Staff | 16 October 2017

Employees and IP. What do I need to know?

Reading Time: 3 minutes

As IP is one of the essential elements of a company, you, and any investor or third party licensee, will want certainty that your company owns the IP and can deal with it as you wish without risk of an employee or contractor who created it bringing an infringement claim against you.

So what kind of things can you do to protect your company?

Put it in writing

Ensure you have a clear written employment agreement (or consultancy agreement) setting out the scope of the employee’s engagement. The employment agreement should state that all IP created by them during their employment will be owned by the company and assigned from the employee to the company.

Be aware of the governing law of your contract

There is a different approach taken to employees and IP in common law and civil law governed jurisdictions.

Under common law (e.g. in ADGM, the UK or the US), the general rule is that you, as the employer, will own the intellectual property created by an employee during their employment. However, if an employee creates IP whilst working for you but it was not a part of their job description, the employee will own the IP. You may have a claim for breach of the employment agreement but this does not change the ownership of the IP. The general rule regarding consultants is that the consultant owns the IP created during their engagement, not the company who has engaged them.

Under civil law (e.g. in the UAE), IP rights such as copyright will be retained by the creator of the work (which could be the employee or consultant). The creator enjoys these IP rights unless and until that specific work is assigned in writing specifying the purpose for, duration of and territory within, which the assignment is intended to take effect. However, this is not the case for all IP rights as an employer is presumed to own the IP in a patent and the employee is entitled to compensation to reflect the value of the patent to the company.

Some civil law jurisdictions (including the UAE), limit the number of future IP rights which may be assigned from one party to another. Although it is tempting to include a blanket assignment on all future IP rights which an employee may create, this is not recommended as it may void your employment agreement.

So how do you protect yourself in this situation?

A blanket assignment of future IP rights is not recommended. You can deal with this issue on a work-by-work basis by requiring employees or consultants working for you to notify you of the creation and delivery of each piece of work they do for you under their contract. Employees and consultants should then be asked to sign an assignment of the IP rights in that work to your company. Set out these steps clearly in your employment agreements, consultancy agreements and internal policies and ensure that your employees and consultants are aware of this process.

Some employees or consultants may ask to carve out any IP rights or work they owned or created prior to working for you. Take care to ensure that any such exclusion does not capture any IP you are expecting the employee or consultant to create for you whilst they are working for you.

Remember to cover off confidentiality

Make sure you include confidentiality provisions in the employment or consultancy agreement or put in place a separate confidentiality agreement.

This can protect your company by ensuring that an employee joining you from another company keeps any information you make available to them confidential and only uses that information for the purposes of carrying out work for you. Ask your new employee or consultant to confirm that they are not bringing with them or using any confidential information belonging to their previous employer or a third party.

If you’d like to know more about confidentiality agreements, please see Confidentiality Agreements: what you need to know.

Restrict them from competing and poaching

Your employment and consultancy agreements should include non-compete and non-solicitation clauses.

A non-compete clause is designed to help prevent the employee or consultant setting up competing businesses using ideas created whilst working for you. A non-solicitation clause supplements the non-compete clause and aims to prevent the employee or consultant from poaching your other employees to help them develop that new competing business. Both clauses should apply during their employment and for a reasonable period afterwards.

Make sure they return documents

Insist that employees and consultants must return or destroy all documentation at the end of their contract and sign a certificate to confirm they have done this. As for the assignment of IP rights, set out what is to happen when an employee or consultant leaves your company in your employment agreements, consultancy agreements and internal policies. Ensure that your employees and consultants are aware of this requirement and the process they must follow.

 

If you’d like to know more, PROTECT my business has information on intellectual property rights and confidentiality.