The IP Agreement, and Tech Hiring
In the hiring and matchmaking process, Intellectual Property (IP) Agreements are an often overlooked matter. Many times this is because the candidate brings with them no separable body of IP. The need to consider IP promptly ends there. That is not always the case, though, and here we will make some consideration for the surrounding factors.
I have read many IP agreements in my career. I have started companies in software, decor/luxury goods, and manufacturing. I have written patents in each of those areas, as well. Along with that I have juggled the needs of the company (owners), employees, and consultants / 3rd parties.
Writing this came from the inspiration of seeing a company’s employment IP agreement, which was massively slanted away from the employee. I’ve only seen that from universities and in other roles with some form of fiduciary-like responsibility.
Parameters of the Matter
In all of these cases, there are a few facets that structure how we think about the situation
- Personal time / resources.
- Defined scope of company business.
- The start and end date of employment.
- Competitiveness of the idea relative to employer.
From these we can get a myriad of permutations. Here is a quick, not legally-scholastic, stratification of the common cases that are experienced by normal staff (particularly those that work around anything ‘inventive’ in their employment):
- No IP assignment or agreement.
- Assigned to the company based on defined business scope
- Assigned to the company based on vague scope
- Assigned to the company based on “any purpose of the business”
- Assigned to the company unilaterally.
The High Bar
A principle like business opportunity doctrine, as well as fiduciary duty, both contemplate and expect loyalty from current and former officers, directors, and major shareholders. These are actors on behalf of the entity and they bear a different level of relationship to their employer.
University professors act under a similar set of conditions, since they act as representatives of the university. In the case of professors, the matter is amplified when the university is a public institution — now the professor’s relationship is not just with the board, but rather is partially vested in the citizens of the state (whose taxes support the university)
That should give us a general boundaries for how other employees would experience less restrictions. That’s (5), above, and maybe (4)
The Builders
California Labor Code § 2870 generally sets the sane standard here. Under § 2870, whatever invention is developed entirely on an employee’s own free time, and does not use the employer’s equipment, resources, or trade secret information, cannot be claimed by the company as its property unless they relate to the company’s business.
Obviously that last bit about trade secrets is the key argument in a dispute. Proof, or lack thereof, is the argumentation that keeps the attorneys well-fed. While we are considering the lines, through, we should remember that California set a moratorium on non-compete agreements — arguing they are bad for the market! That really puts to borders on how much employee-produced IP a company can try to own through all-encompassing clauses.
#2 and #3 define this space; is the purpose of the business well-defined, or vaguely-defined? A well-defined business is safer against litigations. A vague or non-existent scope of business opens the door to an employer [having the ability] to argue for ownership of anything of value that the employee owns.
We should acknowledge this would be rare, but probably no more rare than a genuinely great idea.
Who You Know vs. What You Know
While the topic of inventiveness is the focus, there are many aspects of Non-Compete (NC) agreements that overlap.
NCs can inhibit future employement
Higher level employees suffer more
A ‘network of business relationships’ is not ‘the next thing since sliced bread’
Renegotiate before leaving
What you bring cannot be stolen
https://www.linkedin.com/pulse/non-competes-what-you-need-know-before-sign-dotted-line-turkewitz/
In the Field
In the case of the IP Agreement that motivated this post — it is not just that it was the worst, rather it was the only one that crossed the line (or attempts to) on total assignment, in and out of the office. Here is a fake-but-typical summary of responses from many in HR that I pinged about it:
There are LOTS of companies out there that still don’t understand software IP. Hell… the courts don’t fully understand it yet. The company has a fiduciary duty, to its board / shareholders, to write legal stuff that gives the company as much as possible. Someone could not take the job if its such a big deal to them. It’s not a big deal anyway.
Startups. Enterprise. Consulting. Contracts. They all typically do the right thing. It cannot be said that “companies don’t get IP agreements.”
Lack of empathy for this will cause issues when dealing with the smarter / higher-level talent. Yet it is uncommon that a recruiter will vet each client’s NDA or Non-Compete. Each person has their own threshold of what they find acceptable, when interviewing. If a candidate determines that a client’s NDA or NC isn’t acceptable, then they need to seek a modification to the problematic wording — or don’t don’t continue with the process.
Asking for these modifications takes a bit of careful stepping. Some owners/upper-management are experienced enough to know what their document is designed to do, and can sign exceptions themselves. Other will seek legal counsel on the ramifications, and this counsel will be very costly. When you seek modification, or the conversation goes multiple rounds, be aware there may be a significant cost to the employer for each round. They should have known better, but the less-mature will look at you as the reason for the costs.
Some companies just don’t care and prefer to “go all in.” By this I mean — they take a calculated bet 1) Understanding that they’ll lose people 2) Won’t be able to attract certain people 3) Prefer to let lawyers and courts sort out any ensuing mess believing that most people would never take it that far.
Makers Gonna Make
Just because it is in writing doesn’t mean it is clear. Even if you and a bro in the yard can figure out a non-obvious way to write ‘indentured servant’ on paper, it doesn’t mean that it can be executed. That’s what § 2870 is designed to protect.
If you think you might have ended up in this territory, best that you discuss it with your employer. You have this conversation at the time of hiring, when you’ve been working on a given piece of IP prior to your start date. Many IP Agreements you will be asked to sign include a “Disclosures” page, or similar appendix, which you can use to declare certain works out of your employer’s reach.
If your prior work and the employer’s business aims are not competitive, it will almost never cause a problem. For legal reasons, your employer may be advised to not give feedback and simply acknowledge and counter-sign your agreement. Get, and keep, the counter-signed copy!
If they raise any qualms with your non-competitive work, this might be a red-flag for them not having good legal advice — or that their lawyers are sharks. You need to make your own call, regarding whether you trust they’ll not come after you when you’re en-route to being the next Twitter.
You can also do this after hiring, but make prior arrangements with your employer, rather than surprising them with an updated IP agreement appendix. Steve Wozniak purportedly did the former while working at HP.
Profiling for Success
One bellwether question is “How do you feel about employees consulting for third parties and building their own IP — separate from employment at your company?”
Similarly, for employers and recruiters, we can ask candidates if they consult or are working on their own IP. Include that with their profile; for some hiring managers, the self-initiative is an indicator of a strong contributor.
For those that think they have a strong piece of IP to protect, and have never owned and run a business, you need to learn more about how innovations are transformed into profit. Not every patentable / protectable invention is profitable today. A more holistic understanding of business, and people, will help you find the happy medium.
