Intellectual property (IP) issues for hiring employees

When hiring new employees, it is important to be cognizant of IP issues. Specifically, a hiring company should look to reduce IP flight risk, which is the risk of losing valuable IP. As explained previously, a company is vulnerable to losing IP if:

  • IP is not properly identified; and/or
  • IP is not properly secured.

With regard to employees, proactively incorporating relevant and useful IP clauses into employment agreements is a great way for a company to reduce IP flight risk. This is particularly important because it may be difficult to contact employees after they have left the company.

Different clauses need to be incorporated into employment agreements for the different types of IP.

Inventions

Typically, inventions are either protected as trade secrets or through patents. As explained above, IP needs to be properly identified. An employment agreement should include clauses requiring the employee to identify IP that the employee created in the course of his/her employment. Examples include clauses requiring the employee to:

  • Promptly disclose all inventions that the employee has created during the course of his or her employment; and
  • Participate in IP discovery or mining sessions where the employee discloses inventions created. This could include clauses requiring the employee to fill invention disclosure forms.

The IP then needs to be properly secured. The employment agreement should also resolve issues around ownership of inventions. In many jurisdictions, the employer does not automatically own the invention. Instead, the employee initially owns the invention. Therefore, the employment agreement should include clauses with express language stating that the employee assigns to the company all applicable future rights in inventions created in the course of employment. This is a safeguard in situations where the company does not have current contact with a former employee, or a former employee refuses to execute an assignment to an invention developed in the course of his employment. If the company decides to patent the invention, then the company should require the inventor to execute an appropriate assignment document to transfer ownership of the invention to the company. Coupling an IP-aware employment agreement with an assignment document is strong evidence that the ownership of the invention has been assigned to the company.

Confidentiality is vital to securing the IP in the invention. The employment agreement should include clauses relating to non-disclosure. In the case of trade secrets, confidentiality is extremely important since that is the only form of protection of the invention.

Additionally, it may be necessary for the employee to sign various documents for patent and trade secret protection. The employment agreement should include clauses which compel the employee to co-operate with the company and sign all relevant documents necessary for IP protection. Examples of relevant documents include inventor declaration forms and assignment documents.

The employment agreement should also include clauses transferring power of attorney to the company to strengthen and enforce protection of the IP. For example, in the case of patents, there should be clauses which allow the company to prosecute the patents at different jurisdictions and, if necessary, enforce the patents through lawsuits.

Companies may also seek to reward employees for inventions created during their employment. The employment agreement should state the form of the reward and when the reward will be granted to the employee.

Artistic or other written forms of work, slogans and software

Typically, copyright or trademarks protect works, slogans and software.

Similar to patents or trade secrets, employers should require employees to sign employment agreements where they assign their copyright in works and developments, that they produced or co-produced, to the employer. The employment agreement should contain provisions that permit the employer to register a copyright in these works or developments and if necessary, permit the employer to commence copyright infringement suits. Relatedly, such an employment agreement should bar the employee from registering a copyright for the relevant work or development, from disclosing the work or development to the public and initiating copyright infringement suits related to the works or developments.

In some jurisdictions, employers are the “first owners” of the copyright. However, employers should not rely on these provisions and should always ensure their employees explicitly assign their copyright. These provisions usually contain exceptions and the employer does not want an employee to wrongly assume that an exception applies.

Copyright, in certain jurisdictions, also presents the issue of moral rights. For example, the Canadian Copyright Act protects moral rights which include the author’s right to not have the work modified, the right to be associated with the work and the right to remain anonymous. Moral rights cannot be assigned but the author may waive them. If an author does not waive their moral rights, it could lead to future headaches. An employment agreement should contain an explicit and permanent waiver of the author’s moral rights

Some forms of intellectual property are not frequently subject to employer-employee ownership disputes. One such example are trademarks because they require the owner to use them. However, employees will usually not be contributing to only one form of intellectual property. They are probably contributing to various types of intellectual property. To err on the side of caution, employers should still get the employees to assign their intellectual property rights and waive their moral rights where applicable.

Conclusion

To prevent IP flight risk, employers should include employer IP ownership clauses in employment agreements. These clauses should be detailed, require the employee to assign their rights to the employer and tailored to the specific situation. This is a good practice regardless of the jurisdiction, any relevant legislation and the type of intellectual property.

Co-authored by:

Ramesh Rajaduray & Margot Davis

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