When employees create or conceptualize an invention during the course of their employment, who owns the intellectual property (IP) rights in that invention: the company or the employee? Why it is so important to have formal agreements in place to protect company ownership.
Confidential information and inventions assignment agreement (CIIAA) ideally should be executed prior to the commencement of employment. In most states, a new offer of employment is sufficient consideration for a CIIAA agreement. But, because in many states, continued employment is not sufficient consideration, best practice is to have the CIIAA executed before employment begins.
Proactive use of CIIAAs is one of the best ways to address confidentiality and the protection of the employer’s IP.
Definition of Confidentiality
The agreement should clearly delineate the type of confidential information covered by the agreement, tailoring definitions to suit the nature of the company’s business and industry. If there is a certain category of information that is particularly sensitive, the company should include that category in the definition of confidential information. In some states, it is unlawful to designate the terms and conditions of employment as confidential information, so consider consulting with legal counsel before doing so.
Companies should also provide notice of the Defend Trade Secrets Act’ immunity provisions, which include certain whistleblower protections for employees, in the CIIAA.
Confidential Information: Disclosure and Use Restrictions
CIIAA agreements should include confidentiality provisions that prohibit employees from disclosing confidential information to third parties during and after employment and that prohibit use, access or copying confidential company information for any purpose except in the performance of the employee’s authorized employment duties. The agreement should specify that employees cannot disclose or use the company’s confidential information for personal gain or to benefit another third party after their employment ends. In some cases, laws may prohibit non-compete clauses, but employment contracts may place restrictions on an employee’s post-employment use of confidential information. These restrictions typically outline the duration and scope of the obligation to maintain confidentiality after leaving the company.
Assignment of Proprietary Rights
In a CIIAA agreement, the employee should acknowledge that all copyright-protected work prepared by an employee within the scope of their employment constitutes “work made for hire,” as defined in the Copyright Act of 1976 (17 U.S.C. § 101) and is, therefore, owned by the company.
To ensure that work products not subject to the work-made-for-hire doctrine will be owned by the company, the CIIAA may also include a present assignment of all other work products and IP rights created by the employee.
Further, the CIIAA should include a waiver of all moral rights relating to copyrights in work products created during employment. “Moral rights” typically refers to the right of an author to prevent revision, alteration or distortion of their work, regardless of who owns the work. Moral rights do not apply to work made for hire and are non-assignable but may be waived by the author.
Finally, as a catch-all, the CIIAA should include a present and future assignment of the employee’s entire right, title and interest in and to all work product and IP rights made or conceived during the course of employment.
Pre-Existing Intellectual Property of Employees
It is a good idea to ask the employee to identify any pre-existing IP rights in which the employee may have an ownership interest. Failure to identify any pre-existing IP can also act as a representation and warranty that there is no pre-existing IP in which the employee has an ownership interest. If the employee has pre-existing IP, the CIIAA can include a license to the company to such pre-existing IP to the extent it is used with or incorporated into any work products for the company.
Third-Party IP
Take affirmative steps to prevent the employee from including third-party IP, including IP of a former employer, in any work product created by the employee. One of the best steps a company can take to avoid IP contamination is educating employees about IP contamination during the onboarding process and the importance of not using a former employer’s IP in their current employment.
