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Employee proprietary information and inventions assignment agreements: what they do, and what could happen without them

The typical onboarding process for a new employee at nearly all companies in most industries includes a requirement for the employee to sign an agreement regarding confidentiality and ownership of inventions, copyrights and other intellectual property.  This article explains the purpose of such an agreement and consequences that result from a failure to have such agreements signed by each employee.

What is a PIIA?

The agreement goes by many names, but tech-savvy companies often refer to them as PIIAs (or ''Pee-as'' for short). PIIA is the acronym for the most common name for these agreements, ''proprietary information and invention assignment'' agreements.  The typical form of agreement addresses two main areas: confidentiality and ownership of intellectual property. 

The agreement requires that an employee maintain the employer's non-public and proprietary information confidential and contains language similar to what you would see in a non-disclosure agreement ( see more about non-disclosure agreements ). 

The agreement also requires that the employee agree that whatever the employee creates, discovers, develops or invents while employed with the company is owned by the company. Companies that are in the business of developing products or technology that are protectable by copyright (as is the case with most software companies) can rely on the work for hire doctrine under US copyright law, which automatically gives the employer ownership of copyrights in works of authorship ( eg , software, manuals and documentations) written or prepared by an employee within the scope of his/her employment. The work for hire doctrine, however, does not apply and ownership is not automatically vested in the employer in the case of other intellectual property rights, most notably in the case of patents (see our article providing an overview of  intellectual property rights and a more detailed discussion about  copyrights and  patents ). 

Therefore, the PIIA is the employee's agreement that everything created by the employee for the employer is owned by the employer, and if the employer needs the employee to do anything or sign any document to confirm that the employer owns all the rights in the intellectual property developments, the employee agrees in the PIIA to do so.

PIIAs will also often include non-solicitation clauses and, for those employees working in states where non-competition clauses are enforced, the agreement may also include a non-compete clause (see our article discussing  non-solicitation and non-competition clauses ).

Does the company really own everything the employee creates?

If an employee can show that he or she created intellectual property on their own time and without the use of any of the employer's facilities, equipment, supplies or trade secret information and if the intellectual property did not relate at the time of development to the employer's business or actual or anticipated research or development, then the employee would continue to own such intellectual property. 

In some states, such as California, Washington, Texas and Illinois, this exception is expressed in a statute that requires that the PIIA include a notice of the exception.  Such statutes favor the employer in that the burden of showing the exception applies is typically on the employee.

What happens if I don't have my employees sign PIIAs or if the PIIAs don't include all the bells and whistles?

Whenever a company goes through a financing, whether it is a seed round or an institutional VC round, or if the company is going to be acquired, the investors or acquirer will conduct due diligence. One of the issues that they will review is whether or not all the employees have signed PIIAs and whether or not those PIIAs require employees to assign to the company ownership of all intellectual property rights to developments created by the employee. Investors and acquirers want to make sure that the company owns its intellectual property, products and technology. 

Depending on where the company is in its lifecycle, the due diligence may focus on all employees, former and current, or it may just focus on the former and current employees that have been involved in research and development or engineering activities. (The failure of the company to obtain a PIIA from an employee strictly in an administrative capacity will generally not create a material issue). If due diligence identifies a problem with the PIIAs, or reveals that PIIAs were not signed, investors and acquirers may require that the company obtain signed PIIAs (or the equivalent) after the fact, which may necessitate the company having to pay the employees something in exchange for signing the agreement so that it is binding or, worse yet, give a former employee leverage to ask for something more. Giving someone leverage on the cusp of a financing or an acquisition may not end well for the company.

While PIIAs may seem like a routine document that is available from numerous online sources, it is essential that an employer have a form of PIIA that includes provisions that is enforceable and current and will withstand scrutiny from investor and acquirer's counsel. If you have questions about your form of PIIA, or if you want to make sure that you have forms of PIIA that will be enforceable for your employees wherever they may be located, within or outside the United States, please contact a member of our Technology, Data and Commercial practice .

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• Intellectual Property Law

What is an employee intellectual property agreement

This article is written by Hannah Boban pursuing a Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution from Lawsikho .

Table of Contents

Introduction

Innovative minds often come up with innovative ideas and intellectual property is a creation of such ideas in the mind. As per law, the owner of such an idea is the person which brings it into existence unless there is a contract to the contrary. Many of us think that the employer owns the intellectual property that an employee creates in the course of his employment. However, an employer assuming that all rights of the employee over such intellectual property are extinguished might be careless in his approach. The employee still owns the claim rights of an author, moral rights and rights to object to alterations to work. So, it becomes crucial to include the conditions determining the ownership of intellectual property in the contracts of employment, agreements of independent contractors or in agreements of a designer or consultant.

Hence, it becomes critical to include terms determining the ownership of intellectual property in employment contracts, independent contractor agreements or agreements with a consultant or designer. In this article, we will understand the concept of an employee’s intellectual property and what are the important clauses that should be drafted in an employee’s intellectual property agreement. 

What is the meaning of “in the course of employment?”

If an employee brings any innovative ideas in the course of business or employment, the employer can claim the same if it was already mentioned in the contract and the employee also agreed to the same. But in case the intellectual property is created outside the course of the employment, an employer cannot claim the rights over it. For example, if an employee is hired in the accounting team of a designing company and if that employee designs a new pattern for a product of the company, he can be entitled to the intellectual property right in that design as he has done something outside the course of his employment, i.e. he has done something outside the terms of the employment of an accountant post. So it is necessary to have clarity on the duties of the employees to differentiate the scope of and what will constitute “in the course of employment” in the agreement agreed upon by both the parties. 

Now let’s see what all should be stated in the terms of an agreement between the employer and the employee. 

It should be always remembered that an agreement with an employee should not be an oral agreement, it should always be a written agreement. It will be always best if the employer gets the agreement signed by the employee before the date of commencement of the employment. Most of the companies have their own standard template of employment agreements for various kinds of jobs in the company. For example, the agreement for a designer will be different from that of a developer or a tester.

In a case where the employment agreement is not signed before the commencement of the employment due to any valid reasons, all the rights and liabilities will be affected from the date of commencement of the employment.

Terms that must be included employee intellectual property agreement

Now let’s look into the broad terms that must be included in any agreements that define intellectual property right:

• The intellectual property created by an employee or by an independent contractor or a consultant during the course of employment  will be owned by the employer;
• Terms to the effect that the employee/independent contractor/consultant will sign any documents reasonably required (such as a deed of assignment) to record the employer’s ownership of the intellectual property created during his employment. This obligation should continue during and after employment. An employer should ensure that any assignment or license deals with existing rights and future rights;
• The confidentiality clause requires the employee or the consultant or the independent contractor to keep any information of the employer to be confidential and neither disclose the same nor use it in any matter outside the course of the employment;
• A clause should also be drafted for the employee or the consultant about whether they should disclose the new inventions and should a record be maintained to prove the originality of the work and the date of its creation;
• A clause where all the scope and definition of confidential information must be mentioned in the agreement. It must include the intellectual property created by the employee in the course of their employment, all the business information and any other intellectual property of the employer itself. The business information includes business plans, marketing strategies and plans, the company’s financial information, customer lists and any other details of the company necessary to be stated in the agreement. 
• It must also include a term which states whether there is any waiver of moral rights by the employee during the employment over the intellectual property.
• It must be made sure that a term for restraining the former employee on the competition for a specified period of time and in a specific geographical area. It should be made sure that such restraints are reasonable.

Key points for drafting the agreement

For the best legal document it should be kept in mind to draft the agreement with the following key points:

• Any ideas, discoveries or inventions must be properly disclosed to the company by the employee if such ideas, discoveries or inventions are related to the business of the company and is during the course or period of employment.
• The company will be considered as the owner of such ideas, discoveries or inventions.
• If an employee is hired particularly for any invention, or for developing a work product, then the right on such invention or work products are the employers since it was created out of the employer’s expense and request.

Let’s look into an example: If an app developer is strictly appointed by an employer for the development of a particular app, then once the app is developed and the course of employment of the employee has come to an end, the intellectual property right belongs to the employer.

It should be also kept in mind by the employer to get the signature of the employee appointed in an intellectual property assignment agreement to avoid any future problem of the same. 

• In the case of a startup company, in order to protect the important assets and to inform the investors of a startup company, which has an intellectual property which will be used as the pillar of the company for its success, the start-up must draft an intellectual property clause in its agreement which will be signed by everyone involved in the start-up which will also include the promoters, developers and the employees. 

Now let’s see some of the provisions that must be included in the employee intellectual property agreement:

Provisions to be included in the employee intellectual property agreement

First of all, we should understand that there is no standard form for employee intellectual property agreement. So it must be carefully drafted and signed by the employee for its legal binding. No matter what the situation is, or where the agreement is made it should be made legally binding

Mostly the employee intellectual property agreement has at least the following three clauses in common:

1. Assignment clause

Generally speaking, an assignment clause is where the rights, duties, or contractual obligations are transferred from one party/person to another person/party. The assignment may be wholly or partly. The clause must also mention the conditions under which a party/person can assign these rights, duties or obligations. 

In an employee, intellectual property agreement the assignment provision, the employee assigns to the employer his/her inventions/discoveries/ideas and also transfer the true and total ownership of the intellectual property. In this provision, it can either narrow down or broaden any inventions/ discoveries/ ideas or nearly anything the employee creates.

Example of an assignment clause in employee intellectual property agreement:

“I agree that all inventions that are (a) developed using equipment, supplies, facilities, or trade secrets of the company; or (b) result from work performed by me for the company; or (c) related to the Company’s current or anticipated research and development will be the Company’s sole and exclusive property and are hereby assigned by me to the Company.”

2. Disclosure clause

A disclosure clause in an employee intellectual property agreement is drafted in such a way that the employee informs the employer of the intellectual property that was developed as per the assignment clause. It should be noted that everything must be clearly and properly disclosed in this clause.

Example of a disclosure clause in employee intellectual property agreement:

“While I am employed by the Company, I will promptly inform the Company of the full details of all inventions, discoveries, improvements, and innovations, whether or not patentable, copyrightable, or otherwise protectable, that I conceive, complete, or reduce to practice (whether jointly or with others) and which: (a) relate to the Company’s present or prospective business, or actual or demonstrably anticipated research and development or (b) result from any work I do use any equipment, facilities, materials, trade secrets, or personnel of the Company or (c) result from or are suggested by any work that I may do for the Company.”

3. Power of attorney clause

Finally, there’s a clause where the employee appointed in the company appoints the company as an employee’s power of attorney to execute documents or take actions on behalf of them. The benefit of this clause is that the company will then have the power to sign documents or execute any other agreements on behalf of the employee to assign the intellectual property right to the business.

Usually, every company have this clause as a fairly standard one. The power of attorney provision guarantees the employer can register and administer the ownership rights without the employee, regardless of whether the employee is willing and able to assist.

Example of the power of attorney clause in employee intellectual property agreement:

“If the Company is unable to secure my signature on any document necessary to obtain or maintain any patent, copyright, trademark, or other proprietary rights, whether due to my mental or physical capacity or any other cause, I hereby irrevocably designate and appoint the Company and its duly authorized offers and agents as my agents and attorneys-in-fact to execute and file such documents and do all other lawfully permitted acts to further the prosecution, issuance, and enforcement of patents, copyrights, and other proprietary rights with the same force and effect as if executed by me.”

