This piece is presented by Woods, Fuller, Shultz & Smith PC.
By Carey A. Miller, business and intellectual property attorney
Intellectual property agreements are not just for large companies with portfolios of patents and trademarks. Almost every business has some basic intellectual property. This basic IP often takes the form of information, unknown to the public, about the business’ products, service, customers, finances or strategies that allows the business some competitive advantage. Two types of agreements can protect your basic IP:
- Confidentiality agreements — Nondisclosure agreements or NDAs, which are useful to preserve your business’ basic IP in variety of business relationships.
- Employee IP agreements — These include provisions to ensure you own the IP developed in your business and often include confidentiality restrictions for your employees.
Used appropriately, these two essential IP agreements can have real benefits for your business.
Key issues to consider when using confidentiality agreements:
- Situation. Confidentiality agreements can be used for evaluating business relationships, for potential business sales and for use with employees. An agreement suited to your specific circumstances will clarify what use of the confidential information is allowed and what actions are prohibited.
- Protected information. These agreements often contain long laundry lists of protected items. You may need to add terms describing specific items you desire to protect. A long list is no help if it does not describe the information valuable to your business.
- Specific restrictions. A confidentiality agreement needs to do more than prohibit disclosure of your protected information to third parties. It also should require that your confidential information be used only as allowed in the agreement. The other party should be prohibited from any competitive or unauthorized use.
- Remedies. In the event of a breach by the other party, your business may suffer long-term harm that cannot be corrected with money damages. The agreement should state that you may obtain a court order forcing the other party to comply with its confidentiality obligations and that you can recover your costs in obtaining that order.
- Term. Describing the term of these agreements is tricky because confidential information does not lose the need for protection at the end of an arbitrary period. An agreement may state a specific duration; however, the obligations of confidentiality should continue as long as such information has not been made public by the owner.
Employee IP agreements may contain confidentiality obligations for employees, but these agreements have another goal. They spell out the transfer ownership of any IP developed by an employee to the employer and ensure that the employer can utilize and secure legal protection for that IP.
Considerations for employee IP agreements include:
- Effective assignment. Transferring ownership to IP that has not yet been developed requires specific language. An employee IP agreement should use certain phrases designated by courts as effective to assign rights in future work to your business.
- IP transfer. The employee IP agreement should cover all work created by an employee during business time, using your business resources or property, or based upon exposure to your confidential information.
- Agent. If an employee refuses to sign necessary documents for your business to hold or protect the IP, the agreement should designate your business to act as an agent for that employee for such purposes.
- Employment status. Employee IP agreements are separate from employment contracts and should specifically explain that the agreement does not alter the employee’s employment status.
- Remedies. Similar to confidentiality agreements, employee IP agreements should state that you may obtain a court order forcing the employee to comply with his or her obligations and recover your costs associated with obtaining that order. You will need an explanation of employee rights to benefit from federal trade secret law.
In some instances, employee IP agreements are integrated with employee noncompetition and nonsolicitation agreements for broad employer protection. Integrated agreements can be prepared by counsel skilled in IP and employment law.
For additional information on identifying your company’s intellectual property and how to protect it, attend the free Woods Fuller intellectual property seminar Oct. 5 at the Washington Pavilion. Visit woodsfuller.com for registration information or to learn more about our intellectual property attorneys.