• Written by C. Bentley Harris

    Partner at Akerman LLP
    Email Bentley

“What’s mine is mine, and what’s yours, if you create it on the job, is also mine.”

In my experience, employers sometimes shy away from telling employees and contractors the cold hard facts when it comes to proprietary ideas, trademarks, branding initiatives, logos, and the like and I get it--it’s uncomfortable to seem to be making legal demands at the beginning of what you hope will be a friendly, productive relationship. But, as with other cold hard facts, it’s generally better to address the situation before it becomes a situation. In the case of intellectual property, it can be very simple to protect yourself and your business—if you do it right.

Employees may suppose that their ideas and innovations developed while in your employ may officially belong to you, but really (wink wink) belong to them. And indeed, it’s tempting to believe that, but...IT’S NOT TRUE. Under the “work for hire” doctrine, the work product that emerges from the brains and fingers of your employees, on your dime (in the course and scope of employment) are your property, and you should guard it as closely as that Rolex on your wrist or that Mercedes in your driveway. Your intellectual property may be worth even more. For independent contractors, there must be an express written agreement for the assignment of any intellectual property created in the course of performance of the work the contractor was hired to do. In either case, there are certain precautions a business owner will want to follow to avoid the exorbitant and avoidable costs of litigation.

What is IP?

Intellectual property, or “IP,” is exactly what it sounds like: the rights creators have in ideas and creations, as opposed to material objects. The umbrella of IP covers patents, copyrights, trademarks, and trade secrets.

Patents are ownership rights in a scientific invention, a business innovation, or any unique, original scientific, engineering, or business idea.

Copyrights include ownership of written works, songs, poems, software code, or any creative work, provided that it is truly original.

Trademarks include any word, group of words, or design that is used in association with offering a product or service in commerce (i.e., Nike or “The Real Thing.”)

Trade secrets include formulas, practices, processes, designs, instruments, patterns, or compilations of information that have inherent economic value because they are not generally known or readily ascertainable by others, and which the owner takes reasonable measures to keep secret—the key is that the information is kept confidential.

A company’s intellectual property is of immense importance and value in the workplace. A landscape company’s unique device for draining water may be afforded patent protection; a portfolio book published of commercial properties a design firm has designed may carry copyright protection; and/or the logo for a wedding coordinator, “Wanda’s Perfect Weddings,” may be afforded trademark protection for its design image of a “W” swimming in wedding bells.

Setting the Tone

Good instructions and warnings for employees or contractors, in writing and orally, will help prevent a whole bevy of problems, at the perfect time—before they ever occur.

As any new employee or contractor arrives at your business, he or she should be handed your intellectual property policy, in print, given ample time to read, absorb, and discuss it—see below--and then asked to sign it. No signature? No job. Your attorney can help you craft the specific, relevant language for your line of work, whether you’re a wedding planner, psychotherapist, or interior designer.

And—here’s the hard part—the written policy isn’t quite enough. It’s crucial to have in place a carefully crafted agreement, such as a proprietary information and inventions assignment agreement. And your employee (we’ll just say that, to keep it simple, but this all applies to any self-employed contractor working with you as well) should not merely sign the document, hand it back, and never think about it again. I counsel employers to walk and talk their way through the protective document with every newcomer, so that the employee really hears and understands what he or she is signing. It’s important to encourage questions, and give examples of what is, and is not allowed. This “lecture” may feel harsh or unwelcoming, but it is really to their advantage as well as yours to understand what the rules are, and to ensure that your expectations and theirs are completely aligned with those rules.

“Nobody reads those things,” is a phrase we hear much too often, and often it’s true. Bought an iPhone lately? Pages and pages of disclaimers, indemnities, warnings, and limitations fill your eyes, beaming from your bright, new screen. There may be a gumbo recipe or two in there; no one really knows, because it’s a long time since anybody’s actually read one beginning to end. Scroll, scroll, scroll: “OK, I agree. NOW can I use iTunes?”