Sample of an employee intellectual property agreement

Employee confidentiality and intellectual property assignment agreement

This EMPLOYEE CONFIDENTIALITY AND INTELLECTUAL PROPERTY ASSIGNMENT AGREEMENT (the “Agreement”) is made and entered into by and between [Company name] and [NAME] (“Employee”), as of [DATE] (the “Effective Date”). 

Each of Company and Employee hereinafter may be referred to individually as a “Party” or, collectively, as the “Parties.” 

In consideration of Employee’s employment with Company, the compensation Employee will earn in connection with such employment, Company providing Employee with access to Confidential Information (as defined below), and other good and valuable consideration, the sufficiency and receipt of which Employee acknowledges, Employee agrees as follows:

• Confidential Information:

i. Confidential information and trade secrets defined . Employee hereby acknowledges and understands the term “Confidential Information” means any data, information, or material of Company or its owners or its affiliates relating directly or indirectly to Company or its owners or Affiliates: clients and customers or potential clients and customers (collectively “Customer(s)”); competitors; vendors; advertisers; employees; contractors; suppliers; or business partners, that is discovered or developed by, or disclosed to, Employee through Employee’s relationship with Company, that is not generally ascertainable from public information, whether it is expressly identified as “confidential” or “trade secret,” that includes, but is not limited to: financial information; invoices; business plans; business and contract applications; contracts; forms; research; price lists; marketing materials; advertising materials and developments; sales materials and reports; copyrighted materials; Trade Secrets; the particular needs and requirements of Customers; identities of potential Customers; and all accompanying Customer data. Employee hereby acknowledges and understands the term “Trade Secret(s)” includes, but is not limited to, a confidential, proprietary, and/or sensitive: formula; software; methodology; model; architecture; pattern; compilation; program; device; method; technique; or process, that is discovered, developed in whole or part by Employee, or disclosed to Employee, through Employee’s relationship with Company, including any information, data, or material concerning the business of the Company, and all other information related to Company and its owner and Affiliates businesses, that is not generally known and readily ascertainable by proper means by any other person and/or Employee. This includes, but is not limited to, all inventions or discoveries made by Employee and/or Company (or its owners or Affiliates) resulting in whole or part from Employee’s relationship with Company. The term “Trade Secret(s)” also includes, but is not limited to, Customer lists, invoices and reports containing specifically developed information, such as the name, address, phone number, buying history and other traits of Customers, along with any other information that Company derives a competitive advantage from and that Company makes reasonable efforts to maintain a secret. For purposes of this Agreement, “Affiliates” means an individual, a partnership, a corporation, a limited liability company, an association, a joint-stock company, a trust, a joint venture, or an unincorporated organization, that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, Company.

ii. Use and restriction . Employee acknowledges that Employee will have access to and be provided with Confidential Information in connection with performing services for Company. Employee expressly recognizes that the efficacy and profitability of Company and its owners and Affiliates is dependent in part upon Employee’s protection of the Confidential Information. Employees may use the Confidential Information solely in connection with performing services for Company and its owners and Affiliates. To ensure the continued confidentiality of the Confidential Information, the Employee agrees to hold the Confidential Information in strict confidence. Employee shall not, either during Employee’s relationship with Company or for such period as such information remains Confidential Information after termination, disclose or use for Employee’s own benefit or for the benefit of any other individual or third party, directly or indirectly, any of the Confidential Information, except as such disclosure or use is expressly authorized by Company in writing. Employee hereby agrees to adhere to the method and form of protection of Confidential Information required by Company, subject to change at Company’s sole discretion. Employee shall not communicate any Confidential Information, even in furtherance of Company’s business, to any individual or third party not privy to the Confidential Information, without express consent by Company and the individual or third party’s agreement to be bound by confidentiality terms that adequately protect Company’s Confidential Information.

iii. Exceptions . The confidentiality and restriction on the use of Confidential Information under this Agreement shall not apply to Confidential Information to the extent that such Confidential Information: is now, or hereafter becomes, through no breach of this Agreement by Employee, generally known or available to the public; was known to Employee without an obligation to hold it in confidence prior to the time such Confidential Information was disclosed to Employee by Company; is disclosed or used, as applicable, with the prior written consent of Company and in accordance with any limitations or conditions on such disclosure or use that may be imposed in such written consent; or was or is independently developed by Employee without any use of or reference to the Confidential Information. In addition, notwithstanding any other language in this Agreement to the contrary, Employee understands that Employee may not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made (a) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney if such disclosure is made solely for the purpose of reporting or investigating a suspected violation of law or for pursuing an anti-retaliation lawsuit; or (b) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal and Employee does not disclose the trade secret except pursuant to a court order.

iv. Required disclosure . The confidentiality obligations under this Agreement shall not apply to Confidential Information to the extent that such Confidential Information is required to be disclosed pursuant to the order or requirement of a court, administrative agency, or other authority, or otherwise by operation of applicable law. In the event of such order or requirement, Employee, if and to the extent permitted by law, shall give Company written notice thereof and of the Confidential Information to be disclosed as soon as practicable prior to the disclosure of such Confidential Information and shall provide such reasonable assistance as Company may reasonably request, at Company’s sole expense, in seeking a protective order or other appropriate relief in order to protect the confidentiality of the Confidential Information.

v. Other Nondisclosure Agreements . In the event that Company is subject to the terms of any confidentiality or nondisclosure agreement relating to some or all of the Confidential Information that imposes greater restrictions on the disclosure and/or use of such Confidential Information, then Employee shall comply with such greater restrictions to the extent that Employee is made aware of them in advance and in writing.

vi. Property of Company . Employee specifically acknowledges and understands that all Confidential Information and all of Company’s and its owners and its Affiliates strategies and files, including, but not limited to, computer data, reports, materials, records, documents, notes, memoranda, and other items, and any originals or copies thereof, related to the business of Company or its owners or its Affiliates, which Employee either is provided, prepares, uses, or simply acquires during the term of this Agreement, are and shall remain the sole and exclusive property of Company and, to the extent applicable, shall not be removed from Company’s premises without the prior consent of Company.

vii. Return or Destroy Confidential Information. Employee agrees, immediately upon the termination of the relationship between Employee and Company for any reason or upon earlier request by Company to make a diligent search for any and all documents, computer discs, electronic files, software, tapes, computer printouts, or any other material constituting Confidential Information described in this Section 1, and shall: cease using the Confidential Information; promptly return to Company or destroy all Confidential Information and any copies thereof; certify in writing (if requested in writing by the Company) that Employee has complied with the obligations of this Subsection vii.

viii. Return of Company Property . Employee agrees, immediately upon the termination of the relationship between Employee and Company for any reason or upon earlier request by Company to promptly deliver to Company all Company property not covered by Subsection vii.

2. Intellectual Property

i. Prior Inventions . Any intellectual property, including, but not limited to, any ideas, inventions, patents, trademarks, service marks, copyrights, creations, know-how, work product, and other developments or improvements, if any, patented or unpatented, that Employee, alone or with others, conceived, created, invented, developed, reduced to practice, or caused to be conceived and or caused to be reduced to practice prior to the earlier of (a) commencement of Employee’s employment with Company or (b) when Employee first provided services to Company, is listed on  Schedule I  attached hereto (“Prior Inventions”).

ii. Pre-Existing Work . If, in the course of Employee’s relationship with Company, Employee uses, relies upon, provides, or incorporates any Prior Invention or any other intellectual property Employee owns, or in which Employee has an interest, into any idea, invention, patent, trademark, service mark, copyright, creation, know-how, work product, and other development or improvement conceived, created, invented, written, developed, furnished, produced, or disclosed in whole or in part, alone or with others, whether or not during working hours, by Employee during the term of Employee’s employment with Company, Employee hereby grants Company, under all of Employee’s intellectual property and proprietary rights, the following worldwide non-exclusive, perpetual, irrevocable, royalty free, fully paid up rights: (a) to make, use, copy, modify, create derivative works of such intellectual property; (b) to publicly perform or display, import, broadcast, transmit, distribute, license, offer to sell, and sell, rent, lease or lend copies of the intellectual property, and derivative works of the intellectual property; and (c) to sublicense the rights in this Subsection 2(iii) to third parties.

iii. Work made for hire. Any work of Employee for which copyright could be claimed developed in the course of Employee’s employment with Company will be deemed “work made for hire” under federal copyright law and all ownership rights to such work belongs exclusively to Company. To the extent any invention does not qualify as a work for hire under applicable law, and to the extent, any invention is subject to copyright, patent, trade secret, or other proprietary right protection, Employee hereby assigns, and agrees to assign, all rights therein to Company.

iv. Required undertakings . Employee agrees, both while an employee of Company and thereafter, to assist Company and its owners and Affiliates, at Company’s sole expense, in any and all attempts to obtain patents, copyrights, and/or trademarks or other intellectual property protection on any work Employee participated in developing and agrees to execute all documents necessary to obtain such rights in the name of or to transfer such rights to Company. If, because of Employee’s mental or physical incapacity or for any other reason whatsoever, after the Company’s reasonable effort to secure Employee’s signature, Company is unable to secure Employee’s signature to apply for or pursue any patents, copyrights, or other protection for any invention assigned to Company under this Agreement or otherwise, Employee irrevocably designates and appoints Company and its duly authorized officers as Employee’s agent and attorney-in-fact to act for Employee and on Employee’s behalf and stead to file any applications and to do all other lawfully permitted acts to further the prosecution and issuance of any patents, copyrights, or other protections with the same legal force and effect as if executed by Employee.

v. Limited Exclusion . This Section 2 does not apply to any inventions or intellectual property for which no equipment, supplies, facility or Confidential Information of Company was used, and which was developed entirely on Employee’s own time, and (a) which does not relate (i) directly or indirectly to the business of Company or (ii) to Company’s actual or demonstrably anticipated research or development, or (b) which does not result from any work performed by Employee for Company.

3. Non-disparagement

Subject to Section 5, Employee agrees that during and after Employee’s period of employment with Company Employee will not, publicly or privately, disparage or defame Company or its Affiliates, or any of Company’s or its Affiliates’ employees, officers, governors, members or agents.

4.  Injunctive Relief

In the event of a breach or threatened breach of any covenant in Sections 1, 2, or 3, Employee agrees that Company will be irreparably harmed, that money damages alone cannot adequately compensate Company, and that Company shall be entitled to temporary and injunctive relief as well as all applicable remedies at law or in equity available to Company against Employee including if the Company is the prevailing party in an action to enforce the terms of this Agreement, reasonable attorneys’ fees and costs incurred in bringing any action against Employee or otherwise enforcing the terms of this Agreement. Employee further agrees that in any such action, Company shall be entitled to relief without posting any bond or security.

  5.  No Unlawful Restriction  

Employee understands and agrees that nothing in this Agreement or otherwise is intended to or will prevent or interfere with Employee’s ability or right to (a) provide truthful testimony if under subpoena to do so, (b) file any charge with or participate in any investigation or proceeding before the U.S. Equal Employment Opportunity Commission or any other federal, state or local governmental agency, (c) engage in any conduct protected under the National Labor Relations Act, or (d) respond to a subpoena, court order or as otherwise provided by law.

