Protecting Your IP Through Contracts

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Table of Contents

• Non-Disclosure Agreements (NDA)
• Employment Agreements
• Key Takeaways
• Frequently Asked Questions

You can register several types of intellectual property (IP) with IP Australia, and registration goes a long way in protecting your IP assets. However, some types of IP, such as trade secrets, cannot be registered. This means that you will have to find alternative methods of protecting your business’ valuable IP. To help you keep your IP secure, this article will focus on protecting your IP contractually, such as through confidentiality and IP clauses. 

Non-Disclosure Agreements (NDA)

What is an NDA?

An NDA, also commonly referred to as a confidentiality agreement, is an agreement that prevents a party or both parties to the agreement (e.g. a business, individual or organisation) from publically revealing certain confidential information or data of the other party. NDAs legally bind parties to protect that information and not disclose it except as permitted by the NDA. 

How Will an NDA Protect My IP?

Businesses often use NDAs to protect commercially sensitive information. This may include business plans, ideas, processes, trade secrets, financial data and customer and supplier details. This information often contains certain intellectual property rights. 

Intellectual property is crucial in business development and success and can lose its value if publicly known. For example, trade secrets will lose their protection if they are made public. As such, we recommend putting an NDA in place with anyone you share confidential information with. This is a way of limiting who has access to the information (and intellectual property in that information). 

Is My NDA Enforceable?

When drafted carefully, NDAs are an excellent way of documenting the information, including IP, that each party must protect and is a useful tool when initiating discussions with third parties. In addition, NDAs can be useful when negotiating with potential clients and entities you are considering working or partnering with. 

NDAs are great when you require another party to keep IP or information confidential. You will require NDAs most often at the start of a new commercial relationship. Once both parties decide to proceed with further action, you should enter into a more substantive agreement to govern that relationship. This agreement will often depend on the nature of the relationship. For example, it may differ whether employment is involved (within an employment agreement) or simply an exchange of goods or services (within a supply agreement). 

Will NDAs Keep My Intellectual Property Safe?

An NDA can act as a powerful deterrent and goes a long way in protecting IP. However, it is important to keep in mind that once another party uses or discloses confidential information without authority, the damage can be serious and hard to reverse. This is particularly an issue with confidential information because the information is no longer ‘confidential’ and may lose its value once in the public realm. You may also not be aware that a breach of the NDA has occurred. While it is possible to enforce an NDA like any other agreement, often parties choose not to because legal action can be costly, time-consuming and challenging in the initial stages of running a business. 

Therefore, we recommend conducting due diligence on the other party to make sure the likelihood of a breach is low. Ideally, other parties should sign NDAs often and have a good reputation for being unlikely to commercialise another business’ idea. For example, universities are often good partners as they are likely to not commercialise your business’ IP. Sometimes, however, there is no substitute for being selective about the information you are sharing. 

Employment Agreements

Employment agreements are also effective ways of protecting IP. A standard employment agreement should include clauses that address ownership, access to, and use of intellectual property. In particular, employment contracts should state that all intellectual property created by employees during their employment will become the employer’s property, and the employee waives any moral rights to the work or intellectual property.

The agreement should also clearly outline how employees can use IP (both existing and created) internally and externally. For example, the employee should know how the IP can be:

• shared, such as via email, social media, or cloud storage devices; and
• developed, such as on third-party platforms.

You should implement policies to ensure this, and you should also routinely provide training to employees on this use.

It is good practice to limit the IP that employees have access to only what they need daily. For example, not every employee needs to know development plans or trade secrets. Therefore, restricting access to this information (through passwords or locks) can be a strong protective measure.

Key Takeaways

Intellectual property is a complex area of law. It can cover everything from registrable assets like trade marks to simple assets like customer lists. Although you can register some forms of intellectual property, it is important to protect IP like trade secrets, confidential information, financial data, and the like contractually.

If you need assistance or if you have any questions concerning your contractual agreements (like NDAs) and their IP clauses, our experienced IP lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to solicitors to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.

Frequently Asked Questions