When your employee walks out the door, do they take ‘IP’ with them?

In today’s modern economy all businesses rely heavily on their intellectual property (or ‘IP’). Whether you realise it or not, your employees are using or generating some form of IP each and every day they are at work.

But what happens when your employee walks out the door (or is pushed)? Have you taken the necessary steps to ensure your IP remains behind?

What sort of intellectual property are your employees dealing with?

Certain types of employees are more obviously dealing with your IP. Senior executives and office workers are heavily exposed to your confidential information, financial information, client and customer identities, and copyright in proprietary materials. They may also be dealing with more concrete forms of IP, such as your trademarks, patents, designs, licences, and contracts.

But IP also impacts other categories of employees. People on your shop floor will be interacting with your procedure manuals and pricing techniques. People in your manufacturing plant will be exposed to your designs, recipes, proprietary processes, supplier details and know-how.

A common form of IP that now impacts almost all categories of employee is simple ‘passwords’ and ‘codes’ to your workplace systems.

The bottom line is, all of your employees will either be exposed to, or be involved in creating or updating your valuable intellectual property. For many businesses, this IP will represent one of your most valuable and irreplaceable assets. IP is what gives you your competitive advantage in the marketplace.

What sort of things can go wrong with the protection of your IP?

Many employers we speak to do not realise the extent to which their IP is at risk if they don’t take appropriate measures.

There are many ways an employee can damage the value of your IP.

Taking your confidential information to competitors

Perhaps the most obvious is leaving and taking it with them to one of your competitors. We receive so many calls from business owners in a state of panic after an employee has left and disclosed their client/customer list to a new employer. Other things employees take with them are details about your pricing, target clients, and current tenders and business opportunities.

This risk can be effectively dealt with by:

  • Workplace systems to limit exposure to sensitive IP;
  • Comprehensive confidentiality undertakings; and
  • Appropriate non-solicitation clauses and restraints of trade in your employee’s contracts.

Passwords and other locking systems

Most people remember to take the keys or pass-card off their employee as they walk out the door, but these days that’s unlikely to be enough…

More and more systems and machines are now subject to password or passcode protection. They’re everywhere – it’s the code to lock and unlock your lift, the password on your accounting system, and the electronic lock on an expensive piece of equipment. You need to ensure you always have an up-to-date list of who has access, as well as details of the codes themselves.

If a key employee walks out the door, you will need to be able to open up for business and operate your equipment the next day. Can you?

This risk can be effectively managed by:

  • Implementing different levels of access, including super-user, administrator, user, etc;
  • Updating all passcodes as soon as an employee leaves (or just before);
  • Having a central password and code manager, such as LastPass; and
  • Including a post-employment obligation to provide all passwords and codes.

Do you have control over your copyright?

Copyright is perhaps the most common of all intellectual property rights. When one of your employees writes something down, or records something, they are creating ‘copyright’. Copyright exists in all your manuals, marketing materials, websites, computer code, images and videos. It’s everywhere!

The good news for employers is that any copyright an employee creates while they are on the job vest automatically in the employer. This means that you do not necessarily need a specific ‘assignment’ of copyright from each of your employers. But like all things, it is often not that simple.

The first thing to realise is that you only get the copyright generated by your employees. You do not automatically get ownership of copyright generated by an independent contractor. An independent contractor keeps their IP unless you specifically assign the copyright from the contractor to you in writing.

If an employee brings with them any copyright from other sources, then you do not automatically get ownership of that copyright. This is often referred to as ‘background IP‘. If your employee uses this background IP in any further copyright they create while working for you, you still don’t automatically get ownership of all the rights. Your employment contracts need to specifically state that the employee grants you a free and irrevocable right to their ‘background IP’. When they leave you can continue to use all of the IP, including any background IP embedded within it. This issue is particularly relevant to any software coders you employ – as they all bring with them ‘code snippets’ they have developed on their own or elsewhere. Same with creatives, such as marketing executives or designers.

You also don’t get any IP in anything developed by an employee outside of work hours, (sometimes called the ‘hobby exception’). However, quite often an employee will develop something on weekends that has come out of their time at work. For example, an HR manager may develop a ‘HR app’ on the weekend using her experiences at work during the week. You have no claim against this IP, even thought it clearly relates to your workplace, unless you get a specific assignment in the employee’s employment agreement.

Finally, if your employees are creating copyright in things like images, videos and literary works, then they will be generating what is referred to as ‘moral rights‘ in these works. These rights are separate to the copyright. The three moral rights are the ‘right to attribution’ (i.e. to be recognised as the creator of the work), the ‘right against false attribution’ (i.e. a duty not to attribute the work to someone else) and the ‘right of integrity’ (i.e. the right not to have the work treated in a derogatory manner). These rights are personal to the employee who created the copyright, and can’t be ‘assigned’. However, the employee can give you certain consents over these moral rights, as well as agree not to enforce them against you in the future.

These risks can be effectively managed by:

  • Having written assignments of IP (including copyright) with all contractors;
  • Having a written ‘licence’ granted by each employee over any ‘background IP’ they bring to your workplace;
  • Having a written assignment of IP (including copyright) from all employees in relation to IP produced while at work, and as well as any IP produced outside of work hours but that relates to your business; and
  • Having an appropriate waiver, release and consent over any moral rights.

Do you have control over your trademarks, designs, and patents?

Trademarks, designs and patents are forms of intellectual property created by government laws. Unlike copyright, they are not automatically ‘created’ (you need to lodge an application), and you do not automatically get the right to force an ex-employee to assist you through the registration process. So for example, if an employee is involved in inventing a new process or widget that you later seek to patent, you may need to get the employee involved in the patenting process. For example, they may need to sign forms to lodge the patent. If the employee has moved on, then you may struggle to get their cooperation, or worse, have to pay them additional compensation.

You can avoid this risk by including in your employment contracts a requirement for all employees to provide reasonable assistance to register design and patent rights, whether during or after their period of employment with your business.

What have you done to protect your IP?

Hopefully you’re getting the idea that IP is a big deal when it comes to how you engage your employees.

We strongly recommend you develop a comprehensive strategy to deal with all of your IP issues, and in particular how to protect it in the context of your employees. This should start with the following key steps:

  • Make a list of the types of IP that you have in your business;
  • Make a list of the categories of employees, or roles, that get exposed to this IP;
  • Review your employment contracts with each category of employee and ensure that they include appropriate protection for each category of IP;
  • Update workplace policies and procedures to specifically deal with IP issues. Simple things, like recording of passwords and codes in a central database (e.g. LastPass); and
  • Educate your workforce on the identification and protection of your IP.

Keep in mind that your intellectual property rights can help your business by:

  • Giving you a competitive advantage against your competitors, through proprietary manuals, policies and systems;
  • Helping you develop and maintain a unique brand, by protecting your logos and other marketing elements;
  • Providing you with long-lasting monopoly rights over certain processes and products that are enforceable against everybody; and
  • Providing you a commercial opportunity to make profits through licensing agreements.

What to do next

Call us on 1300 654 590 to get us involved in your IP strategy.

We can help you protect your IP by:

  • Drafting clauses in your employment contracts that will ensure your company owns and controls your intellectual property;
  • Assisting you with breaches of your intellectual property rights in a commercially sensible way; and
  • Setting up workplace policies and processes to ensure your company has evidence of its ownership of intellectual property.

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