  6.  Miscellaneous

i. At-will employment . Employee’s employment with Company is “at will,” which means it may be terminated at any time and for any or no reason, at the option of either Employee or Company.

ii. Assignment . All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, executors, administrators, legal representatives, successors and assigns of the Parties, except that the duties and responsibilities of Employee under this Agreement are of a personal nature and shall not be assignable or delegable in whole or in part by Employee.

iii. Severability . If any provision of this Agreement or application thereof to anyone or under any circumstances is adjudicated to be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect any other provision or application of this Agreement which can be given effect without the invalid or unenforceable provision or application and shall not invalidate or render unenforceable such provision or application in any other jurisdiction. If any provision is held void, invalid or unenforceable with respect to particular circumstances, it shall nevertheless remain in full force and effect in all other circumstances.

iv. Entire agreement . This Agreement together with the Employment Agreement effective as of [DATE] sets forth the entire agreement of the Parties and supersedes any and all prior agreements and understandings concerning Employee’s employment by Company. This Agreement may be changed only by a written document signed by Employee and an authorized representative of Company.

v. Governing law . This Agreement shall be governed by, and construed and enforced in accordance with, the substantive and procedural laws of the State of Minnesota without regard to rules governing conflicts of law.

vi. Jurisdiction . Employee irrevocably and unconditionally (a) agrees that any legal proceeding arising out of this Agreement shall be brought in a court of general jurisdiction in the State of [JURISDICTION], (b) consents to the non-exclusive jurisdiction of such court in any such proceeding, and (c) waives any objection to the laying of the venue of any such proceeding in any such court. The employee also irrevocably and unconditionally consents to the service of any process, pleadings, notices or other papers.

vii. Attorneys’ Fees . In the event of any litigation or other proceeding concerning any controversy, claim or dispute between the parties hereto, arising out of or relating to this Agreement, the breach thereof or the interpretation hereof, the prevailing party will be entitled to recover from the other party reasonable expenses, attorneys’ fees, and costs incurred therein or in the enforcement or collection of any judgment or award rendered therein. The “prevailing party” means the party determined by the court to have most nearly prevailed, even if such party did not prevail in all matters, not necessarily the party in whose favour a judgment is rendered. Further, in the event of any breach by Employee under this Agreement, Employee shall pay all the expenses and reasonable attorneys’ fees incurred by Company in connection with such breach if the Company is the prevailing party.

viii. Counterparts . This Agreement may be executed in any number of counterparts (including facsimile counterparts or counterparts delivered by electronic transmission (e.g., PDF attachment)), each of which shall be an original, but all of which together shall constitute one instrument.

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date first above written.

Employee Name

Company Name

So, now we understand the importance of an employee intellectual property agreement and how it can affect the company if such an agreement is not drafted. This agreement acts as a layer of protection to the company especially a new company in avoiding any future problems. Much care must be given to the intellectual property of an employee. It can either help in the growth or destruction of the company.

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Agreements Can Help Protect IP and Ensure Company Ownership of Employee Inventions

Employment contracts may not be enough to guard against improper use of work products.

When an employee creates or conceptualizes an invention during the course of their employment, who owns the intellectual property (IP) rights in that invention — the worker or the company? Absent a specific agreement to the contrary, inventors in the U.S. typically own their inventions, which is why it’s so important to have formal agreements in place to protect company ownership, write April Wurster, Tracy Clements and Shifa Kousar.

Confidential information and inventions assignment agreement (CIIAA) ideally should be executed prior to the commencement of employment. In most states, a new offer of employment is sufficient consideration for a CIIAA agreement. But, because in many states, continued employment is not sufficient consideration, best practice is to have the CIIAA executed before employment begins.

Proactive use of CIIAAs is one of the best ways to address confidentiality and the protection of the employer’s IP. 

Specific definition of confidentiality

The agreement should clearly delineate the type of confidential information covered by the agreement, tailoring definitions to suit the nature of the company’s business and industry. If there is a certain category of information that is particularly sensitive, the company should include that category in the definition of confidential information . In some states, it is unlawful to designate the terms and conditions of employment as confidential information, so consider consulting with legal counsel before doing so.

Companies should also provide notice of the Defend Trade Secrets Act’ immunity provisions,  which include certain whistleblower protections for employees, in the CIIAA.

How to Protect Precious IP From Layoff-Related Insider Theft

2023 has seen dozens of companies issue layoffs, and some predictions call for even more through the end of the year. Aside from a potential loss of institutional memory, companies undergoing a reduction in force also open themselves up to another threat: trade secret theft.

Disclosure and use restrictions for confidential Information

CIIAA agreements should include confidentiality provisions that prohibit employees from disclosing confidential information to third parties during and after employment and that prohibit use, access or copying confidential company information for any purpose except in the performance of the employee’s authorized employment duties. The agreement should specify that employees cannot disclose or use the company’s confidential information for personal gain or to benefit another third party after their employment ends. In some cases, laws may prohibit non-compete clauses, but employment contracts may place restrictions on an employee’s post-employment use of confidential information. These restrictions typically outline the duration and scope of the obligation to maintain confidentiality after leaving the company.

Assignment of proprietary rights

In a CIIAA agreement, the employee should acknowledge that all copyright-protected work prepared by an employee within the scope of their employment constitutes “work made for hire,” as defined in the Copyright Act of 1976 (17 U.S.C. § 101) and is, therefore, owned by the company.

To ensure that work products not subject to the work-made-for-hire doctrine will be owned by the company, the CIIAA may also include a present assignment of all other work products and IP rights created by the employee. 

Further, the CIIAA should include a waiver of all moral rights relating to copyrights in work products created during employment. “Moral rights” typically refers to the right of an author to prevent revision, alteration or distortion of their work, regardless of who owns the work. Moral rights do not apply to work made for hire and are non-assignable but may be waived by the author.

Finally, as a catch-all, the CIIAA should include a present and future assignment of the employee’s entire right, title and interest in and to all work product and IP rights made or conceived during the course of employment.

Pre-existing intellectual property of the employee

It is a good idea to ask the employee to identify any pre-existing IP rights in which the employee may have an ownership interest. Failure to identify any pre-existing IP can also act as a representation and warranty that there is no pre-existing IP in which the employee has an ownership interest. If the employee has pre-existing IP, the CIIAA can include a license to the company to such pre-existing IP to the extent it is used with or incorporated into any work products for the company. 

Third-party IP

Take affirmative steps to prevent the employee from including third-party IP, including IP of a former employer, in any work product created by the employee. One of the best steps a company can take to avoid IP contamination is educating employees about IP contamination during the onboarding process and the importance of not using a former employer’s IP in their current employment.

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IP Assignment Agreement Review

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ContractsCounsel has assisted 36 clients with intellectual property assignment agreements and maintains a network of 64 intellectual property lawyers available daily.

An intellectual property (IP) assignment agreement is a legal contract between a party that transfers its intellectual property rights (assignor) to another party (assignee). This agreement outlines the specifics of the transfer, including the type of IP, the scope of the assignment , compensation, and conditions.

How Do I Review an IP Assignment Agreement?

The purpose of an IP assignment agreement is to facilitate the transfer of patents, copyrights , trademarks , and other valuable IP. For this reason, it is vital that an IP assignment agreement is thoroughly reviewed before the parties execute the contract.

To review an IP assignment agreement, follow these steps:

• 1. Read entire contract Before agreeing to sign an IP assignment agreement, you need to read the entire document. You should familiarize yourself with the basic terms found in the contract and ensure that the provisions laid out in the contract accurately represent the agreement between the parties.
• 2. Note key terms and provisions Identify the key terms of the agreement like the type of intellectual property and the rights and restrictions that are attached to the property. Make sure that you understand these terms and make a list of any provisions you’re unsure about or that may need to be readdressed and further negotiated.
• 3. Verify financial terms Be sure to double-check any provisions that include financial terms.
• 4. Be prepared to negotiate If you find any terms that need clarification, modification, or adjustments, prepare to negotiate with the other party to reach an agreement that is fair for both sides.
• 5. Seek legal help Intellectual property assignment agreements can be complex legal documents . Before signing this contract, you should consider seeking legal advice from an experienced intellectual property lawyer . An attorney can provide guidance, review the contract for mistakes, and offer recommendations.

Reviewing an IP Assignment Agreement requires an eye for detail and a deep understanding of the legal implications of transferring intellectual property ownership rights.

When you hire an attorney to review this type of contract, you are ensured that your rights and interests are protected. An intellectual property lawyer will have experience with assignment agreements and will know what terms must be included to make the contract legally binding and enforceable.

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What Should I Look for in an IP Assignment Agreement

A comprehensive IP assignment agreement should include the following key terms:

• Party information The names and contact information of the assignor and assignee.
• Intellectual property description A clear and detailed description of the intellectual property being transferred, including the type of IP like whether it's a patent, copyright, trademark, or other type.
• Scope of assignment The extent of the rights to the intellectual property being transferred like whether the assignment encompasses all rights or involves some restrictions.
• Consideration The monetary payment, equity, royalties, or other value being exchanged for the assignment.
• Warranties and representations Any assurances made by the assignor regarding the authenticity of the IP and its non-infringement.
• Termination clause The circumstances under which the assignment can be terminated by either party. This section should include any required notice of termination and consequences for terminating before the contract term is up.
• Governing law and jurisdiction The parties should agree upon what laws and jurisdiction will govern the agreement in case of a dispute.
• Confidentiality Provisions to protect any sensitive information shared between the parties.
• Recordation Whether the assignment will be recorded with relevant authorities like the United States Patent and Trademark Office (USPTO).

If you are unsure what provisions should be added to your agreement to best protect your interests, always consult with an experienced intellectual property attorney.

How Does an IP Assignment Agreement Work?

To successful assign intellectual property to an assignee through an assignment agreement, the following process should be followed:

• The assignor (current owner of the IP) and assignee (new owner of the IP) must negotiate and agree on the transfer, including terms like compensation and assignee rights.
• A lawyer familiar with intellectual property assignment should draft the contract incorporating the agreed-upon terms and ensuring legal compliance.
• Both parties are encouraged to thoroughly review the drafted agreement to ensure accuracy, clarity, and mutual understanding. Negotiations can address and fix any discrepancies.
• Once both parties are satisfied with the agreement, they sign the contract, indicating their consent to the terms. Depending on the laws of the jurisdiction, the signatures may need to be notarized.
• Once the contract is signed, the assignor transfers ownership rights to the assignee.
• Depending on the jurisdiction and type of IP, the assignment may need to be recorded with a specific government agency to establish public notice.

Each step in this process is vital to transfer intellectual property rights legally and securely between parties.

What are the Three Major Methods of IP Assignment?

IP assignment typically occurs through three major methods:

• Assignment deed A formal written agreement where the assignor expressly transfers ownership rights to the assignee.
• Incorporation by reference An agreement refers to another document like an employment agreement , that contains IP assignment clauses .
• Employment agreement When an employee creates intellectual property in the course of their employment, an employment agreement should include provisions that assign ownership of the created IP to the employer.

Each of these methods are used in different scenarios with different purposes. Whenever you are planning to assignment intellectual property rights, always consult with an attorney to determine which method is right for you.

Should I Hire a Lawyer to Review an IP Assignment Agreement?

Yes. Even though it is not legally required for a lawyer to draft and review an IP assignment agreement, it is highly recommended to have a legal professional create or at least review this contract.

Hiring a lawyer to review your contract provides the following benefits:

• Legal expertise Lawyers who specialize in intellectual property will understand assignment contracts and the legal implications of IP assignment. Your lawyer can identify potential weaknesses in the agreement that non-legal professionals might overlook.
• Customization Every intellectual property assignment agreement will be different depending on the type of IP and the needs of the parties. A lawyer can tailor the agreement to suit the goals of the parties involved.
• Risk mitigation A lawyer's review helps identify and address potential legal risks, protecting your interests and reducing the likelihood of disputes.
• Advocacy If certain terms need to be revised, a lawyer can negotiate more favorable terms on your behalf.
• Confidence in the contract Knowing that a legal professional has thoroughly reviewed the agreement can provide you with confidence and peace of mind.

