Are Your Employment Agreements and Policies Protecting Your Intellectual Property?

Many of our clients are surprised to learn that they have protectable intellectual property within their business or practice. Some are obvious: formulas, manufacturing and testing methods, product names, authored literature, customer lists. Others, including most “sensitive information” may not be obvious: financial information, patient lists, and marketing plans—to name a few.

A non-competition provision can be an effective safeguard against employees leaving their company with its trade secrets and utilizing them at another company. However, since many states’ courts apply distance and duration limits, this provision is most useful for businesses that produce time-sensitive and cutting edge information, such as companies developing new drugs.

Fortunately, under the 2016 Defend Trade Secrets Act (DTSA), employers now have a federal cause of action against current and former employees, contractors, and others who misappropriate trade secrets. DTSA provides injunctive relief (e.g., a company may obtain an Order directing an employee to cease the unlawful activity) as well as working compensatory damages, punitive damages, and attorneys’ fees. To recover punitive damages and attorneys’ fees, it is crucial that the company put the employee on notice of the whistleblower provisions of the act: an employee is protected from liability for divulging trade secrets (1) in confidence to a government official, or (2) under seal in a judicial matter. The notice must be included in any agreement the employer uses to govern employee use and misuse of trade secrets, such as an employment agreement.

DTSA protection is not subject to time limitations like non-competition provisions, making it a useful tool for employers wishing to protect valuable trade secrets.

Another source of intellectual property protection our clients tend to overlook is copyright. Certain businesses will wish to ensure that any written works of authorship (such as blog posts, research papers, and the like) drafted by their employees in the course of their employment become the property of the company, not the individual employee. While this arrangement is the “default” under the law, we strongly recommend that our clients’ employment agreements contain language conveying all copyright to the employer.

Relationships with independent contracts are less clear. In such arrangements, the business will almost always want a “work-made-for-hire” provision included in any written agreement with the independent contractor. This provision ensures that any creation of intellectual property by a person on behalf of another (e.g., an independent contractor) remains the property of the business. This prevents that independent contractor from later attempting to claim a right to the business’s intellectual property.

Employers who wish to maintain their trade secrets and other intellectual property must understand the intricacies of the law and the consequences of inadequately drafted employment agreements and handbooks. Frier Levitt has extensive experience in the areas of employment and intellectual property laws specific to the healthcare and life sciences industries. Contact us to discuss how our skilled attorneys can help you navigate your business’ employment practices and policies.