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So, you have set up your website and social media, hired employees and designed a unique logo. Your brand is really coming together. Your trading name, logo and designs all form part of your intellectual property, a valuable part of your business. What happens when your employee misuses this information, either while employed with you or once their employment ends? Is there a way you can protect yourself from this happening? As an employer, you should make sure that your employment contracts are properly drafted and contain appropriate intellectual property (IP) clauses

This article will set out several essential terms to include within these intellectual property clauses. 

Ownership of Intellectual Property

This term refers to who owns the materials, products or goods your employees create during the course of their employment. Essentially, it ensures that all intellectual property your employees create while at work becomes the property of your business. It might also cover intellectual property that is related to a certain field, even if not created during the course of employment. However, it is critical that this term is not drafted too broadly, otherwise it might be unenforceable. 

Specific Ownership of Intellectual Property

You may encounter situations where you would like to keep a record of your ownership over a particular piece of intellectual property. 

For example, perhaps you own a fashion label and you employ fashion designers. It would be prudent to ask your employees to sign their intellectual property rights to any individual designs to your business, to ensure they do not replicate these designs post-employment. 

This term ensures that the obligation on employees to sign over any ownership rights to you, the employer, applies both during and after their employment.

By incorporating this term in your employment contracts, you can secure your ownership of any particular intellectual property your employee has created in the course of their employment. This could include designs, products or inventions.

For example, imagine that a former employee contributed to the design or functionality of an invention that you now wish to patent. You may require that employee to give his or her signature on any patent application documents, even once the employment relationship has formally ended.

You should speak with a lawyer if you are unsure about whether you can assert an entitlement to the intellectual property in the invention.

Confidential Information 

Maintaining confidentiality within your workplace is often crucial to being able to distinguish yourself from competitors in the market. The last thing you want is your employees revealing your secret baking technique for nailing the perfect croissant to your biggest rival down the road. This term should be drafted so that it requires all employees to:

  • keep information confidential by not disclosing it to anyone; and
  • not utilise the confidential information for their own personal or commercial benefit.

This term should apply to employees both during and after employment.

What Is Confidential Information?

Confidential information can include anything developed or held by your business that is of value and is not in the public domain. 

For example, this might include:

  • trade secrets
  • business information like supplier or client lists; 
  • financial data; and
  • strategic plans. 

Moral Rights Waiver

Your employees may create works that attract copyright during their employment. Ordinarily, the creator of any works in which copyright subsists will have moral rights to his or her work. These rights include the right to: 

  • have the work attributed to its creator;
  • not have the work wrongly attributed; and 
  • not have the work treated derogatorily. 

It is important that, as an employer, you ensure employees waive these rights with respect to works created in their capacity as employees by agreeing to a moral rights waiver.

Restraint of Trade

When an employee leaves your business, one of the most common ways of preventing them from setting up a competitive business is through restraint of trade (or ‘non-compete’) terms in an employment contract. This can be particularly attractive where you have spent time and money training an employee and you want to be confident that they will not take everything you have taught them and immediately establish a similar business. 

Importantly, this clause must dictate that it only applies for an agreed period of time and within a restricted area. However, a restraint term that is drafted too broadly will be considered too restrictive and unreasonable. In this case, the Court is unlikely to enforce the term.

For example, if a clause operates for too long or over too large an area in the circumstances (e.g. Australia or worldwide) the term will not be valid. 

Key Takeaways

To make sure you are protecting yourself and your business, it is important to engage an employment lawyer to help prepare your employment agreements to include all relevant clauses. You can use your employment contracts to protect your business’ IP. It is particularly important to ensure your contracts are validly drafted, reasonable and enforceable if a dispute arises. If you are an employer seeking assistance in drafting or reviewing your employment contracts, contact LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.

Frequently Asked Questions

Who owns the IP an employee creates?

As an employer, you can ensure that you own any IP your employees create during their work through intellectual property clauses in your employees’ employment contracts.

How can I stop former employees from competing with my business?

You can use restraint of trade or non-compete clauses to prevent your former employees from operating in the same space as you when they leave your business. You should be careful not to draft these clauses too broadly.

How can I protect confidential information in my business?

You can protect your business’ confidential information with a confidentiality clause in your employees’ employment contracts.


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