IP Created by Employees
Employees often create intellectual property (invention, trade secret, copyright or patent) as a natural consequence of their employment. For example, its often part of an employees job to create forms, data, client lists, write ups, brochures, publications, presentations, and, in many cases, inventions. This is particularly true where it is part of the employee’s job to “fix problems”. All of these products fall under the category of intellectual property, and they are all the property of the employer. However, any intellectual property created by an employee outside of his/her employment is NOT the property of the employer. Also, make sure that your employees are not independent contractors – because the rules are quite different for independent contractors. Also, make sure your employees sign an employment agreement which specifies that, even after they leave their employment, they are obligated to sign any document as may be required by your company to record its ownership in those intellectual property assets.
IP Created by Independent Contractors
Unlike the case of employees, any intellectual property created by an independent contractor belongs to the contractor. It does NOT automatically belong to the person or company who paid for the work to be done, regardless of the cost of the contract. Hence, if you pay a third party company to develop some software for you, or fix an engineering problem you have, or prepare some technical drawings or marketing material, then the intellectual property in those products and solutions do not belong to your company. It is irrelevant how much money was spent for the work. At best, all your company is entitled to is a license to use the work (more on that later). If you want to ensure that your company owns this work, then it is critical to assign the contractors intellectual property work to your company in a written agreement. Preferably, this is done as a clause in the original contract. The clause should also specify that the contractor will sign all documents as may be required in order to record the ownership of the intellectual property by your company. This last clause should survive the termination of the agreement.
Copyright in Works, Logos, Brochures, Software, etc.
Copyright exists in hundreds of different “documents” created during the course of doing business. Examples include brochures, artwork, software, technical drawings, presentations, manuals, mailing lists, web pages, invoices, forms and written descriptions of products or services. In copyright language, these documents are called “works”. It is vital to ensure that copyright in these valuable documents are secured. Firstly, all of these works should be marked with a copyright notice as follows: “Ó your company’s name, 2009. All rights reserved.” Secondly, anyone who creates these works must assign all copyright in the work to your company. If the work is created by an employee, then this assignment happens automatically. However, in addition, all employees must waive all “moral rights” in the work. By waiving all moral rights in the work, the employee cannot raise any issues if the work is not used in the manner in which the employee intended. This waiver of all moral rights does not occur automatically, and must be included in a written employment agreement.
If the work is created by an independent contractor, then copyright in the work must be assigned (in writing) with a waiver of all moral rights contained in the written assignment. If the work is particularly valuable, then it is possible to register copyright in the work for a modest fee.
Ownership of Data, Supplier’s lists, Price Lists – Trade Secrets
Some intellectual property falls under the category of “trade secret”. This generally includes information or “know how” which cannot be protected by copyright or patent, but which is never the less valuable. Client lists, internal price lists, procedures, supplier’s lists and lists of key contacts often fall into this category. With a few general exceptions, ownership of trade secrets usually rests with the employer. However, publicly available lists or information, such as a list of government phone numbers, may not be a trade secret.
Misappropriating trade secrets, either by a rogue employee or by some form of corporate espionage, is actionable under law. Courts are reluctant to categorize just any information as a trade secret, so its necessary to first identify what information is a trade secret and what is not. By its very nature, the trade secret must consist of either information which is not publicly available (internal procedures or price structures) or information which may be publicly available but which is organized into a convenient format (customer lists, lists of contacts, etc.). Also, it is generally required that the owner take reasonable steps to ensure that the trade secret is actually kept secret. Hence, certain key trade secrets are disclosed on a “need to know” basis while none secret information is widely distributed to everyone. It’s always a good idea to create a file specifically identifying which assets are trade secrets and the steps taken to keep those assets protected.
Standard Clauses in Employee Agreements
Every employee creates and accesses critical information and intellectual property. If those intellectual property assets are handled improperly, they can be lost. To ensure that any intellectual property created by an employee is owned by the employer, each employee must agree to the terms of a written employment agreement. That agreement should contain a clause which specifies that any work created by the employee in the course of their employment is the property of the employer and the employee agrees to sign all documents as may be required to record the employer’s ownership of those intellectual property rights. The clause should further specify that the employee agrees not to publicly disclose or otherwise reveal any details concerning the employer’s intellectual property. The employment agreement should also contain clauses specifying that the employee shall not keep copies of any of the intellectual property and shall not use or reveal details of the intellectual property to any other person or company after the employee leaves the company. It is often a good idea to include competition clauses in the employment agreement prohibiting an employee from doing certain things after the employee leaves the job. The competition clause would prohibit the employee from working for a competitor for a period of time and also prohibit the employee from communicating with or soliciting clients, suppliers and other critical contacts for a period of time. These confidentiality clauses should survive the termination of the employee’s employment. We suggest having a professional draft these clauses since, if they are not drafted correctly, they may be un-enforceable.
In the event an employee or group of employees have been working with your company for a period of time without an employment agreement (or without the appropriate type of employment agreement), it may be possible to issue a new employment agreement and have the employees sign it. To be enforceable, something of significant value must be offered to the employee in exchange for signing the new employment agreement. This could include a bonus, a raise or a promise not to be let go for a set period of time.
