How Can Employers Protect Their Intellectual Property?

In this technological age, intellectual property issues often arise in employment, including questions regarding the ownership of intellectual property developed or created by an employee and disputes with departing employees over trade secrets and other confidential business information. As a matter of general practice, and especially when the intellectual property created is essential to the long-term growth potential of the business, well-drafted employment agreements which fully address an employee’s rights and duties with respect to an employer’s intellectual property should be in place.

 Employers often mistakenly assume that because they pay their employees a salary, any intellectual property developed or created by their employees belongs to them and as a consequence, forgo written agreements that assign copyrights to the business. The Copyright Act’s “work for hire” provision does offer some protection. However, it is limited in its application and applies only to employees and not independent contractors who work for a business, unless a written agreement exists. According to the Act, an employer owns the copyrights in work created by employees in the course and scope of their employment. Disputes often arise as to the scope of employment, and even whether the relationship is one of employment and not of independent contract.

Employers must have certain policies in place if they want to make sure to retain ownership of this valuable property, including drafting employment manuals and policies that address this issue, and obtaining clear, timely, and written agreements that spell out the ownership of all copyrights, inventions, trade secrets, and ideas that an employee conceives of or develops during his or her employment. In most cases, a properly drafted agreement will control the parties’ rights and will be enforceable in federal and state court. Otherwise, without such an agreement, the parties’ rights will often be decided under the law of the state in which the employment relationship exists, which may or may not be favorable to the employer.

These agreements can take many forms, from an all-encompassing employment agreement to a series of agreements that are specific to intellectual property. Employers might be tempted to claim ownership of all inventions or ideas that an employee conceives of during his or her employment, whether it is related to his or her work for the employer, but a judge may be unwilling to enforce an agreement if it overreaches and is unreasonable. Thus, the scope of such invention assignment agreement should be limited to processes, inventions, works, and ideas that are related to the course and scope of employment.

In addition, businesses should ensure that employees do not misappropriate their intellectual property and include a discussion of their rights and duties concerning an employer's intellectual property in employment policies and manuals. Taking these steps can help secure a company's Intellectual Property.

Sara Dajani is an associate attorney with Washington, DC law firm Berenzweig Law. Sara can be reached at sdajani@berenzweiglaw.com.