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EMPLOYEE OBLIGATIONS TO KEEP
SECRETS
 Common 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 ---
- mark a proprietary document with the word "confidential"
or "proprietary" or an equivalent word when it is given to
employees;
- direct employees to maintain the secrecy of the document; and,
- track use of the proprietary document.
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.
Related Outsourcing Intellectual Property Issues.
Outsourcing research and development can create uncertainties over
ownership of intellectual property. A company might be facing surprises in
assuming that it would always own the product of a consultant or other
third party just because the company paid for the product. If other
persons besides the employees of the company participate in research and
development activities, it is important to ensure that all such persons
sign an agreement before work is started whereby they give the company
sufficient rights to the results of their works. It is common that
such persons transfer any and all rights to the results of the project to
the company, including the right to re-transfer the rights and especially
the right to alter the works if the R&D project produces works or
other materials eligible for copyright protection. Apart from
inventions, the R&D agreements should also contain provisions
conferring the rights to know-how, copyright for the research reports and
results, and rights over the physical material involved in research
activities, such as micro-organisms or other biological material, as well
as intellectual property rights over any background information which is
not within the public domain. All this should also be kept
confidential.
Provisions Requiring Employees to Keep Trade
Secrets? An employee should be required to execute a
confidentiality agreement, non-disclosure agreement and non-compete
agreement as a precaution and deterrent to the temptation to take and
share with a new employer, that which is valuable to the company's
competitors. A high-level employee with access to the company's secrets
should have an employment agreement with a narrowly defined restrictive
covenant not to compete with the Company and prohibiting such employee
from soliciting former co-workers, who also have trade secret information,
or customers to join him or her at his next employer.
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.
How Can This Firm Help? Attorney Louis
Ventre, Jr. could prepare intellectual property provisions for your
employee agreement, or a complete employee agreement for your use can be
drafted. In addition, Attorney Louis Ventre, Jr. could prepare a
company policy statement and an exit interview acknowledgment to remind
departing employees of their intellectual property obligations. A fixed
price quote for services is available upon request. Continuing advice
concerning policies, procedures and protection of company property is
provided at a rate of $250 per hour.
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