IP Issues in Employment Law
Every business has a strong interest in protecting the assets that allow
it to maintain its competitive advantage, including good employees, good will,
confidential information and intellectual property (IP). Businesses must take
the appropriate steps to ensure that their intellectual property is kept safe
from competing businesses and defecting employees. Putting an IP protection
policy in place gives the employer the upper hand in court, and it may also
deter errant employees who may be otherwise tempted to benefit personally from
the company's knowledge.
» New employees. Exposure to trade secrets may occur
in advance of the employment relationship. Even in the interviewing process,
prospects who take a tour of the company's premises should sign a nondisclosure
An employer can be open to lawsuits for IP theft without even knowing it
if a new employee brings trade secrets from a former employer. The new employee
should be required to sign a statement guaranteeing that he has not brought
confidential or proprietary information from his old company.
» Trade secrets. The obligation of a former employee to maintain
the confidentiality of his former employer's trade secrets is well recognized.
The Maryland Uniform Trade Secrets Act imposes tort liability for misappropriation
of a trade secret, defined broadly as valuable information that is the subject
of reasonable efforts to maintain its secrecy. Md. Code (1975, 1990 Repl.
Vol.), § 11-1201 of the Commercial Law Article.
Cautious employers include a non-disclosure covenant in their employment
agreements with employees who are exposed to confidential information. A comprehensive
trade secret policy begins with an audit of restrictive covenants currently
in place and identification of the proprietary information to be protected.
Of course, the agreement must contain a strict nondisclosure provision that
requires the employee a duty to maintain trade secrets and other proprietary
information in confidence. Evidence of security measures to protect trade secrets,
"Confidential" marking, limiting accessing and password authentication, must
be demonstrated before a claim of misappropriation can be established.
» Copyright. Any work of original expression in a tangible
medium is owned by its creator. A "work made for hire" is "a work prepared
by an employee within the scope of his or her employment," 17 U.S.C. § 101,
that is owned by the employer, id. § 201. The "work for hire" doctrine
does not apply to works created by independent contractors, such as freelance
software programmers and website developers. Community for Creative Nonviolence
v. Reid, 490 U.S. 730 (1989). Employers concerned with protecting their
ownership rights in copyrights should obtain written agreements with employees
and independent contractors acknowledging that copyright in any works will
belong to and be assigned to the employer.
Copyright gives the owner of written materials, including websites and computer
software, the exclusive right to make and distribute copies and to create derivative
works such as updates, new versions and translations. It also gives the copyright
owner the ability to prevent others from creating and selling works that are
"substantially similar" to the copyrighted work.
Most importantly, once assigned, the business should register its copyrights
with the U.S. Copyright Office. Registration is a prerequisite to filing suit
to enforce your copyright, entitling the business to federal court jurisdiction,
statutory damages and attorneys' fees. Registering a work is simple and inexpensive – an
ounce of prevention that will deter infringement and bolster the employer's
ability to seek meaningful redress for infringement and maintain its competitive
» Trademarks. Trademarks, service marks, slogans, logos and
the like need not be registered in order to be protected. However, the national
right to exclusive use granted via registration with the U.S. Patent and Trademark
Office provides a powerful means to redress trademark infringement and unfair
competition. Also, a trademark policy that restricts casual use of a company's
marks, such as in e-mail correspondence, will assist in maintaining the strength
of the marks and prevent against inadvertent dilution and genericization.
» Patents and shop rights. If an employee is hired to create
or innovate, patents on inventions relevant to the employer's business are
owned by the employer. Nonetheless, an express agreement requiring an employee
to transfer to his employer any rights to inventions developed by the employee
is the safest course. Under the "shop right" doctrine, an employee who uses
his employer's resources to conceive an invention or reduce it to practice
must afford to his employer a nonexclusive, royalty-free, irrevocable and nontransferable
license to make use of the invention.
» Employee awareness. Employees should be educated about intellectual
property issues so that inadvertent misuse or public disclosure does not destroy
the company's ability to protect its IP. Providing an intellectual property
seminar is extremely helpful for educating employees regarding the protection
of intellectual property.
Sherry Flax, a partner in the Baltimore office of Saul Ewing LLP, concentrates
her practice on matters dealing with intellectual property law, with an emphasis
on trademark and copyright counseling, registration and litigation.