Intellectual Property Rights in Employment Contracts

Intellectual Property is a creation of the mind. According to law, its ownership vests in the person which brings it into existence unless there is a contract to the contrary. It is a statutory presumption in most of the countries that the employer owns the intellectual property that an employee creates in the course of his employment. However, an employer would be careless to assume that all rights of the employee over such intellectual property are extinguished. The employee could still claim rights of an author, moral rights and rights to object to alterations to work. Hence, it becomes critical to include terms determining the ownership of intellectual property in employment contracts, independent contractor agreements or agreements with a consultant or designer.

Meaning of “In the course of employment.”

An employer cannot usually claim rights over any intellectual property created outside the course of employment. For instance, if an employee is hired as a salesperson for a software company, but he then creates a software code, the employee may be entitled to the intellectual property rights in that software code as writing software code are unlikely to be within the terms of employment of a salesperson. Hence, an agreement between an employer and employee must have clarity on the employees’ duties to demarcate the scope of and what will constitute as “in the course of employment.”

What should the terms of the agreement state?

First and foremost, any agreement with an employee must be a written one. Ideally, the contract should be signed before the date of commencement of employment. Employers may maintain a standard employment agreement for different kinds of job titles. For instance, a standard agreement for all developers and testers and another one for designers.

If the employment agreement is signed at a later date, there should be provided describing rights and liabilities retrospectively from the date of commencement of employment.

Any agreement which defines the intellectual property rights must include the following broad terms.

1. The employer owns the IP created by the employee/independent contractor/consultant during his employment or about a particular field.
2. Terms to the effect that the employee/independent contractor/consultant will sign any documents reasonably required (such as a deed of assignment) to record the employer’s ownership of the Intellectual Property created during his employment. This obligation should continue during and after the employment. An employer should ensure that any assignment or license deals with existing rights and future rights.
3. Confidentiality terms which require the employee/independent contractor/consultant to keep confidential any confidential information of the employer and neither disclose it nor use it in any manner outside the course of employment.
4. Whether the employee/consultant should disclose inventions and whether the record should be kept to prove that the work is original and its date of creation.
5. The scope/definition of confidential information must be specified in the agreement. This scope should include the intellectual property created by the employee in the course of employment, any other intellectual property of the employer and further business information such as customer lists, marketing plans and strategies, business plans, financial information and so on.
6. Waiver of moral rights by the employee over the intellectual property created during employment.
7. Restraint on the competition by a former employee for a specified duration of time and geographical area. Such restrained, to be valid must be reasonable.

Please contact us for assistance in drafting or reviewing your employment agreements, particularly the intellectual property clauses within them.