? Would it be unethical to impose such a requirement? Discuss.

THE LEGAL ENVIRONMENT DIMENSION Why would a business such as Improv West include a covenant not to compete in such an agreement as the contract at issue in this case? Explain.

Improv West Associates is the founder of the Improv Comedy Club and owner of the “Improv” trademark. Comedy Club, Inc. (CCI), owns and operates restaurants and comedy clubs. Improv West granted CCI an exclusive license to open four Improv clubs per year in 2001, 2002, and 2003. Their agreement prohibited CCI from opening any non-Improv comedy clubs “in the contiguous United States” until 2019. When CCI failed to open eight clubs by the end of 2002, Improv West commenced arbitration. The arbitrator’s award in 2005 stated that CCI had forfeited its right to open Improv clubs but that the parties’ agreement had not terminated and the covenant not to compete was enforceable—CCI could not open any new comedy clubs for its duration. A federal district court confirmed the award, and CCI appealed.