Pay-for-work contracts stem from the U.S. Copyright Act of 1976, but have since been extended to many forms of intellectual property. Basic employment contracts stipulate that the product of the work of an employee or independent contractor for a start-up is the property of the company. Pay-for-work contracts are often included in employment contracts to protect against an employee who creates derivative work with the start-up`s capital and competes with the company for market share and venture capital investments. To ensure the effectiveness of an employee employment contract, the Copyright Act requires that the invention be created in the course of employment. However, to ensure the effectiveness of an independent contractor`s lease, the invention must be in writing, specifically commissioned by the start-up and in one of the nine categories listed in the law, such as. B a part of a film or other audiovisual work. To protect against the situation where a lease does not fall into one of the nine categories listed in the Copyright Act, it is recommended that start-ups receive a full assignment of copyright or other intellectual property rights related to the work or invention to be created. Many start-ups should also use confidentiality agreements to protect against the disclosure of business plans and data, expressed but unexplored ideas, and trade or business secrets by employees. Intellectual property is now the lifeblood of many companies.
No employer wants these assets to come out when an employee leaves. Contracts for the award of employee inventions are a crucial tool for protecting intellectual property, but the laws that govern them contain traps for the unwary. If the agreement is too narrow or ambiguous, it can make the inventions disappear. If the agreement does not contain certain provisions, it may be invalid in some states. Agreements should also be drafted in such a way as to cover the widest possible range of intellectual property. In addition to inventions, concepts, discoveries, improvements and original works of authorship, the agreement should include an attribution of „know-how“ and „ideas“ that the employee has learned or created in the course of employment. The deal has many names, but tech-savvy companies often call it PIIA (or „pee-as“ for short). PIIA is the acronym for the most common name for these agreements, „agreements for the transfer of proprietary information and inventions“. The typical form of the agreement deals with two main areas: confidentiality and intellectual property. As a general rule, invention assignment agreements should be formulated in such a way as to include language that reflects the requirements of the seven States mentioned above, as this ensures that the agreement is enforceable in those States and in most other States. Variants can be designed for Nevada, Utah, and any other states that may adopt unique restrictions.
CIPAAs often also include non-solicitation clauses, and for employees working in states where non-compete obligations are enforced, the agreement may also include a non-compete clause (see our article on non-solicitation and non-compete clauses). The agreement requires an employee to keep the employer`s non-public and proprietary information confidential and to include language similar to that of a non-disclosure agreement (see more information on non-disclosure agreements). At least nine states have passed laws governing assignment agreements for employee inventions. Seven of these states — California, Delaware, Illinois, Kansas, Minnesota, North Carolina and Washington — have almost identical requirements. For example, the California Labor Code provides for § 2870: In Illinois, a law called the Illinois Employee Patent Act, 765 ILCS 1060/2, protects workers` intellectual property rights over inventions created in certain circumstances. Illinois companies cannot require the attribution of an employee invention to the company if the employee`s invention was created without the use of the company`s equipment, supplies, and facilities, unless the employee`s invention relates to the business, the expected development of the business, or any other work the employee performs for the employer. Companies that require employees to assign invention rights under their employment contract must include a provision specifying the employee`s rights under the Employees` Patent Act. Depending on the progress of the company in its life cycle, due diligence may focus on all current and former employees or focus only on current and former employees who have been involved in research and development or engineering activities. (The fact that the company does not obtain an EIP from an employee solely in an administrative capacity usually does not lead to a significant problem.) If due diligence detects a problem with the PIIA or reveals that the PIIA have not been signed, investors and acquirers may require the Company to receive subsequently signed PIIA (or equivalent), which may require the Company to pay employees something in exchange for signing the agreement so that it is binding, or worse, give a former employee leverage to ask for something more.
Giving someone leverage at the dawn of a financing or acquisition may not end well for the business. I further confirm that I have complied with all of the Company`s signed employment terms and conditions, confidential information and invention assignment, including, but not limited to, the report of inventions and original works of authorship (as defined in it) designed or manufactured by me (exclusively or jointly with others) and covered by this Agreement. . . .