Your businesses Intellectual Property (IP) is a vital business asset. Innovative and creative companies have much of their value in their intangible assets including in research and development, know-how, trade secrets, plans, and proprietary information such as customer lists and pricing information.
Your employees are a vital part of your business and are involved in helping you develop your business’ IP. We’ve been contacted by many businesses worried about how to protect the business IP when an important employee leaves. This article focuses on how to protect your IP when an employee or contractor leaves.
This article is part 5 of a 5-part series on how to protect and monetise your IP. Part 1 looks at copyright. Part 2 discusses trade marks, and parts 3 and 4 explain how to license or assign your IP.
Step 1: Employment and Contractors Agreements
Employees and contractors make vital contributions to your business’ IP. It is crucial to clarify IP ownership and to protect IP in your employment and contractors’ agreements.
In the past there was a stronger presumption that all intellectual property created by an employee was created for the business. This is less clear now, following developments in case law. For example, who owns intellectual property that an employee develops outside of work hours, for their own purposes?
It is wise to address intellectual property ownership directly in the employment agreement. The key clauses that we recommend including are:
- intellectual property assignment: that all intellectual property created by the employee for the business is assigned to the business, including any intellectual property created for the business outside of business hours;
- confidentiality: start with a broad definition of what is confidential, and then have a strong clause on how that confidential material is protected; and
- non-compete: that employees cannot use your businesses IP including to set up their own business or to be employed by a competitor. This is to deter employees from leaving and become competitors. Non-compete clauses are complex. Whether the clause will be enforced depends on how it was written, what it includes, and the facts. We can assist in detail with drafting or advising on a restraint of trade clause.
A well-advised employee may seek to amend a strong intellectual property clause, so it is more favourable to them. For example, the employee may want the clause to expressly say that the employee will retain the rights of any IP they develop outside of their job, that doesn’t relate to the business. We have assisted employees with these negotiations, including to assist an employee who was a film producer by day, and a budding author by night, to protect the rights to his books.
Step 2: Exit Letter
When your employee leaves, or when you cease the contract with the contractor, it is wise to give them an exit letter. This is to remind them of the obligations that continue after they leave, including the non-compete clause and the confidentiality obligations.
Step 3: Practical steps
You can give your business’ IP strong legal protection, but it is important to bolster this with practical protection.
- considering what is the most important IP for your business, and restricting physical and electronic access to it;
- saving IP on the main business server, and prohibiting or minimizing IP storage on portable devices including laptops and USB sticks; and
- keeping clear records of prototypes and materials, to limit and track any theft.
A professional adviser with intellectual property experience can assist you to protect your intellectual property from both a legal perspective and from a practical perspective. If you would like to speak with one of our IP lawyers today, contact LegalVision on 1300 544 755