An IP assignment agreement can have significant legal and financial implications for the assignor and assignee. Any mistakes could lead to disputes between the parties or even an infringement lawsuit.

When you hire a lawyer to review the IP assignment agreement, the lawyer will ensure that the contract is fair, follows all applicable laws in the jurisdiction, and will be legally enforceable if a dispute arises.

Get Help with Hiring an Attorney

Do you need help with an IP assignment agreement? If so, post a project in ContractsCounsel's marketplace to receive bids from lawyers who are licensed to practice law in your state and can handle your project. All lawyers on the ContractsCounsel's platform are vetted by our team to make sure you are provided with top-tier service.

ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.

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At Whalen Legal Group, PC, we strive to ensure that our clients are provided with the highest quality legal representation. Our team is committed to providing you with personalized and effective legal advice. We specialize in Business Law, Estate Planning and Trust, and Real Estate Law and have years of experience in these fields.Our goal is to provide our clients with the best possible service and to ensure that their legal matters are handled with compassion, integrity, and transparency. We understand that every situation is different and we take the time to listen and understand each and every one of our clients’ needs.

I represent business owners throughout California with their business, IP and employment law matters.

I attended the University of Illinois- College of Law on a full merit scholarship. While in law school, I was a 711 Attorney at the Lake County State's Attorney's Office, specializing in traffic and misdemeanor cases. After graduation, I served as in-house counsel for one of the largest insurance companies in the world, managing thousands of cases from initial intake to trial. Upon leaving this position, I accepted a role as Legal Counsel to the Illinois Senate Minority Leader. There, I advised Senators on legislative matters, labor and employment law, and complex constitutional questions. After leaving public service, I accepted a role at a mid-size Chicago-based law firm, where I practice insurance defense and litigation. In addition to this, I also serve as outside general counsel to a food brokerage business, where I handle all of their labor and employment matters.

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Intellectual Property Assignment Agreement Template

Used 5,944 times

An Intellectual Property Assignment Agreement transfers ownership of any IP created by an employee to the employer. Make sure you have your employees sign this document prior to their start.

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Intellectual Property Agreement Template

Prepared by:

​ [Sender.FirstName] [Sender.LastName] [Sender.Company] ​

Prepared for:

​ [Employee.FirstName] [Employee.LastName] ​

​ [Employee.Company] ​

This Intellectual property agreement is entered into on (date) and will be effective from the same date, between [Sender.FirstName] [Sender.LastName] and [Employee.FirstName] [Employee.LastName] (Receiver).

­­As a condition of my employment with the Company, its subsidiaries, affiliates, successors or assigns (hereinafter, the “Company”), and in consideration of my employment with the Company and my receipt of the compensation now and hereafter paid to me by the Company, I agree to the following:

This Property Assignment Agreement will have the effect of transferring ownership in anything created by the employee during the period of his/her employment with the company. Intellectual Property Assignment Agreements are also entered into between business entities and even individuals, where one party is looking to sell the rights to its intellectual property in exchange for something of value — usually money.

​In an employer/employee Intellectual Property Assignment Agreement (which is what this agreement is), the employee may want to limit the intellectual property that would otherwise transfer to the employer. For example, the employee may not want to transfer anything conceived or created by him/her on his/her own time, especially if it does not relate to the employer’s business.

1. INVENTIONS RETAINED & LICENSED.

I have attached hereto, as Exhibit A, a list describing all inventions, original works of authorship, developments, improvements, and trade secrets which were made by me prior to my employment with the Company (collectively referred to as “Prior Inventions”), which belong to me, which relate to the Company’s proposed business, products or research and development, and which are not assigned to the Company hereunder; or, if no such list is attached, I represent that there are no such Prior Inventions.

If in the course of my employment with the Company, I incorporate into a Company product, process or machine a Prior Invention owned by me or in which I have an interest, the Company is hereby granted and shall have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide license to make, have made, modify, use and sell such Prior Invention as part of or in connection with such product, process or machine.

At the time of joining the company, I was the owner of or held proprietary rights in relation to the intellectual property identified herein and related to the company’s business of (description of business), which Intellectual Property was developed in contemplation of being used, either directly or indirectly, by the Company in connection with carrying on the business of the Company.

2. ASSIGNMENT OF INVENTIONS.

I agree that I will promptly make full written disclosure to the Company, will hold in trust for the sole right and benefit of the Company, and hereby assign to the Company, or its designee, all my rights, title, and interest in and to any and all inventions, original works of authorship, developments, concepts, improvements, designs, discoveries, ideas, trademarks or trade secrets, whether or not patentable or registrable under copyright or similar laws, which I may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, during the period of time I am in the employ of the Company (collectively referred to as “Inventions”), except as provided in “Exception to Assignments” below.

I further acknowledge that all original works of authorship which are made by me (solely or jointly with others) within the scope of and during the period of my employment with the Company and which are protectable by copyright are “works made for hire,” as that term is defined in the United States Copyright Act.

I understand and agree that the decision whether or not to commercialize or market any invention developed by me solely or jointly with others is within the Company's sole discretion and for the Company’s sole benefit and that no royalty will be due to me as a result of the Company’s efforts to commercialize or market any such invention.

3. REMAINDER OF INTELLECTUAL PROPERTY.

I hereby declare that I have assets, rights or interests that go beyond the scope of this agreement, and are not included as a part of this agreement, either in sum or whole. The benefit of such assets may not be used by [Employee.Company] , unless with my expressly stated written permission.

4. MAINTENANCE OF INVENTIONS RECORDS.

I agree to keep and maintain adequate and current written records of all Inventions made by me (solely or jointly with others) during the term of my employment with the Company. The records will be in the form of notes, sketches, drawings, and any other format that may be specified by the Company.

The records will be available to and remain the sole property of the Company at all times.

5. COSTS AND EXPENSES.

If either party incurs any costs, fees, expenses, etc., both parties will be liable to pay for costs and expenses, in full, unless if otherwise mentioned explicitly in this Agreement, any of the other Ancillary Agreements or any other agreement between parties. If any cost was borne by any person on the instance of completing a task for another person, the person who completed the task shall be reimbursed for the amount spent, as long as they can provide receipts.

6. PATENT & COPYRIGHT REGISTRATIONS.

I agree to assist the Company, or its designee, at the Company’s expense, in every proper way to secure the Company’s rights in the Inventions and any copyrights, patents, mask work rights or other intellectual property rights relating thereto, in any and all countries, including the disclosure to the Company of all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments and all other instruments which the Company shall deem necessary in order to apply for and obtain such rights and in order to assign and convey to the Company, its successors, assigns, and nominees the sole and exclusive rights, title and interest in and to such Inventions, and any copyrights, patents, mask work rights or other intellectual property rights relating thereto.

I further agree that my obligation to execute or cause to be executed, when it is in my power to do so, any such instrument or papers shall continue after the termination of this Intellectual Property Assignment Agreement.

If the Company is unable because of my mental or physical incapacity or for any other reason to secure my signature to apply for or to pursue any application for any United States or foreign patents or copyright registrations covering Inventions or original works of authorship assigned to the Company as above, then I hereby irrevocably designate and appoint the Company and its duly authorized officers and agents as my agent and attorney in fact, to act for and in my behalf and stead to execute and file any such applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent or copyright registrations thereon with the same legal force and effect as if executed by me.

7. COOPERATION.

I agree to perform all commercially reasonable acts deemed necessary or desirable by the Company to assist the Company, at the Company’s expense, in obtaining and enforcing the full benefits, enjoyment, rights and titles that come as a part of the Assigned IP. Such acts may include, but are not limited to, execution of documents and assistance or cooperation (i) in the filing, prosecution, registration, and memorialization of assignment of any applicable patents, copyrights, trademark, mask work, or other applications for my invention, (ii) in the enforcement of any applicable patents, copyrights, trademark, mask work, moral rights, trade secrets, or other proprietary rights, and (iii) in other legal proceedings related to the Assigned IP.

In the event that the Company is unable, for any reason, to secure my signature(s) to any document required to file, prosecute, register, or memorialize the assignment of any patent, copyright, trademark, mask work or other applications or to enforce any patent, copyright, mask work, moral right, trade secret or other proprietary right under any Assigned IP, I hereby irrevocably designate and appoint the Company and the Company’s duly authorized officers and agents as my agents and attorneys-in-fact to act for and on my behalf and instead of me, (i) to execute, file, prosecute, register and memorialize the assignment of any such application, (ii) to execute and file any documentation required for such enforcement, and (iii) to do all other lawfully permitted acts to further the filing, prosecution, registration, memorialization of assignment, issuance, and enforcement of patents, copyrights, mask works, moral rights, trade secrets or other rights under the Assigned IP, all with the same legal force and effect as if executed by me.

8. RETURNING COMPANY DOCUMENTS.

I agree that, at the time of leaving the employ of the Company, I will deliver to the Company (and will not keep in my possession, recreate or deliver to anyone else) any and all devices, records, data, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, equipment, other documents or property, or reproductions of any aforementioned items developed by me pursuant to my employment with the Company or otherwise belonging to the Company, its successors or assigns.

9. REPRESENTATIONS.

I agree to execute any proper oath or verify any proper document required to carry out the terms of this Agreement. I represent that my performance of all the terms of this Agreement will not breach any agreement to keep in confidence proprietary information acquired by me in confidence or in trust prior to my employment by the Company. I have not entered into, and I agree I will not enter into, any oral or written agreement in conflict herewith.

10. EQUITABLE REMEDIES.

I AGREE THAT IT WOULD BE IMPOSSIBLE OR INADEQUATE TO MEASURE AND CALCULATE THE COMPANY’S DAMAGES FROM ANY BREACH OF THE COVENANTS SET FORTH HEREIN.

ACCORDINGLY, I AGREE THAT IF I BREACH ANY OF SUCH PROVISIONS, THE COMPANY WILL HAVE AVAILABLE, IN ADDITION TO ANY OTHER RIGHT OR REMEDY AVAILABLE, THE RIGHT TO OBTAIN AN INJUNCTION FROM A COURT OF COMPETENT JURISDICTION RESTRAINING SUCH BREACH OR THREATENED BREACH AND TO SPECIFIC PERFORMANCE OF ANY SUCH PROVISION OF THIS AGREEMENT.

I FURTHER AGREE THAT NO BOND OR OTHER SECURITY SHALL BE REQUIRED IN OBTAINING SUCH EQUITABLE RELIEF AND I HEREBY CONSENT TO THE ISSUANCE OF SUCH INJUNCTION AND TO THE ORDERING OF SPECIFIC PERFORMANCE.

11. GOVERNING LAW.

This Agreement will be governed by the laws of the State of [Employee.State] . I hereby expressly consent to the personal jurisdiction of the state and federal courts with jurisdiction in [Employee.Country] [Employee.State] for any lawsuit filed there against me by the Company arising from or relating to this Agreement.

12. ENTIRE AGREEMENT.

This Intellectual Property Assignment Agreement sets forth the entire agreement and understanding between the Company and me relating to the subject matter herein and merges all prior discussions between us.

No modification of or amendment to this Agreement, nor any waiver of any rights under this agreement, will be effective unless in writing signed by the party to be charged.

Any subsequent change or changes in my duties, salary or compensation will not affect the validity or scope of this Agreement.

