Protection of Proprietary Information
This publication will discuss some of the proprietary
interests possessed by business entities and ways in which
entities can protect these interests from exploitation by
employees. Such proprietary interests include: (1) the right
to own inventions conceived or created in the course of the
employer’s business; (2) the right to maintain confidentiality
of trade secrets and other confidential information of the
business; and (3) the right to pre-vent employees from competing
with the business.
Inventions
Some businesses
have a high potential for the creation of inventions related
to the business. An employer naturally wishes to control inventions
which are conceived and created in the course of its business
and at its expense. Therefore, it is wise for an employer
to provide in its employment agreements that an employee shall
promptly disclose to the employer all business inventions,
designs, improvements, etc. that the employee may conceive
or create during the term of his/her employment. The employee
should also agree that any such inventions, designs, improvements,
etc. shall be considered the exclusive property of the employer.
In order to properly compensate an employee for an invention
created during the course of employment, an employer may grant
certain royalty rights to the employee for any inventions
which are later licensed by the employer to third parties.
Trade
Secrets/Confidential Information
Every business
possesses certain information which it considers confidential,
unique in nature and valuable to the business. Any employment
agreement should address the confidentiality of such information.
An employee should be required to acknowledge that he or she
may have access to certain trade secrets and other confidential
information which is not available to the general public.
Trade secrets and other confidential information include,
but are not limited to, secret inventions, formulas, patterns,
processes, information regarding customer lists, and company
financial information. An employee may be restricted from
disclosing any such trade secrets or other confidential information
both during his/her employment and for a reasonable time after
termination of employment. Upon termination of employment,
an employee should be required to deliver all documents (and
all copies) containing trade secrets or other confidential
information to the employer.
Non-Competition
Clause
An employer
having an interest in restricting its employees from soliciting
customers and competing against the business can prohibit
employees from doing so through the inclusion of a non-competition
clause in the employment agreement. The employer can also
restrict an employee from participating in any business that
is in competition with the business of the employer. Such
restrictions can be made enforceable both during the term
of employment and subsequent to the termination of employment.
However, any covenant restraining an employee from competing
against the employer after termination of his/her employment
will only be enforceable if the restraint is designed to protect
a legitimate interest of the employer and is reasonable in
time and geographical scope.
Examples
of Proprietary Rights
- The right
to own inventions created
- The right
to maintain confidentiality of trade secrets
- The right
to prevent employees from competing with the business
