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How to Protect Your Intellectual Property in an Employment Contract (2020 Update)

How to Protect Your Intellectual Property in an Employment Contract (2020 Update)

Hiring employees means that they will either get access to, or create intellectual property for your business. Find out how to protect it here.

27th April 2020

Employment contracts and intellectual property

Employment contracts outline the rights, duties and responsibilities of both the employer and the employee. As an employer, when you hire an employee they will likely get access to your company’s intellectual property, or even create on behalf of your business. In this sense, protecting your business’s IP is crucial, and remains so if your employee leaves the business. Specifically, a section in your employment agreement will provide how your intellectual property (IP) is dealt with and who is entitled to it. As a general rule, the employer will own the intellectual property created by its employees ‘in the course of their employment’. In this article, we’ll explain how you can protect your company’s intellectual property in an employment contract.

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What Does ‘In the Course of Employment’ Mean?

‘In the course of employment’ refers to an act of any kind done during the performance of an employee’s job. This is usually (but not always) during the period of time specified in the employment agreement. However, ownership is not restricted by where it was created or whether it was necessarily created during working hours. Therefore, what is important to identify is whether the employee has a duty to create IP as part of their employment duties. So, an employee who creates IP but was not hired with the intention to do so will own that created IP. For example, an employee who works as a graphic designer may design their own comic books in their spare time. As this is done in their spare time and not part of their usual duties, they will not be bound by the employment contract when it comes to this.

The only exception to this would be through specific wording to the contrary in the employment contract. You would need to explicitly show your intention  to keep certain IP that they have created.

Furthermore, you may need to issue non-disclosure agreements and non-compete clauses to prevent employees from manipulating/competing against your IP. Draft these clauses broadly but accordingly to prevent any potential exploit by your employees against past, present or future IP.

Moral Rights

Even though you own the IP of your employees, the creators have moral rights to their work. This means you need to correctly attribute the work to the creator, not attribute the wrong person to the work, and the work must not be treated in a derogatory way. If you wish to waive these rights it is necessary to obtain the creator’s consent. These moral rights may also not apply if you act reasonably in line with legislation and industry practices.

How to Further Secure Your Intellectual Property

Here are some measures you can enforce in your company to protect your intellectual property:

Implement a ‘need to know policy’:

  • This will prevent the flow of information between departments while confining information to only what is necessary for the performance of an employee’s job.

Enforce an employment commencement and exit protocol:

  • A commencement protocol identifies when an employee began working. This will help resolve any dispute about intellectual property created prior to employment;
  • An exit protocol provides the employer with surety that the employee has left all intellectual property with the company. This also identifies the employee’s future obligations under their employment contract regarding confidentiality and competition.

Restrict certain access:

  • Limit access to the physical company premises as well as online databases and computer systems.

Conclusion

Subject to any wording to the contrary, IP created by employees vests in the employer. It is important to clearly account for your intellectual property in an employment contract. This will allow you to negate any potential disputes and implement measures within your business to protect your IP.

Don’t know where to start? Contact us on 1800 529 728 to learn more about customising legal documents and obtaining a fixed-fee quote from Australia’s largest lawyer marketplace.

Author
Jakub Grzybowski

Jakub is a legal intern at Lawpath as part of the content team. He is currently studying a Bachelor of Laws at Macquarie University. His main interest is on the integration of legal and technological services.