Keeping it confidential

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How to hold on to Intellectual property rights, employees and contractors

Intellectual property is often the most valuable asset of any entrepreneur or business. Many entrepreneurs and business owners in Australia are aware that intellectual property such as patents and trademarks, and related rights in company, business and domain names, can be registered and take appropriate steps to protect them. But what seems to slip between the cracks is the protection of copyright, confidentiality and trade secrets, all of which are essential to business enterprises.

When you hire employees and contractors to work for you, whether on a particular project or an ongoing basis, they may create original works – such as documents, computer programs and graphics – which automatically by law carry the protection of copyright. Over time contractors and employees also build a body of proprietary knowledge about your enterprise, including about the client base, business model and commercial know-how. To ensure that business owners have the ownership and control of all intellectual property arising in connection with their commercial enterprise, it is essential to have carefully-drawn contracts in place with all the people who work for you.

This is especially the case with contractors, who – unlike employees – own their work, including all intellectual property in their work, unless their contract specifically provides otherwise. It is therefore essential that the terms of contractors’ engagement includes a written assignment of all their interest in any work they create or contribute to, to the business engaging the contractor.

 

As a matter of good practice, these clauses should also appear in employment contracts, even with permanent staff. Whether someone is a contractor or an employee can be a “grey area” in some circumstances. More important, spelling out the ownership of intellectual property rights in a contract helps to improve workplace communication and foster an environment where employees are made aware of these rights. A clear written agreement about intellectual property ownership can help alleviate the risks of a dispute over ownership down the track.

A strong contract will also contain confidentiality clauses, to stop employees and contractors from revealing your businesses’ secrets and proprietary knowledge. This is all the more important in the age of social media. Employees – particularly young “digital native” employees – should be made aware of the risks of Tweeting or Facebooking about their work.  A good social media policy should emphasise confidentiality and the importance of protecting relationships with clients and the business “brand”.

Confidentiality clauses can bind employees and contractors during the term of their contracts, and for a specified period afterwards. They often go hand-in-hand with undertakings on the part of the employee not to compete with your business or offer jobs to fellow employees for a period after they leave.

Commencing legal action against a contractor or employee can be expensive, time consuming and difficult. Many problems can be avoided with straight-forward agreements setting out your expectations of your employees and contractors, and their legal obligations to you and your business. Contractual obligations provide clear guidance for those who work with you, but also – perhaps more importantly – a clear path for enforcing your rights if problems arise.

This article is intended only to give you a brief outline of the kinds of steps entrepreneurs can take to protect intellectual property that can’t be registered. It is important that you seek your own legal advice that considers and addresses your particular circumstances.

©Shiff & Company 2011