13. SEVERABILITY.

If one or more of the provisions in this Intellectual Property Assignment Agreement are deemed void by law, then the remaining provisions will continue in full force and effect.

14. SUCCESSORS & ASSIGNS.

This Agreement will be binding upon my heirs, executors, administrators and other legal representatives and will be for the benefit of the Company, its successors, and its assigns.

15. DISPUTES AND RESOLUTIONS.

Both parties agree that they will try to amicably settle any disputes amongst themselves, or with the help of a third party such as an agent. In case that they are unable to reach a settlement or do not wish to discuss the terms of the settlement with one another, they may approach a court of law situated in [Sender.Country] , [Sender.State] where applicable laws will come into motion.

AGREED AND ACCEPTED.

I ACKNOWLEDGE THAT I HAVE CAREFULLY READ THE FOREGOING INTELLECTUAL PROPERTY ASSIGNMENT AGREEMENT, I AM SATISFIED THAT I UNDERSTAND IT COMPLETELY, AND I AGREE TO BE BOUND BY ITS TERMS AND CONDITIONS.

​ [Sender.Company]

​ [Sender.FirstName] [Sender.LastName] ​

LIST OF PRIOR INVENTIONS AND ORIGINAL WORKS OF AUTHORSHIP­­­­­­

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IP Clauses In Employment Contracts And Assignments

Written by Saad Khan | March 30, 2022

IP Contracts

If you have a contract of employment, there’s a good chance it includes a section that deals with intellectual property (IP) rights. The IP clause will likely state that all IP created by the employee in the course of their employment is owned by the employer. As IP encompasses a broad range of rights, such as trade marks, designs, copyright, database rights and patents, it’s important to read this clause carefully before signing your employment contract.

This blog will focus only on the IP clause in the context of copyright. Copyright protects works such as books, music, software code and film (amongst other things), and arises automatically – so there is no requirement to register the right. The owner of copyright has many exclusive rights in relation to the work in question. For example, an author of a book has exclusivity to copy the book, issue copies to the public, and make adaptations. As such, the owner of copyright work holds the cards when exploiting the IP’s potential. Whether you’re an employer or employee, pre or post-contract, it’s extremely useful to know your rights in relation to IP clauses.

The general rule of copyright

The general rule is that the author (defined as the person who creates the copyright work) is the first owner. However, if a literary, dramatic, musical or artistic work is made by an employee in the course of their employment the employer is the first owner, subject to any agreement to the contrary. As mentioned earlier, employers will reinforce this by including an IP clause in the employment contract, along with the other rights.

Firstly, you need to know whether you are in an employee-employer relationship, as opposed to a worker or self-employed. The contract document isn’t determinative, so it’s necessary to look at the practical reality and nature of the relationship between both parties.

Secondly, the work needs to be made during the course of an employee’s employment. Below are some factors that will help determine this:

• a) The terms of the contract of employment
• b) Where the work was created
• c) Whether the work was created during normal office hours
• d) Who provided the materials for the work to be created
• e) The level of direction provided to the author
• f) Whether the author can refuse to create the work/s
• g) Whether the work is ‘integral’ to the business

To illustrate, in a recent case, the High Court dealt with the interpretation of an employment contract. The employee (Mr P) created virtual forensic computing (VFC) software prior to his employment at a company called MD5. MD5 employed him on the premise that he would develop that VFC software for the company’s product, which would be sold to their customers. Mr P argued he worked on the VFC software at home on his own computer and during his time off. Similarly, Mr P worked at home on a user guide to assist the end-users of MD5’s product.

The Judge stated that it did not matter that Mr P developed the software using his own computer at home as he was paid to do this, and it was part of his employment duties. Similarly, the guide was also integral to the software and also formed part of his duties. Therefore, MD5, the employer, was held to be the first owner of the copyright to the VFC software and user guide.

As this case shows, doing work at home on a personal computer was deemed to be in the course of employment, but this was based on Mr P having been hired to develop the software for MD5. Had Mr P worked on a different software unrelated to his MD5 duties, he would have a stronger argument. It’s also important to note that the factors listed above are not a checklist exercise when determining ‘in the course of employment’. The court will look at those factors which are relevant to the facts of each case.

Assignment of copyright

Another key thing to consider is commissioning someone to create work for you. If you hire someone such as a freelancer/creative agency to produce a copyright protectable work, such as a logo, they will be the first owner of the copyright in the artistic work. These individuals or companies will not be your employees, meaning you do not automatically become the first owner of their copyright works. Such a situation can be overlooked and, before you know it, the copyright has been assigned to some other party.

Accordingly, you will want them to assign the IP rights in the work to you as soon as possible. An assignment means they transfer the ownership of the IP rights in question to you.

An assignment must be in writing, signed by or on behalf of the assignor. It is wise to have this document prepared before commissioning any work.

The IP clause in an employment contract will of course be relevant to some employees more than others. Certain roles may require employees to create pieces of work eligible for IP protection over the course of their employment. Equally, an employee may take some initiative outside of work to create something innovative and unique that is closely related to their employment.

From an employee’s perspective, check whether any work you create is protected by copyright. Then, make sure you are in fact an employee. And finally, consider whether you are creating the work in the course of your employment. Before creating work while employed, ask yourself if the copyright work is something you would create in the course of your employment. It’s also worth checking the clauses in the contract as some can be quite wide and potentially try and take ownership of all IP you create.

From the employer’s side, ensuring there is an employer-employee relationship in the first place would be wise to start with. Then, include an IP clause and ensure it covers all IP rights, regardless of whether it may or may not be relevant to you and your business. Sound recordings and broadcasts don’t fall under the general rule so if these are important, consider getting these assigned to you.

If you require assistance with IP clauses in contracts or drafting an assignment, no matter how small or complex, then please get in touch with one of our specialist lawyers.

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Benjamin Franklin is credited with coining the axiom that "an ounce of prevention is worth a pound of cure." Allegedly, Franklin actually made the statement in connection with fire safety, which was an avocation for him. Today, the axiom applies perfectly to corporate efforts to manage intellectual property (IP) issues. Many companies rely on old proprietary rights forms or use generic forms collected by the human resource department (HR) with little thought given to downstream consequences.

This article advocates for having in-house or retained counsel make periodic reviews of corporate employment agreements and for having counsel involved in any new hire where there is strong likelihood that the position will lead to the creation of IP. Furthermore, interviewing a potential new hire with prior IP experience for a position that is expected to generate IP should receive special attention in order to avoid conflicts with a prior employer and any prior agreement concerning IP.

The IP provisions in employment agreements frequently include a holdover or surviving provision that obligates the departing employee to assign post-employment inventions that have a tangential relationship to the employer's business back to the employer. These provisions present several problems.

For the new employer, this information should be gathered before hiring the potential employee in order to evaluate the possibility of a conflict with a prior employer and determine if a prior agreement creates any limitation on the potential employer's ability to engage in the work of the proposed position. In requesting this information, it is important to have the potential employee identify all prior inventions, whether or not patented and/or assigned to another company or previous employer. If the individual is hired, this information should be documented in the new employment agreement.

For the prior employer, the issue turns on whether the provision surviving the prior employment is reasonable and enforceable. Many jurisdictions view a surviving assignment provision as a post-employment restriction and analyze them in a manner similar to the approach taken with non-compete agreements. Namely, courts consider whether the time and scope of the agreement provisions are reasonable and whether the provisions unduly hinder the employee's ability to work and use acquired skills.

The Supreme Court of New Jersey in Ingersoll-Rand v. Ciavatta, 542 A.2d 879 (N.J. 1988) provided  a helpful overview of the issues with assignment provisions from prior employment agreements that survive the previous employment. In  Ingersoll-Rand, the Supreme Court of New Jersey included the following instructive footnote:

"As an aid to employer's drafting future holdover agreements, we emphasize the following language of Paragraph 1(c) [Ingersoll-Rand agreement] that applies the agreement to 'inventions, copyrights and/or designs ... if conceived as a result of and is attributable to work done during such employment and  relates to a method, substance, machine, article of manufacture or improvements therein within the scope of the business of the company or any of its affiliates.'" Ingersoll-Rand has 30 divisions worldwide, so arguably the clause could apply to activities outside the scope of Ciavatta's employment but within the scope of any of those numerous divisions. We caution employers that such language appears to be overly broad, and, hence, would be unenforceable."

The above caution is something that a new employer should keep in mind when evaluating a potential employee's prior agreement. Note how the risk is allocated based on the reasonableness of the provision, and a new employer's possible defense in hiring the employee. If the provision appears to be reasonable on its face, could enforcement of the provision hinder the employee in the proposed position? If the provision does not seem reasonable, is the potential hire important enough that the new employer is willing to litigate the issue?

Having cleared the pre-employment hurdles, an employment agreement should consider and specifically address anticipated IP-related issues. In the words of Franklin, a solid agreement is the recommended "ounce of prevention."

Consider the case of  Aetna-Standard Engineering v. Rowland, 493 A.2d 1375 (Pa. Super. Ct. 1985) . In that case, a designer was hired and was subsequently tasked with improving a given machine and, along with his supervisor, was successful. The parties did not have any agreement regarding ownership or assignment of the invention in place. The employer attempted to force the employee to assign the patent, but was rejected by a lower court and affirmed on appeal.

In  Aetna-Standard, the inventor had training and engineering experience when he was hired, but he maintained that he had no contract or obligation, written or oral, requiring assignment of any invention to Aetna. He refused to assign his invention. When he was given a specific task that resulted in the invention for which a patent was filed, he received no additional compensation and was only instructed to develop equipment for an Aetna project contract with a third party. Ultimately, in the absence of an agreement, Rowland did not have to assign the patent to Aetna and retained his co-inventor rights. However, since Rowland's supervisor was a co-inventor who had assigned his interest to Aetna, Aetna was at least a co-owner of the patent with Rowland and each was free to use the patent without any obligation to the other. Aetna ultimately received an expensive "pound of cure."

In 2011, the Supreme Court, in  Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, 563 U.S. 776 (2011) , reiterated the long and well-established principles that the rights to an invention belong to the inventor and absent an express grant of those rights to the employer, the employer does not have rights in the invention. The principle relied upon dates back to a Supreme Court case,  United States v. Dubilier Condenser, 289 U.S. 178 (1933) .

When considering whether an employee has a duty to assign inventions to their employer, courts also consider the inventor-employee's refusal to sign employment agreement documents with IP assignment provisions. The failure to address the issue can be fatal to a later effort to force an assignment under another theory of ownership. See Banks v. Unisys, 228 F.3d 1357 (Fed. Cir. 2000) . Stated in different terms, "if the scope of an employee's work is generalized within a field, a court will not presume an employee's duty to assign his employer patents, absent a contract.  Peregrine Semiconductor v. RF Micro Devices, No. 3:12-CV-0911-H (S.D. Cal. Jan. 8, 2014). In that case, Peregrine was denied a preliminary injunction because it had no contract assigning employee inventions to the company, and could not show that the inventor was bound under the "hired-to-invent" doctrine. The "hired-to-invent" doctrine is an equitable one that generally states that if an employee is hired to design and develop new instrumentalities in order to solve a particular problem, the employer has an equitable right to practice the inventions devised by the employee in solving that problem; see also  Standard Parts  v. Peck, 264 U.S. 52, 59-60 (1924). The "hired-to-invent" doctrine does not, however, transfer legal title to a patent. An agreement transferring all rights in the invention to the employer is always preferred.

