How to Protect IP in Employment Contracts – An Explainer

Protecting IP in an Employment Contract

You’ve worked hard to build your brand with awesome trading names, eye-catching logos, and unique designs. Now, imagine if an employee decided to misuse all that hard work either while working for you or after they leave. 

That’s where an IP clause can save the day. By including it in your employment contracts, you can protect your valuable assets and ensure that your employees understand the dos and don’ts when it comes to your intellectual property. It’s like having a superhero shield for your creations! Plus, having an IP clause fosters a culture of innovation and creativity within your team, all while keeping potential conflicts at bay.

Let’s learn more about IP in employment contracts in this article. 

Table of Contents

What is intellectual property? 

Intellectual Property or IP refers to the creations or “property of the mind” that individuals produce. Whenever you use your creative thinking to develop something fresh and unique, such as a logo, a catchy phrase, artwork, distinctive sounds, or even captivating scents, it falls under the umbrella of your intellectual property.

It encompasses a wide range of intangible assets, such as trademarks, copyrights, patents, and trade secrets.

Let’s break it down with a few examples: 

  • Trademarks protect brand names and logos, like the iconic swoosh of Nike or the golden arches of McDonald’s. 
  • Copyrights safeguard original artistic, literary, or musical works, such as bestselling novels, blockbuster movies, or catchy songs. 
  • Patents are granted for new inventions, like innovative technology or medical devices. 
  • Lastly, trade secrets include confidential information, formulas, or processes that give a business a competitive edge, like the secret recipe of a famous soft drink.

By understanding and protecting your intellectual property, you can maintain exclusivity, prevent unauthorised use, and ensure the value and uniqueness of your creations in the ever-evolving business landscape remain even 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.


Looking for ways to safeguard your IP? Watch this detailed recording by Lawpath’s expert lawyers.

Ownership of intellectual property

As a general rule, the employer will own the intellectual property created by its employees ‘in the course of their employment.’ 

But what does ‘in the course of their 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 IPs 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.

What is moral rights waiver? 

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, obtaining the creator’s consent is necessary.

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, online databases, and computer systems.

Conclusion

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

And if you need an experienced lawyer to help you understand IP in employment contracts, look no further than Lawpath. Our experienced lawyers can help you with everything that’s needed for your business. 

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