The Law Firm of
Louis Ventre, Jr.
Registered Patent Attorney
INTELLECTUAL PROPERTY OBLIGATIONS
EMPLOYEE OBLIGATIONS TO KEEP SECRETSCommon Employment Issues on Intellectual Property? Most employers will not be surprised to learn that questions will eventually arise as to the obligations of employees and employers regarding protection of company trade secrets, ownership of documents and inventions made by employees.
Starting the Employment Relationship? It is a good idea to start off an employer/employee relationship with the employee understanding that the company's intellectual property assets include such things as customer lists, vendor lists, inventions conceived by the employee, materials written by the employee, electronic documents transferred to a home computer, or taken, or written at, home on company business, company know-how and trade secrets. It should be made clear that an employee has a legal responsibility and obligation not to transmit the company's intellectual property to unauthorized third parties though electronic means both prior to and following a termination of employment. The employer should explain and implement written computer policies establishing that the company may be monitoring employee electronic email and other transmissions.
Common Misconceptions? Many times an employee will think that documents written by him may legitimately be taken home upon termination of employment. While an employer may permit this, any misconception about employer/employee ownership should be clarified early on to avoid problems upon the employee's subsequent termination. The employee should be told that if he locates any of such information outside the workplace, he has an obligation to return it to the employer upon termination of employment.
No Employee Agreement? Not every employee will have an employment agreement. Many will be "at will" employees, meaning they can be fired at any time by the employer with or without cause. So, it is a good idea that whether or not a written agreement is in place, the employee should be told of his obligations with respect to the employer's intellectual property. It is also a good practice to have a written set of internal policies or guidelines on these matters. Early communication will help avoid misunderstandings, hard feelings, and possibly litigation.
Written Employment Agreement. For senior-level employees, who may have a significantly greater role in an employer's trade secret or confidential information holdings, it is a good practice to include intellectual property provisions in a written employment agreement. One should also recognize that trade secrets and confidential information are two different things and the law can treat them differently.
Having each employee sign a "confidentiality and assignment agreement" as a condition of future employment is a good start. Also, having a trade secret and confidential information policy is a good idea. But these alone are not good enough, even for documents, such as customer lists, that you might expect employees to know are trade secrets and confidential. For proprietary information, an employer should take reasonable efforts under the circumstances to keep its information secret, such as ---
Incentivizing Innovation. It is common for
an employer to incentivize or reward employee inventors through employment
contract provisions that specify fixed payments, royalties or other
incentives such as stock options. Addressing this component of
compensation in advance can eliminate the potential for later hard
feelings with employees. It also gives the parties a chance to
define what category of inventions fall within the field of the employer’s
business and which do not and are owned by the employee. Other
matters important to a business include the employee inventor’s
obligation to notify the employer of inventions, to document all
inventions and concepts for inventions, the employer’s procedures for
handling such notifications, confidentiality requirements, assignment of
interest, patent prosecution, the rights of the employee if the company
rejects investing in a patent, obligation to use invention notebooks
to document research results, etc.
However, some states, such as California and Georgia, have enacted a policy severely restricting non-compete agreements, particularly those outside the context of protecting trade secrets. This trend continues in an August 30, 2006 decision by the California 2nd District Court of Appeal, which held that California statutory law prevents companies from making employees sign non-competition contracts promising not to work for a competitor, unless they fall within the statutory or trade secret exceptions. Raymond Edwards II v. Arthur Andersen LLP, No. B178246. To achieve the broadest acceptability, a non-competition provision should be narrowly drawn to protect the employer's legitimate business interest; but in California even a narrowly drawn provision will not be valid unless it is closely tied to trade secret protection. For most other states, such provision should not be unduly burdensome on the employee's ability to earn a living.
Exit Interviews. Upon leaving a job, an exit
interview should be conducted and the employee should be asked to return
any company proprietary information or destroy any such information on his
home computer after a copy is given to the company. He should
be asked to sign an acknowledgment that during employment the employee had
access to confidential information, that the employee kept it secret and
that the employee will not take any written materials on such
secrets with him. In
addition, employees who maintain invention notebooks
should be asked to confirm the location of all such notebooks and that all
notebooks are up to date, witnessed, dated and signed.
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© 2004 Louis Ventre, Jr.
This file last modified 07/09/11.