The language of an IP assignment provision included with an employment agreement is critical. Assignment provisions that have express, nonconditional language are likely to be enforced. Future, contingent provisions are problematic. Accordingly, there is a significant difference between " I will assign" and invention, and " I do hereby assign" the invention.

This was demonstrated in the case of  DDB Technologies v. MLB Advanced Media, 517 F.3d 1284 (Fed. Cir. 2008) . The  DDB case involved a surviving IP provision in an agreement that included the following language: "Employee shall promptly furnish to company a complete record of any and all technological ideas, inventions and improvements, whether patentable or not, which he, solely or jointly, may conceive, make or first disclose during the period of his employment with [Schlumberger]. Employee agrees to and  does hereby grant and assign to Company or its nominee his entire right, title and interest in and to ideas, inventions and improvements coming within the scope of Paragraph 3:" The court followed the general rule that when the employment agreement expressly grants rights in future inventions to the employer, no further act is required once an invention comes into being, and the transfer of title occurs by operation of law.

In contrast, as noted in  Stanford University v. Roche Molecular Systems,  583 F.3d 832, 842 (Fed. Cir. 2009) , an agreement to assign an invention in the future (" I will assign") has been interpreted by the U.S. Court of Appeals for the Federal Circuit as conveying mere equitable title. As a mere promise to assign rights in the future, such language requires a subsequent assignment to transfer legal title.

Thus, IP agreement language that creates a promise to assign future IP does not readily resolve the ownership issue. In  IpVenture v. Prostar Computer, 503 F.3d 1324 (Fed. Cir. 2007) , the Federal Circuit considered the following language: "Such Proprietary Developments are the sole property of HP, and I agree: a. to disclose them promptly to HP; b.  to assign them to HP; and c. to execute all documents and cooperate with HP in all necessary activities to obtain patent, copyright, mask work, and/or trade secret protection in all countries, HP to pay the expenses." The Federal Circuit concluded that it was only an agreement to assign at a later date, rather than a present assignment. Accordingly, the agreement language required a subsequent written instrument to vest title in the employer. In the recent case of  Advanced Video Technologies v. HTC,  879 F.3d 1314 (Fed. Cir. 2018) , the Federal Circuit again held that employment agreement assignment language using the terms " will assign" is a mere promise to assign, and it is not a present assignment transferring title by operation of law.

The primary takeaways for employers are as follows: when hiring someone that might generate IP, be sure to research all prior agreements and work experience that could impact the potential employee's duty and/or ability to assign inventions to either the prior employer or potential new employer; and make sure that company employment agreements include  language that presently assigns IP by operation of law; and, even if corporate documents have acceptable present assignment language, obtain separate signed assignment agreements, prepared for recordation, for each invention. Separate assignment documents are straight forward and can be recorded with the U.S. Patent and Trademark Office without concern for private company information that might be in an employment agreement.

As the cited cases clearly demonstrate, the attention paid to these issues ahead of time is more than " an ounce of prevention."

Reprinted with permission from the March 30, 2018 issue of The Legal Intelligencer ©2020 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.

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D. Mass. IP Litigation Blog

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Patent Assignments in Employment Agreements – a Sometimes Overlooked, but Always Important Component

• November 16, 2021

By: Peter C. Lando and Thomas P. McNulty

With assistance from summer intern Tyler Gruttadauria

Businesses, of course, have a strong interest in owning intellectual property created by their employees. Intellectual property—patents, copyrights, and other confidential and proprietary information including trade secrets—is often the most valuable asset a business can own, so it is important to ensure that employee developments and inventions belong to the employer. In the United States, inventions presumptively belong to the inventor, and any transfer of ownership (“assignment”) must be in writing to be effective. Rather than requiring employees to sign assignment agreements for each patent application filing, employers sometimes rely on employment agreements and handbooks to establish ownership in intellectual property created by an employee. Employers often provide employment agreements with assignment clauses that are intended to give the employer rights in inventions made by the employee during the period of employment. These assignment clauses are often treated as mere boilerplate, yet the precise wording of these clauses can have major impacts on the effectiveness and limitations of any assignment.

Ensure that you have an Assignment and not a mere promise to assign

When drafting an agreement to have an employee assign future inventions, it is vital that the language used in an assignment clause states a present-tense, actual assignment. Phrases such as “hereby assign,” “agrees to grant and does hereby grant,” or that inventions “shall belong” to the employer and employee “hereby conveys, transfers and assigns” have been deemed by the courts to be effective to transfer ownership of a future invention without the need for any subsequent agreement. Ownership effectively transfers immediately, once the invention has been made. Assignment clauses that use future tense language, on the other hand, generally will require an additional agreement to result in a transfer of ownership of the invention, and any intellectual property (“IP”) covering the invention. Terms such as “will assign,” “agree to assign,” “will be assigned,” and the like, have been found by numerous courts to constitute nothing more than a promise or contract to assign an invention in the future, but not to serve as an actual assignment.

In addition to the wording used in the assignment clause, the language of any carve-outs should also be scrutinized. Agreements may contain a carve-out clause to exclude a new employee’s prior inventions from being assigned, or to prevent assignment of inventions unrelated to the employee’s work from being swept into the assignment provision. A broad, non-specific carve-out clause may prevent an employee agreement from automatically assigning inventions of that employee, even where the assignment clause includes the proper “hereby assign” type of language, because this leaves open the possibility that an invention is not subject to the assignment clause. This contrasting language may create an ambiguity in the employment agreement that subjects it to construction under state law, which in turn may allow for the employee to introduce extrinsic evidence, such as conversations that took place during employment negotiations, to defeat the automatic assignment. While patent assignment provisions are governed by Federal Circuit law, resolution of contractual ambiguities is governed by state law, which varies considerably regarding the admissibility of such extrinsic evidence.

Failure to obtain an automatic assignment can have negative consequences

An assignment clause that is deemed ineffective to automatically transfer ownership of an invention can create significant problems for an employer. In such circumstances, a business would not have standing to bring a patent infringement suit until it has taken the necessary steps to obtain a valid assignment. This may require the filing of a breach of contract claim against the employee to require fulfillment of the contractual obligations, including execution of assignment documents. In the interim, infringers could continue practicing the invention; and if the infringing activity has gone on long enough, the six-year statute of limitations may prohibit full recovery of damages. Further, if an inventor/employee has made only a promise to assign, and instead transfers ownership to a third party who lacks knowledge of the assignment obligation, that second transfer of ownership may well prevail, leaving the original employer with no exclusionary rights at all.

Ineffective assignment provisions can affect more than just litigation. Businesses and investors typically conduct IP due diligence when entering into transactions involving the investment in or sale of IP assets, company divisions or entire entities, and any weaknesses in assignment provisions may affect the perceived value of the IP assets and/or business being considered.

Do not count on the “Hired-to-Invent” doctrine to result in ownership of employee inventions

Some employers do not require employees to sign an agreement containing an assignment of inventions because they believe that they automatically own inventions that they paid someone to create. Under the “hired-to-invent” doctrine, this will only occasionally be correct. Employees or contractors hired (and paid) specifically to create a particular invention or to solve a particular problem may be deemed to have implicitly assigned their rights in the invention to the employer. This is a highly fact-based determination, however, and applies only to inventions created in response to the specific thing the employee was hired to do. A mere title of “researcher” or even “inventor” will not, standing alone, suffice to ensure ownership of inventions by the employer. Further, until a court has ruled one way or the other, an employer relying on this doctrine will not have any certainty in its rights to the invention. Should the court rule against the employer, it would lose the exclusionary rights it believed it possessed and may face an infringement lawsuit from the employee or anyone to whom the employee may have assigned the invention/patent rights.

Absent an effective assignment, an employer may obtain limited “shop rights” in inventions made using the employer’s time, materials, facilities or equipment. Shop rights take the form of an implied license to practice the invention, precluding the employee from obtaining damages or injunctive relief on a patented invention. Shop rights are limited, however, and do not allow the employer to prevent others from competing by practicing the invention. Further, shop rights cannot be transferred via license or assignment, effectively devaluing the IP assets and, perhaps, the company.

Other Considerations

In addition to having the proper “hereby assign” language, employment contracts should ensure that inventions , rather than just patents or patent applications, are subject to the assignment clause. Language stating that all inventions, improvements, discoveries, and the like, whether or not patentable or copyrightable, are subject to the assignment, ensures that information that could be protected through other regimes, such as trade secrets, automatically become the property of the employer.

Intellectual property has taken on an ever-increasing role in determining the value of a business. A company’s ability to develop and protect its intellectual property is a key factor in its future success. Given this, it is important that businesses recognize that assignment provisions of employment agreements are not mere boilerplate, but instead may be one of the most important legal provisions that ultimately can impact not only an employment arrangement, but the value of the business itself.

• Peter C. Lando
• Thomas P. McNulty

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Secure Your Company's IP with a Confidentiality and Intellectual Property Assignment Agreement: The Essential Guide

LegalGPS : July 26, 2024 at 9:38 AM

As an entrepreneur, one of your most valuable assets is your company's intellectual property (IP). From trade secrets and customer lists to patented inventions and copyrighted materials, your IP is what sets you apart from your competitors and drives your business forward. That's why it's crucial to take the necessary steps to protect this critical asset, and one effective way to do this is by implementing a confidentiality and intellectual property assignment agreement.

Confidentiality and Intellectual Property Assignment Agreement Template

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In this blog post, we'll dive into the world of confidentiality and IP assignment agreements in a friendly and approachable manner, breaking down complex legal topics into simple, actionable steps. We'll explain their importance, outline their key elements, discuss the benefits of implementing them, provide guidance on how to draft one, and highlight common mistakes to avoid. By the end, you'll understand why these agreements are an essential tool for securing your business's intellectual property and be equipped with the knowledge you need to create one tailored to your business.

Imagine sitting down for a coffee chat with a friend, and they're curious about what a confidentiality and IP assignment agreement is, and why it's important for a business. You could explain that protecting a company's intellectual property is essential for its success and longevity. Confidentiality and IP assignment agreements are an effective way to safeguard valuable assets and ensure the business retains control over its IP.

Now, let's delve deeper into the world of confidentiality and IP assignment agreements.

What is a Confidentiality and IP Assignment Agreement?

A confidentiality and intellectual property assignment agreement is a legally binding contract between two or more parties that addresses the protection, disclosure, and sharing of confidential information and the assignment of intellectual property rights. It's designed to safeguard the sensitive information of a business while also ensuring that any intellectual property created by an individual or entity involved with the company is assigned to the company itself.

These agreements differ from other IP protection methods, such as patents and trademarks, in that they specifically address the assignment of IP ownership and provide clear terms for the management of confidential information.

Key Elements of a Confidentiality and IP Assignment Agreement

When crafting a confidentiality and IP assignment agreement, these are the essential elements to include:

Parties Involved

Clearly identify the parties entering into the agreement. This typically includes the company and the individual or entity being hired (e.g., an employee, contractor, consultant, or partner). Be sure to use accurate and complete names, as well as any relevant titles, to avoid any confusion or disputes.

Scope of Confidential Information

Define the scope of the confidential information that is subject to the agreement. This could involve trade secrets, financial data, customer lists, marketing strategies, and any other sensitive information that the business wishes to protect.

Ownership and Assignment of Intellectual Property

Specify the terms of the intellectual property assignment. This involves stating that any IP created, developed, or conceived by an individual or entity within the scope of their relationship with the company will be assigned to the company. The agreement should also mention any exceptions or conditions that apply.