Occasionally, an employee may leave the company’s employment and either takes a position with a competitor or goes into business as a competitor. Both of these actions are perfectly legal and, in most cases, there is no “downside” to simply letting the employee go about his/her business. However, if the employee had access to critical intellectual property such as trade secrets or client lists, then there is a real possibility that these former employees could cause serious trouble for the previous employer. There are several measures a company can take to protect itself from rouge employees walking off with valuable intellectual property.
The first step is to ensure that all employees sign an employment agreement with clauses covering confidentiality, ownership of intellectual property and, if possible, none competition. See the discussion on standard terms in employment contracts for details as to what the employment agreement should contain.
If the rogue employee signed a suitable employment contract before leaving, then in the event the former employee breaches the terms contained in the employment agreement, then legal action against the employee can commence. It may be possible to sue the competitor who hired the employee if there is reason to believe that the competitor induced the former employee to break the terms of the employment agreement. However, even if the employee has not signed an employment agreement, it is still possible to bring legal proceedings against the former employee if the employee misappropriates the employer’s intellectual property, including trade secrets, customer lists, and the like.
The first step to enforcing the employer’s rights against the rogue employee is to send a strongly worded letter from a lawyer. A seriously worded letter from a lawyer is often all that is required to keep a rouge employee from divulging or misappropriating trade secrets and other forms of intellectual property.
Preliminary Patent Searches – Avoid Patent Legal Actions
It is strongly recommended you conduct a preliminary patent search before introducing a new product. There are few things more frustrating then spending a great deal of time and effort on a new product only to find out that the product can’t be sold because it infringes another company’s patent. What is even worse is to incur those costs only to end up embroiled in a costly legal action one year after launching your product. Patent infringement legal actions are very expensive to maintain and often very costly to settle. A preliminary patent search can help you avoid those costs.
The costs of a preliminary patent search can be relatively modest. Usually these searches are conducted early on in the development of a new product in order to ensure that potential patent problems are flushed out before the product evolves too far. Expect to spend from $500 to $2,000 for a preliminary patent search. Detailed patent infringement opinions generally cost a bit more.
There are a variety of free on-line patent searching resources. Both the US Patent Office (www.uspto.gov) and the Canadian Intellectual Property Office (www.cipo.gc.ca) provide free on-line patent searching. The US patent office patent searching site is a little intimidating, but it contains a wealth of useful tools for identifying potentially problem patents. We have a series of videos on patent searching which walk you through the patent searching process which may help you with conducting patent searches.
Periodic Patent Searches on Key Competitors
One way to avoid potential patent conflicts is to conduct periodic searches of patents owned by key competitors. Search engines like the one available from the US patent office’s web site, permit searching for patents based on company name. Periodically reviewing which patents your competitors are filing for can help you avoid possible legal conflicts and identify possible opportunities.
Trademark Searches – search before you adopt
Conducting a trademark search is a necessary step before adopting any new trademark. Not only does a trademark search help you avoid potentially costly trademark litigation proceedings, a search can also help you select a trademark which will be stronger and more valuable. Trademark searches can be performed quickly and free online, or you could retain the services of a trademark lawyer to search your trademark. We have videos on how to conduct trademark searches.
Protect trade secrets and Inventions with confidentiality agreements
As mentioned above with reference to trade secrets, some intellectual property is simply can not be by patents, copyright or registered trademarks. When that intellectual property is also quite valuable, such as a new marketing idea, then it may be considered a trade secret. Inventions which have not yet been protected by filing a patent application are also trade secrets.
Trade secrets can be protected in a variety of ways, the most obvious of which is to keep them secret. However, when meeting with potential investors, suppliers or customers to discuss the viability of a new idea, secrecy is not an option. In those cases, the only option may be to have all the parties to the discussion sign binding confidentiality agreements. Contrary to popular belief, confidentiality agreements are enforceable and often quite effective; however, if not executed correctly, a confidentiality agreement is of no value. Firstly, the confidentiality agreement must correctly identify all of the parties. Failing to do so will render the agreement useless since anyone who is not a party to the agreement is not bound by it. Secondly, the agreement must be executed (signed) correctly to be enforceable – make sure the person signing the agreement has the authority to bind the party they are signing for. Finally, the wording of the agreement must be specific enough to make clear what the confidential information is, without being so broad as to be unenforceable. What happens before and after the signing of the confidentiality agreement is also important. A well laid out “paper trail” can help you identify who you met with, what was discussed and what the “confidential information” was.
Maintain a paper trail to avoid costly litigation
Enforcing your rights in a court of law is often complex, time consuming and expensive. All of the effort involved in launching (or defending) a legal action can come to nothing unless you can muster the best evidence possible. This is where a well laid out “paper trail” can make all the difference in the world. Here are a few tips to ensure the paper trail you create will serve you well should you end up in costly legal proceedings.
Inventions – Don’t Disclose Until You File
Inventions can not be patented if their details are publicly available for more than one year before a patent application is filed. Prematurely disclosing an invention to the public is the most common way inventors lose their patent rights. Any public disclosure, such as an offer for sale, a published web page, a demonstration at a trade show, can trigger the one year limitation period for filing a patent application for the invention. Also, various countries such as Japan and most nations in Europe, will not grant a patent if the invention is disclosed before a patent application is filed (Canada and the USA give you a one year grace period to file for patent protection). Its generally a good idea to file for patent protection BEFORE publicly disclosing an invention.
How to Select a Strong Trademark
This is such a popular topic that we have a separate web page for it. Read up on tips to selecting a strong trademark.