Companies spend significant money developing all kinds of valuable assets, such as proprietary products and services, marketing strategies, customer goodwill, and employee training and development. Many companies wrongly assume that the company automatically owns the rights to trade secrets, intellectual property (IP), and other confidential information created by the company’s employees or contractors.
However, in many cases, if there is no agreement to the contrary, the individual inventor or creator, rather than the company, owns the IP by default. Fortunately, there are ways to protect the confidentiality of your company’s proprietary information and its ownership of inventions and other IP.
Enter the Proprietary Information and Inventions Assignment Agreement (PIIA). Here are some best practices to consider when using PIIAs:
What is a PIIA?
- PIIAs ensure that, to the extent permitted by state law, any inventions an employee or contractor creates while working for your startup will qualify as works made for hire that belong to the company, not the individual.
When should I ask my employees and contractors to sign a PIIA?
- Require all employees and contractors (including consultants and advisors) to sign a PIIA at the beginning of their engagement.
- This is particularly crucial for startups that are sharing sensitive product specs and design info company-wide early in the life of the business, which is a common occurrence for many of our tech clients.
- An early PIIA can ensure that adequate protections are in place BEFORE employees and contractors are exposed to the company’s confidential or proprietary information.
- This timing also may allow the new employment offer to serve as consideration for the employee’s obligations under the PIIA (in certain jurisdictions).
- Having PIIAs in place early on protects you from potential IP ownership disputes which can impact your company’s ability to raise capital. Furthermore, if you don’t have PIIAs in place by the time you start fundraising and have to go back to employees and contractors after they have been with you awhile to negotiate for these, your leverage is reduced.
What form should a PIIA take?
- Though you can include provisions often found in a PIIA (such as confidentiality) in offer letters or employment agreements, it may be preferable to put these protections in stand-alone agreements so that you can use the agreement across the entire worker population.
What else do I need to be thinking about when it comes to PIIAs?
- Be aware that there are limits to PIIAs. Some employees may want to negotiate carve-outs for preexisting inventions, and, as mentioned above, there are statutory and common law restrictions on the scope of PIIAs in some states.
If you need assistance navigating this area of law, give us a call at Campbell Teague. We’re happy to talk about it over a slice, whether you’re partial to Brooklyn-style, Chicago deep dish, or something from one of our favorite spots here in Greenville.