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Non-Disclosure Terms

Establish clear guidelines for the treatment and handling of confidential information. This includes prohibiting the unauthorized use and disclosure of protected information, as well as outlining any restrictions on accessing the information. It's essential to include obligations and expectations for maintaining the confidentiality of the information, even after the agreement's termination.

Duration and Termination

Indicate the duration of the agreement, which could be for a set period or ongoing until terminated by either party. Include any provisions for termination, such as notice requirements or specific events that could trigger termination (e.g., breach of contract, completion of a project).

Remedies for Breach

Outline the remedies available to the aggrieved party should the other party breach the agreement. This may include monetary damages, injunctive relief, or other legal remedies.

Benefits of Implementing a Confidentiality and IP Assignment Agreement

By incorporating a confidentiality and intellectual property assignment agreement into your company's legal arsenal, you can enjoy several key benefits:

Protection of Sensitive Business Information

Your company's competitive advantage relies on the careful protection of its sensitive information. These agreements help ensure that confidential information is treated with care and not disseminated or exploited by unauthorized parties.

Assurance of IP Ownership

By clearly stipulating that any IP created or developed in the scope of the relationship is assigned to the company, you provide a solid legal foundation for your business's ownership claims to all valuable assets.

Attraction of Investors and Partners

A strong confidentiality and IP assignment agreement demonstrates your company's commitment to safeguarding its intellectual property. This can make your business more attractive to potential investors, partners, or clients who are seeking assurance that their information and contributions will be treated with care.

Mitigation of Legal Disputes and Risks

Establishing clear guidelines and expectations around the treatment of confidential information and the assignment of IP rights can help prevent future misunderstandings and disputes while reducing the risk of costly litigation.

How to Draft a Confidentiality and IP Assignment Agreement: A Detailed Walkthrough

Crafting a robust confidentiality and IP assignment agreement may seem daunting, especially when your most valuable assets are at stake. But fear not - we're here to guide you through the process step-by-step, making it as straightforward and actionable as possible. By the end of this section, you'll be well-equipped to develop an agreement that fits your unique business needs.

Step 1: Identify Your Needs and Objectives

The first step is to clearly define the goals of your agreement. Ask yourself:

What types of confidential information do I need to protect (e.g., trade secrets, financial data, customer lists)?

What intellectual property needs assigning (e.g., patents, copyrights, trademarks)?

Who will be bound by the agreement (e.g., employees, contractors, partners)?

As you're determining your objectives, make sure to consider the scope and nature of the relationship between the parties involved. This will vary depending on whether the individual is an employee, a contractor, a partner, or another entity related to your business.

Step 2: Consult with Legal Counsel

Once you've identified your needs and objectives, it's time to seek legal guidance. Consulting with a legal professional is essential to ensure your agreement adheres to all legal standards and offers comprehensive protection for your intellectual property. They can provide valuable input and advice to help tailor the agreement to your particular circumstances.

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Step 3: Craft the Agreement

After consulting with legal counsel, you can begin to draft your agreement. Here, remember to use precise and easy-to-understand language and to make your terms as explicit as possible. Let's further break down what you need to include:

Identify the Parties Involved: Spell out the full legal names of both the disclosing party (your business) and the receiving party (the individual or entity obliged to keep your information confidential). Often, a business will adopt a ‘catch-all’ approach by covering all directors, employees, agents, and contractors under the same agreement.

Define the Confidential Information: Make sure to clearly define what constitutes confidential information within the scope of your agreement. Keep the definition broad enough to cover all relevant details, but not so broad that it's unenforceable. Be as specific as you can be here. Typical categories include: business strategies, customer databases, financial data, unpublished patent applications, technical designs, and prototype details.

Establish the Term of the Agreement: Specify the duration of your agreement, as well as any conditions for its termination.

Specify IP Ownership: The assignment clause should state that any intellectual property created, developed, or conceived by the receiving party while in service to your company will be assigned to the company.

Set Out Non-Disclosure Obligations: Lay out clearly what is expected of the receiving party when it comes to handling your confidential information.

Outline Consequences for Breach: Define remedies for the breach of the agreement, typically an injunction and/or monetary damages.

Step 4: Review and Amend as Necessary

The work doesn't stop after you've drafted your agreement. It's important to review and revise the document regularly to ensure it continues to align with your changing business needs and updated laws.

Don't worry if the agreement doesn't come out perfectly the first time. It often takes multiple iterations to draft a document that accomplishes everything you need. The key is to keep refining it until you're confident it protects your company's best interests.

Use these steps as your roadmap to drafting an effective confidentiality and IP assignment agreement. Always make sure to consult with legal counsel to ensure your agreement's terms comply with current laws and are legally enforceable. Empowered with this knowledge, you're now equipped to safeguard your company's most valuable assets.

Common Mistakes to Avoid

As you put together your confidentiality and IP assignment agreement, be mindful of these common mistakes:

Ambiguous language: Keep the language of your agreement clear and concise to avoid confusion or misinterpretation.

Overly broad or narrow scope: A well-crafted agreement will strike a balance between protecting your business's interests without being overly restrictive or impeding the free flow of creativity and collaboration.

Failure to specify IP assignment terms: Clearly outline the terms of ownership, transfer, and assignment of intellectual property to prevent ambiguity and future disputes.

Inadequate remedy clauses: Ensure your agreement includes fair and appropriate remedies for breaches of contract to deter unauthorized actions effectively and offer recourse should violations occur.

Confidentiality and intellectual property assignment agreements play a vital role in protecting a company's precious assets. By understanding their importance and crafting a thorough, legally sound agreement, you can safeguard your business's valuable IP and maintain a competitive edge in the marketplace.

Use the knowledge you've gained from this guide to create a customized confidentiality and IP assignment agreement that meets your company's unique needs. Remember that consulting with legal counsel is essential to ensure that your agreement is enforceable and provides the best possible protection for your business. Good luck, and happy drafting!

Check out our customizable contract template to create your own Confidentiality and Intellectual Property Assignment Agreement and protect your business today!

Get Legal GPS's Confidentiality and Intellectual Property Assignment Agreement Template Now

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Employee Intellectual Property Assignment and Confidential Agreement

This is a sample employee intellectual property assignment and confidentiality agreement, under which an employee, among other covenants, assigns to the company intellectual property such as designs, inventions, improvements, technical information, know-how, technology and suggestions relating in any way to the products or services of the company, which the employee conceives, develops, or contributes to or acquire during the employment period.

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Innovations At Work: Who Really Owns Employee-Created Inventions?

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Innovations at Work: Who Really Owns Employee-Created Inventions?

Let's say your employee, using company resources, develops a software algorithm that could revolutionize your product line. That's great news, right? But before you issue a press release and pop the champagne corks, you must consider a critical question: Who owns this invention?

This question of who owns the IP—the company or its employee—is a common one, and sometimes a difficult one to answer. That's why it's essential for companies to take proactive steps to avoid scenarios in which IP rights can be disputed. The stakes are high: get it right, and you foster a culture of innovation while safeguarding your company's intellectual assets; get it wrong, and you risk losing valuable IP or facing legal disputes.

Understanding the Basics of Employee Inventions

When discussing patentable inventions created by employees, we're referring to inventions that meet the criteria for patentability under U.S. law—namely, they must be novel, non-obvious, and useful. This distinction is important because not all creations by an employee, even those related to their work, are necessarily patentable.

The scope of what constitutes a patentable employee invention can be complex. It includes any invention that an employee develops that could be patented, regardless of whether a patent application is filed. This includes inventions developed as part of the employee's regular job duties or using significant company resources.

Default Legal Stance on Patentable Inventions

In the U.S., the default legal position regarding patentable employee inventions is not as straightforward as the general "work made for hire" doctrine. The key principle here is that patents are awarded to inventors. In the absence of an agreement to the contrary, an employee who invents something during their employment typically retains the patent rights. In Banks v. Unisys Corp ., 228 F.3d 1357 (Fed. Cir. 2000), the court explained "[t]he general rule is that an individual owns the patent rights to the subject matter of which he is an inventor, even though he conceived it or reduced it to practice in the course of his employment."

This is a departure from other types of intellectual property like copyrights, where the employer generally has the default rights under the "work made for hire" doctrine.

As we'll address shortly, there are ways employers can navigate around the default rule, such as by requiring employees to sign agreements that assign any patent rights from their inventions to the company.

The "Hired to Invent" Doctrine

Another important concept that can impact patent ownership rights is the "hired to invent" doctrine. This applies when an employee is specifically employed for their inventive capabilities or to solve a particular problem. In these cases, any inventions created by the employee in relation to their specific employment objective are typically considered the property of the employer.

This doctrine is particularly relevant in industries where innovation is a primary focus, such as technology or pharmaceuticals. For instance, if a company hires a chemist to develop a new pharmaceutical compound, any invention related to this task would generally be owned by the company. The rationale is that the invention was the expected outcome of the employment, and the employee's inventive work was effectively pre-assigned to the employer through the nature of their hiring.

The Shop Right Doctrine

The Shop Right Doctrine provides a unique balance when it comes to employee inventions. This doctrine grants employers a non-exclusive, royalty-free right to use inventions developed by employees using company resources, even if the invention remains legally owned by the employee. Unlike the "hired to invent" doctrine, where ownership is typically with the employer, the "shop right doctrine" allows the employee to retain ownership but permits the employer to use the invention without compensation. It's a crucial concept when an employee creates an invention on company time or with company materials, but without a specific assignment of rights.

Differentiation Between Inventions Made During and Outside of Employment

As the foregoing discussions suggest, the line between inventions made during employment and those made outside is an important consideration when evaluating ownership of patentable inventions. The key factor here is not just when or where the invention was created, but also whether the invention falls within the scope of the employee's job responsibilities and whether company resources were used.

An invention created on an employee's own time, without the use of company resources, and that does not relate to the company's line of business, is more likely to be considered the employee's property. However, if the invention is within the field in which the employee works for the company, or if it was created using any company resources, it's more likely to be deemed as belonging to the employer, especially if there's an agreement in place covering such situations.

Employment Agreements and IP Clauses

When it comes to protecting intellectual property, particularly patentable employee inventions, well-drafted employment agreements are paramount. These agreements serve as the bedrock upon which the expectations and rights of both the employer and the employee are built. Clear, comprehensive employment agreements ensure that both parties understand who owns an invention created during the course of employment.

Employment contracts often include specific intellectual property clauses that outline the handling of inventions and creations made by the employee. Common clauses include:

A. Assignment Clauses: These clauses require the employee to assign their rights to inventions to the employer. They typically cover inventions made during the employee's tenure at the company and, crucially, can also encompass inventions made for a period after the employee leaves the company, especially if they relate to the employee's work.

B. Disclosure Clauses: These require employees to disclose any inventions developed during their employment. Such clauses help employers identify potential IP assets and decide how to proceed with them.

C. Invention Retention and Licensing Clauses: In some cases, agreements may allow employees to retain ownership of certain inventions while granting the employer a license to use them. This arrangement can be particularly relevant for inventions that are not directly related to the company's business but were developed using company resources.

D. Non-Compete and Confidentiality Clauses: While not directly related to IP ownership, these clauses play a significant role in protecting a company's broader intellectual interests. They prevent employees from using trade secrets or sensitive information in future endeavors, especially in competing businesses.

Drafting effective IP assignment clauses, in particular, requires a careful balancing act: protecting the company's interests while being fair and clear to employees. Here are some guidelines:

A. Specificity: Be as specific as possible about what types of inventions are covered. Vague language can lead to disputes and confusion.

