Don’t Let Your Employees Walk Out the Door with Your Intellectual Property

In our knowledge-based economy, intellectual property is indispensable to businesses of all sizes in virtually every industry. And much, if not most, of that intellectual property derives substantial value from not being generally known. But unlike other asset classes, intellectual property is highly vulnerable. As a mind-based resource that can be popped onto a thumb drive or added as an attachment to a quick, surreptitious email, intellectual property can easily follow an executive or employee out the door. 

Maintaining the confidentiality of intellectual property and ensuring employees turn over new intellectual property, know-how, and inventions derived on company time or while using company assets and resources is thus essential. And in this regard companies are not without recourse; through a bit of planning and legal work, they can position themselves not only to protect themselves but also capture and enhance the value inherent in their intellectual property assets.

In crafting solutions to help protect, capture, and enhance your intellectual property, here are some points that we suggest you consider:

1. Know Your Intellectual Property and How It’s Used. Intellectual property ranges from more public-facing assets—like patents, copyrights and trademarks—to more confidential information, like trade secrets, positive and negative know-how, and a company’s internal proprietary methods and systems. But, like all aspects of a company, intellectual property ultimately depends on its use and exploitation by a company’s employees to drive value and growth to the bottom line. Accordingly, as a critical first step, a company should take the time to understand what constitutes its intellectual property, what part of that intellectual property is confidential and derives substantial value from remaining as such, which employees and employee classes interact most acutely with intellectual property in performing their duties, and how and to what extent that interaction generates new intellectual property and opens points of vulnerability for the company. In doing so, the company will not only be able to better capture and protect its intellectual property but also understand the flow, use, and development of intellectual property within the company. 

2. Getting the Employment Agreement Right. The first line of defense for companies worried about protecting their intellectual property is a robust employment agreement. That agreement should squarely address and define intellectual property, including an employee’s obligations in using, returning, and assigning it. At a minimum, the agreement should incorporate protections for the company’s intellectual property, including requirements for its return at the end of the employment relationship. It should also incorporate intellectual property assignment and work-for-hire clauses that clearly specify what belongs to the company throughout the course of the employment relationship. (These protections are additionally appropriate for consultant and independent contractor agreements—especially when the consultant or contractor is providing services, work, or advice that uses or relates to a company’s intellectual property. While outside the scope of this blog, nonetheless, third-party vendors should be bound to protect, return, and assign intellectual property rights to the company as part of any engagement.) 

3. Getting Access Right. While a robust employment agreement can provide legal recourse for a company confronted with an unauthorized disclosure of confidential intellectual property assets, proactive measures to prevent unauthorized or improper disclosures are just as important—not just as a matter of routine business but also if the company has to go to court to protect its intellectual property. (Courts are generally reluctant to do more to protect a company’s business than the company itself was willing to do.) 

A company’s internal policies and procedures should include:

  • Password-protected databases and email systems.
  • Tiered access to systems and databases (with employees being limited to the level of access appropriate to their function and status within the company). 
  • Limiting the number of employees who are privy to certain email and database passwords.
  • Having a clear process for removing a former employee’s login credentials and digital footprint from company systems and controls. 
  • Possibly monitoring certain employee emails and communications, including for keywords related to trade secrets, patents, and other intellectual property.
  • Setting a culture of accountability and responsibility around intellectual property and its exploitation.

4. Getting the Exit Interview Right. At the end of the employment relationship, it is essential that exiting employees—including key employees and executives—are reminded of their contractual obligations, including in regard to intellectual property and confidential information. It is also a good idea to have exiting employees sign a certification back to the company confirming that they understand their contractual and legal obligations and have returned and do not have any intellectual property or other company assets. Exit interviews are a company’s last best chance to establish (both to the employee and in court, should that prove necessary) that the company is serious about protecting its intellectual property and has taken reasonable steps to ensure departing employees give back and assign what they have and know in consequence of the employment relationship.

There are numerous considerations not covered in this blog. Nonetheless, each company is responsible for ensuring its employees understand the protocols for accessing and disseminating intellectual property—and the consequences for violating pertinent agreements, policies, and procedures. Having an experienced law firm to help you assess current business practices and document and protect intellectual property assets is a good start. 

Baker Jenner has spent years helping business owners implement smart strategies and agreements to protect what really matters to them. That includes non-disclosure agreements, employment and consulting agreements, restrictive covenants, and agreements that help clients exploit and safeguard their intellectual property assets. Our goal is to provide targeted and effective legal services so businesses can grow and achieve long-term success. Let’s talk.

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Baker Jenner LLLP

Baker Jenner LLLP is a business solutions law firm. We partner with clients to achieve their goals while managing transactional, regulatory, and legal risks.

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