IP Protection and Employer-Employee Relation

With ever-changing business opportunities and fluctuating markets, the change of working area is common where multiple employees leave the job and multiple people enter the same. This has become very common when one sees a situation like the pandemic where a major chunk of people are getting laid off and entering into other organizations. That becomes more challenging for the employers as well who need to keep up with the regular onboarding and exiting procedures. Such initiatives are necessary for keeping a robust check over the protection of intellectual property rights. Multiple intellectual properties which form a major part of the organization finance needs to be protected which typically includes patent, trademark, copyright, and even trade secret which protect works of authorship and creativity; and trade secrets which protect a company’s confidential or propriety information.

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On-boarding stage

The employees entering into the new setup must go through the onboarding process. The main issue which lies here is about IP rights which might be owned by the previous employers. Such aspects if studied carefully can help the company to understand the issue with regards to the intellectual property rights utilized and developed during employment. This will assist the screening of third-party IP and giving more protection both during and after the term of employment. The employee while entering must inform the employer about the knowledge or any possession of IP that it has concerning the previous employers. Such representation of information reduces the risk of IP infringement that might occur had it been that the information was not disclosed. Not only must the IP information be disclosed but also information with regards to the confidentiality and other non-disclosure agreements must be cleared.

There must be a very strong employment agreement for the employees on-boarding. This agreement must state the expectation that the current employer will have with regards to the IP owned by prior employers, company-owned IP, including any IP developed by the employee throughout employment, and include procedures that the employee should take to protect or maintain company-owned IP during and after employment. So primarily, the IP agreements must focus on the issue of the previously-owned IP and the employment agreement must be structured in a way that the clear identification of all the previous relevant agreements involving IP or any such confidentiality provision and non-compete provisions is done.

Confidentiality

While entering the company, the employee must understand the confidentiality expectation from the company. The employment agreement must clearly state the confidentiality provisions which must include the obligation over the employees to protect the company’s confidential and proprietary information which is utilized or created during employment and extends beyond the term of employment. Confidentiality is very critical. In the US, this information tends to be the trade secrets that are protectable and holds economic value. Under the Federal Defend Trade Secrets Act (“DTSA”), the owner of a trade secret must establish that it took reasonable measures to keep the information as secret. For example, in Freedom Med. Inc. v. Whitman, the United States District Court for the Eastern District of Pennsylvania 343 F. Supp. 3d 509, 519 (E.D. Pa. 2018), the court determined that the plaintiff company took reasonable measures to maintain its confidential information as secret as required by the DTSA by (1) identifying the particular information as confidential to its employees, (2) expressly restricting its disclosure, and (3) including restrictive covenants in employment agreements to prohibit exiting employees from using the confidential information.

Ownership and Assignment

The agreement must be clear with the parameters of ownership and assignment of IPs. In various organizations, this is presumed that the work done by the employee will be deemed to be owned by the employer. But this assumption doesn’t hold well with all organizations. It is important that that the agreement must have a clear assignment of IP as per the company policy. This assignment is important in a situation where the employee leaves the job in the future. Such drafting must be done in a much-expressed manner and non-conditional language to not create any dispute in the future. As an example, in Stanford University v. Roche Molecular Systems, 583 F.3d 832, 842 (Fed. Cir. 2009), a researcher signed an agreement upon joining Stanford stating that he “agree[d] to assign” his right, title, and interest in inventions resulting from his employment to Stanford. The U.S. Court of Appeals for the Federal Circuit interpreted this clause as a promise to assign rights at some point in the future and not a present assignment. As a mere promise to assign rights in the future, such language was held to be unenforceable without a subsequent assignment to transfer legal title.

Author: Saransh Chaturvedi an associate at IP & Legal Filings, in case of any queries please contact/write back to us at support@ipandlegalfilings.com.