B. Compliance with State Laws: Be aware that some states have specific laws governing employee inventions and IP agreements. For example, California has limitations on the enforceability of certain types of IP assignment clauses. And an increasing number of states are banning non-compete agreements.

C. Reasonableness and Enforceability: Ensure that the terms are reasonable. Overly broad or restrictive clauses may not be enforceable.

D. Clarity in Scope and Duration: Clearly define the scope of the inventions covered and the duration for which the assignment is applicable. This helps in avoiding ambiguity regarding post-employment invention rights.

Handling Disputes Over Employee Inventions

Disputes over employee inventions are not uncommon. These disputes typically emerge from gray areas in employment agreements or company policies, or from differing interpretations of these critical documents. Understanding the common scenarios that lead to these disputes, and how to effectively resolve them, is key for any organization seeking to manage its intellectual property rights efficiently and fairly.

Disputes often arise in several typical scenarios:

A. Disagreements Over Ownership: One of the most frequent points of contention is the ownership of the invention. An employee might believe that their invention was developed independently, outside the scope of their employment duties, and thus belongs to them. Conversely, the employer may argue that since the invention is related to the employee's job or was developed using company resources, it rightfully belongs to the company.

B. Use of Company Resources: Another common area of dispute involves the use of company resources. The extent to which an employee has used company time, materials, or information in developing an invention can significantly impact the ownership rights. Determining this often requires a detailed examination of the circumstances under which the invention was created.

C. Post-Employment Inventions: Issues also arise concerning inventions developed shortly after an employee leaves a company. If the invention is closely related to the employee's work at the company, the employer may claim rights to it, leading to disputes that hinge on the specifics of the employment agreement and the nature of the invention.

In all these scenarios, the importance of careful documentation and record-keeping is crucial. Comprehensive records—including employment agreements, policy acknowledgments, invention disclosures, and all related communications—often provide the necessary clarity on the intentions and agreements of the involved parties and can be decisive in resolving disputes. They serve as a factual basis in negotiations and are indispensable in legal proceedings, should the dispute escalate to litigation.

Navigating the intricacies of intellectual property rights in relation to employee inventions is an important task for business leaders and in-house legal counsel. Being proactive, and consulting with an experienced IP lawyer, is vital. By establishing clear policies, drafting detailed employment agreements, and educating employees about their rights and responsibilities, companies can mitigate the risks of disputes over IP rights.

Remember, at the heart of these legal considerations is the goal of fostering a culture of innovation where employee creativity is encouraged and valued, while simultaneously protecting the company's intellectual assets.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Intellectual Property

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Confidential Information and Inventions Assignment Agreements (CIIAA)

Also known as Proprietary Information and Inventions Assignment Agreements (or PIIAAs), Confidential Information and Inventions Assignment Agreements ensure that intellectual property and other proprietary rights created by employees during the course of their employment are assigned to the employer.

Effective CIIAAs assign intellectual property to the company and also contain nondisclosure, nonsoliciation, and (in some cases) noncompetition clauses (beware, though, that in some states, such as California, noncompetition clauses in these types of agreements are not enforceable and, accordingly, should not be included). Inventions or intellectual property created by the employee prior to beginning their employment are carved-out from the assignment by this type of agreement.

• Incorporation Package (Delaware)
• Form of Employee Confidential Information and Inventions Assignment Agreement (Singapore)
• Form of Employee Offer Letter (Singapore)
• PBC Incorporation Package (Delaware)
• Glossary: Inventions Assignment Agreement An inventions assignment agreement is a typical feature of an independent contractor or employee agreement where the worker agrees to assign any intellectual property arising from the worker's services to the company.

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The ciia agreement: a startup guide.

The Confidential Information and Invention Assignment Agreement (CIIAA) is critical for any startup or technology company that wants to protect its intellectual property and confidential information. Sometimes referred to as a Proprietary Information and Inventions Assignment Agreements (PIIAA) or Tech Assignment Agreement, this is an underrated but essential agreement for every startup founder and employee. Getting this agreement from the beginning will save a great deal of conflict down the line and will protect you from costly litigation.

In this article, we’ll explore what a CIIAA is, why it’s important and what terms your startup should include in its independent contractor agreement. We’ll also discuss how a CIIAA can help facilitate corporate transactions, clarify expectations and provide legal recourse.

Of course, every company is different, so it’s worth hiring legal counsel to both draft and educate you on the CIIAA. If you are looking for legal counsel, feel free to reach out to us here .

Purpose of the CIIAA

Here’s why a CIIAA is important:

• Protecting Confidential Information . A startup may have sensitive information that is crucial to its competitive advantage. A CIIAA requires that employees and contractors keep this information confidential.
• Intellectual Property Ownership . When an employee or contractor develops something new while working for the company such as a product, a piece of software, or a business strategy, the CIIAA helps ensure that the intellectual property rights for these inventions remain with the company and not the individual.
• Preventing Competitor Advantage . Without a CIIAA, an employee could potentially take the knowledge and expertise gained at your startup and use it to benefit a competitor or start a competing business.
• Investor Relations . Investors are often more willing to invest in a company that has taken steps to protect its intellectual property and confidential information. Having a CIIAA in place can show investors that you are serious about protecting your business.
• Legal Recourse . In case a former employee or contractor violates the agreement, a CIIAA provides the company with more solid ground for legal action.
• Facilitating Corporate Transactions . When a startup is involved in a merger, acquisition or is raising funds, the other party will conduct due diligence. Having a CIIAA in place can make these processes smoother as it shows that the startup has taken steps to secure its assets.
• Clarifying Expectations . A CIIAA can help in setting clear expectations with employees and contractors regarding what they can and can’t do with the information and resources they access during their tenure with the company.

Terms of the CIIAA

These agreements can take many forms, but below are the bare minimum terms that your startup should include in its independent contractor agreement:

Definition of Confidential Information

Use of confidential information, definition of inventions, assignment of inventions, return of company property.

The definition of “Confidential Information” can vary, depending on the jurisdiction and the specific nature of the business. Generally, it refers to information that a company considers sensitive and private to the public. Examples include:

• trade secrets, inventions, ideas, processes, formulas, software in source or object code, data, technology, know-how, designs and techniques;
• research, development, new products, business plans, budgets, financial statements and projections, future plans and strategies, capital-raising plans, internal services, suppliers and supplier information;
• data about customers and potential customers;
• details about company’s business partners and their services;
• personnel, employee lists, compensation and employee skills; and
• any other non-public information that a competitor of the startup could use to gain a competitive edge.

Generally speaking, use of confidential information is limited to using it to provide service to the startup. Any other use is prohibited. Restrictions on the use of confidential information are typically outlined to ensure that the particulars are handled properly and to protect the company’s interests. Common restrictions on the use of confidential information in a CIIAA include:

• No Unauthorized Disclosure. Employees and contractors are typically prohibited from disclosing the confidential information to any third party without explicit authorization from the company.
• Limited Use. The confidential information should only be used for the specific purpose it was disclosed for, usually in the performance of the employee’s or contractor’s duties for the company. Any use beyond this scope is generally prohibited.
• No Personal Benefit. Employees and contractors are often restricted from using confidential data for their personal benefit or gain.

Specific restrictions and terms can vary depending on the jurisdiction, company and nature of the relationship. It is advisable to consult legal counsel when drafting or entering into a CIIAA to ensure it complies with applicable laws and protects the interests involved.

The definition of “Inventions” can vary depending on the jurisdiction and the specific nature of the business. Generally, it refers to anything created that is related to the startup’s business, including:

• trade secrets, inventions, ideas, processes, formulas, software in source or object code, data, technology, know-how, designs and techniques; and
• documentation regarding research, development, new products, business plans, budgets, financial statements and projections, future plans and strategies, capital-raising plans, internal services, suppliers and supplier information; and
• facts and figures directly related to the startup’s business or actual or anticipated business.

There are two sets of inventions that are sometimes carved out of the definition:

• Prior Inventions. In this carve out employees or contractors list any inventions that they developed before starting their relationship with the company, which are excluded from the assignment of inventions. This ensures that the individual retains ownership of these prior inventions.
• Side Projects. Similar to the prior inventions carve-out, an agreement might include a provision that excludes certain side projects that the employee is working on. These are typically projects that are not related to the company’s business and that employees work on during their own time without using company resources.

The most talented and experienced employees will likely insist on retaining ownership of prior inventions and side projects. To accommodate these concerns, consider adding these two carve-outs to your standard CIIAA. Doing so will help attract top talent, provide clarity for all team members and protect the company’s intellectual property.

This clause is of utmost importance. It is essential for the employee to assign all rights to the startup, which gives the startup full ownership and the freedom to utilize the inventions in any way they desire, without any restrictions. This ensures that the startup can fully leverage the inventions to achieve its business objectives without any hindrances or legal issues. Additionally, the clause serves as a means to protect the startup’s interests and investments, since it provides them with legal grounds to take action against any potential infringement or misuse of their intellectual property. Thus, it is crucial for all employees to carefully read and understand this clause before signing the CIIAA, as it has far-reaching implications for both the startup and the employee.

This clause is aimed at ensuring that when employees end their relationship with the company, the confidential information they had access to during their tenure remains secure and is not retained or misused. The primary goal of this clause is to prevent the unauthorized retention, use or dissemination of confidential information after the contractual relationship has ended. This is critical for safeguarding the company’s trade secrets, intellectual property and other sensitive information.

• Return of Materials . The employee or contractor is usually required to return all documents, files, equipment, and any other materials that contain or relate to the company’s confidential information. This includes not only physical materials but also electronic files and data.
• Destruction of Information . In some cases, the company might prefer the destruction of the information instead of having it returned. This could be due to the sensitive nature of the information or to reduce the risk of the information being accidentally disseminated. The employee or contractor may be required to permanently delete electronic files, shred documents or otherwise ensure that the information is irretrievable.

This clause is important because it helps companies to control and protect their valuable assets even after an individual’s relationship with the company has ended. It’s important for both parties to understand their responsibilities under this clause and for companies to enforce it effectively.

Ownership Rights for Inventions Created During Work Hours Versus Outside of Work Hours

When drafting an invention assignment agreement, it is important to determine the ownership rights for inventions created by employees during work hours versus outside of work hours.

In general, inventions created during work hours are the property of the employer because they were created using company resources and within the scope of the employee’s job duties. However, there are exceptions to this rule if the employee can prove that the invention was not related to their job duties and was not made using company resources.

On the other hand, inventions created outside of work hours are typically the property of the employee because they were not made using company resources and were likely unrelated to their job duties. However, if an employee used company resources or confidential information to create an invention outside of work hours, then it may still be subject to the invention assignment agreement.

Employers and employees should understand these ownership rights to avoid potential disputes over intellectual property ownership. As mentioned above, the best way to create clarity is to include a carve-out for side projects in the definition of inventions.

In conclusion, a CIIAA is an essential document for protecting a startup’s intellectual property and confidential information. It helps ensure that the company retains ownership of any inventions created by its employees or contractors and prevents competitors from gaining an advantage. Having a CIIAA in place can also make corporate transactions smoother and provide legal recourse in case of violations.

It’s crucial for both employers and employees to understand the implications of a CIIAA and to seek legal counsel when necessary to ensure compliance with applicable laws and protection of their interests. While the specifics of the agreement may vary depending on the company and jurisdiction, including these minimum terms can provide a solid foundation for your CIIAA.

If you’re looking for legal counsel to help you draft your CIIIA, feel free to reach out to us here .

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