Getting Real

Your agreement can be much shorter than Apple’s, and it should be as clear as possible, and cut to the chase. Highlight the parts about intellectual property. Sit with the employee, talk it through with him or her, assure him or her that you just want to be clear as to what the guidelines and rules are, for both your sakes. I’ve counseled employers on exactly what words to use to be clear and direct, without being aversive. It’s not easy, but it’s possible. A phrase I like to have them use: “Good communication is the basis of any healthy working relationship and I’d like us to begin on the right foot in having an open dialogue as to our expectations in working together. My company has invested considerable resources and time in developing and building our brand and other intellectual property so it’s very important to us that we take adequate measures to protect it.”

The heart of the problem, of course, is that in many businesses at least some employees will be looking, within a few years or even months, to leave and start their own related or competing business. In general, they can do that (in which case, you would want to prevent them from trying to steal your existing customers), but what they cannot do is use the work product they created for YOU and use it to attract customers to get THEIR business started. The rules about that will be in a separate, proprietary information and invention assignment agreement that includes confidentiality, non-solicitation and non-compete provisions. If they want to show off their talents (as shown in performing their work for you) on their own social media accounts, you may allow that, but that’s up to you; they can’t and shouldn’t assume permission. You should assert and maintain control of any intellectual property, from a patent to a portrait, created under your entrepreneurial roof.

Another way you can show you’re serious is to protect your intellectual property the traditional, and only safe way: through the appropriate federal office. That, of course, is the federal Patent and Trademark Office for scientific or business ideas, and for your logo and name, respectively. And it’s the U.S. Copyright Office—part of the Library of Congress—for copyrighted material like books, articles, music, or photographs. The law says you own the copyright the minute you create something original, by the way, but registering it provides a layer of protection; the damages for improperly using the creating don’t begin to accrue until the day the registration is complete.

All of this said, the last thing you want to do is squelch your employee’s creative impulses. When your employees stretch their creative wings, all of you benefit. The issue isn’t whether they can create, but who reaps the benefit when they do. You can encourage their new art and ideas with praise, raises, bonuses, or vacations, but you do not have to vest them with ownership rights or the right to use it in their own interests, rather than in yours. This is not black and white, however; there are always ways to craft a license agreement with your employees granting them the right to use their work product for limited purposes. Everything can be tailor made to suit your wishes and needs—your lawyers are there to help and make sure that you are adequately protected.

Parting is Such Sweet Sorrow

The day comes when virtually any employee heads for greener or perhaps just different pastures—often one where he or she hangs their own shingle. This is a very good moment to remind them of their original commitment—that what they learned working with you is theirs to keep and build on, but what they created while in your employ remains yours. You can even hand them the original document again for them to re-read, but don’t insist on a signature this time; that might give them the idea that if they neglect or refuse to sign it, they are not bound by their obligations under the original agreement. THEY STILL ARE.

In short, a business-minded and carefully meted out notice that is explicit as to what is and is not allowed when it comes to intellectual property could well make the difference between the two of you a) prospering as a unit and building a mutually beneficial relationship extending past the employment period, or b) having a litigious future borne of misunderstanding. You can help prevent the expense and hassles of litigation if all hands and eyes are open to your intellectual property and the need for its protection.

Need I say more? Your friendly local employment and intellectual property lawyers can craft the perfect language that will help you enjoy a collaborative relationship while employee X is working for you, and yet leave you with ample protection when she’s gone. Your time frame for making all this happen? Start yesterday, if not sooner.

Catherine Bentley Harris is a litigation partner in the Austin office of law firm Akerman LLP. Bentley focuses on assisting companies in formation, governance, and general corporate law as well as the selection, protection, and enforcement of intellectual property assets. She also helps companies with labor and employment issues including the negotiation of employment agreements, independent contractor agreements, and non-disclosure agreements.