1. Securing IP Requires More than an NDA
© 2006 Dana H. Shultz – Readers may reproduce and distribute copies of this article in its entirety.
When it comes to protecting intellectual property (IP), non­disclosure agreements (NDAs) are ubiquitous.
What many entrepreneurs fail to realize, however, is that for an NDA to do its job, the company must
actually own the IP in the first place!
The most serious ownership problems arise when there is no written agreement between the company and
the individual developing the IP. Depending on the nature of the IP (for example, whether copyright or
patent protection applies) and whether the developer is an employee of the company or an independent
contractor, the developer may own the IP, leaving the company with, at most, a non­exclusive license.
Employees
The company should make sure that every at­will employee ­ one whose employment can be terminated
at any time ­ has entered into a Proprietary Rights Agreement (alternatively called an Invention
Assignment Agreement, Patents and Invention Agreement, or something similar). Senior executives, in
contrast, typically have employment agreements that address IP ownership, among other issues.
Proprietary Rights Agreements usually include the following operative provisions:
· Acknowledgement of at­will employment
· The employee's obligation to maintain company information in confidence
· Assignment of employee­developed inventions and associated IP rights to the company
· An obligation to help the company perfect those rights
· In California, notice that inventions covered by Section 2870(a) of the Labor Code (inventions
developed entirely on the employee's own time without using the company's equipment, supplies,
facilities or trade secrets, subject to certain exceptions) will not be assigned to the company
Independent Contractors
The company should make sure that every independent contractor has entered into an agreement that
includes, among other provisions:
· Acknowledgement of the independent contractor relationship
· The contractor's obligation to maintain company information in confidence
· Acknowledgement that deliverables are works made for hire under U.S. copyright law
· To the extent that deliverables are not works made for hire, assignment of the deliverables and
associated IP rights to the company
· An obligation to help the company perfect those rights
· The contractor's obligation to indemnify the company against third­party claims of IP rights
infringement
If you would like more information on when an “independent contractor” may be treated as an employee,
or if you would like to examine Labor Code Section 2870(a) in detail to better understand which
inventions employees may keep for themselves, please e­mail your request to the address provided below.
Dana Shultz (www.danashultz.com) provides high­touch legal services to high­tech companies. He can be
reached at 510­547­0545 or dana@danashultz.com.
The information in this article is not intended as legal advice. If you need legal advice on a matter, please
contact an attorney directly.