How concerned should I be about IP agreement with a large company?

Sikender Singh Founder & CEO at Catalyst, Senior Consultant at EY

January 29th, 2015

Over the past six months I've been developing a web app that I'm planning on beta testing very soon, and launching soon after. At the same time, as a means to make a living I've accepted a position with one of the big four consulting firms and am currently going through the on boarding process. The company is aware of the startup as it was something that was a part of my resume and also discussed during the interview process. While signing various documents and agreements as part of the on boarding process, I came across the following clause in the confidentiality agreement, which I have not yet signed, which is concerning to me.

" I agree to disclose and assign promptly, completely and in writing to the Firm any inventions, whether or not patentable, and including but not limited to, any innovations on processes, methodologies, software applications or products which I discover, conceive and/or develop, either individually or jointly with others, during the term of my employment with the Firm ("Inventions"). I understand that all inventions which I do hereby assign are and shall become the exclusive property of the Firm, whether or not patent applications are filed thereon, and I agree to treat such inventions as Firm proprietary and confidential information and to use such solely for the benefit of the Firm."

I understand that this is a standard agreement, but I certainly don't want to lose ownership of my work because I have to take a job to support myself. I understand that in California, this isn't technically enforceable, but this agreement adheres to New York State law, and I haven't been able to find anything discussing it. Has anyone dealt with a similar issue? What have you done to resolve this? Alternatively are there any technicalities that I fall back on should I find myself in a situation at some point where the company is claiming legal ownership of the web app?

Nick Gray Co-Founder / Sales / Data Architecture

January 29th, 2015

I'd ask your prospective new employer to just include the specific fact that your web app. is excluded from that clause of the agreement or even better, anything you have been demonstrably working on prior to accepting their offer of employment.

I can't see them moaning about it if they are, as you say, already aware.

Omar Hakim Technology Commercialization & Patent Monetization Professional | Expertise in Management Consulting & Startup Investing

January 29th, 2015

Having worked at a "Big Four" consulting firm for a decade, I'm familiar with the kind of agreement that you've been given. Your work relationship with your new employer will most likely be a "work for hire" arrangement (depending upon which state you live in), so that any IP that you invent - be it on the job or while taking a shower over the weekend - will belong to them.

While keeping separate notebooks, email accounts, phone accounts, etc. is generally good advice, it won't shield you from this legal reality.

As an angel investor, I've run into this problem and passed on potential deals because one of the company co-founders was a current employee of a tech firm with a similar IP ownership agreement in place. Since the co-founders didn't have clear ownership of the IP, it was too risky to proceed with a potential investment.

In my experience, the advice that others having given you about documenting and fully disclosing all of your inventions and having them attached to your confidentially agreement as an exhibit is the only effective way that I know of to proactively deal with this.

Good luck.

Jason Oliver Founder and Technology & Product Executive

January 29th, 2015

It is quite standard to have a "carve out" - that explicitly excludes certain IP/inventions - such as that of your startup idea.

Usually its an exhibit outlining the IP - be very broad - it works in your favor.

good luck

Jason Oliver Founder and Technology & Product Executive

January 29th, 2015

Sikender,

Just that they generally have language in the body that will point to an exhibit to the agreement (attached at the end and enumerated - ie. Exhibit A, etc) that outlines your IP. This way the main agreement sticks with the legal language and the Exhibit deals with the details.

By broad, I am speaking to the description of your idea - don't be too specific as that can be limiting, as you will most likely expand the scope of your idea. If you have other startup ideas, feel free to list them even if you haven't done anything about it yet.

Marc Stevens Senior Associate at Austin Technology Incubator

January 29th, 2015

It is also extremely important to completely segregate all future work on your app from any new work activity or resource. This means, you shouldn't answer app-related emails or do app-related research on your work computer, office phone, or company-provided mobile. And, you shouldn't use company research material or resources to assist in the future development of your app.

Sikender Singh Founder & CEO at Catalyst, Senior Consultant at EY

January 29th, 2015

Thanks Nick

Clynton Caines SharePoint Developer at Discover Technologies

January 29th, 2015

"during the term of my employment" - This already addresses your immediate concern, but you could also get them to clarify in writing (email or document amendment/addendum/edit/etc) that the statement relates to their content space only.

Also consider that even if you create something in direct competition and they come after you once you've left and become successful, you can consider the resulting legal/licensing fees to be a cost of doing business as you continue forward. In either case, it helps your case to develop on your own time and your own resources.

Good luck

Brian Gannon Owner at Gannon Law, LLC

January 29th, 2015

You should definitely disclose your prior inventions to your employer and have them expressly excluded, in writing, from any invention assignment requirements in your employment arrangement documents. You should also consider the impact of such provisions on inventions made by you going forward, including any improvements made to your App. If you plan to make any new inventions during the term of your employment, outside of the scope of your employment, you should take steps to make sure that you will own such new inventions and not be required to assign them to your employer. You should consult an attorney regarding these issues.

Sikender Singh Founder & CEO at Catalyst, Senior Consultant at EY

January 29th, 2015

Jason,

That makes a lot of sense, can you elaborate on what you mean when you refer to an "exhibit". By being broad, I imagine that this will give me latitude for any future ideas that I may start while employed by the company.

Anonymous

January 29th, 2015

I would suggest to consult a lawyer. Legal counsel will be able to search your documents for seemingly innocuous legal terms which could impact your current state and how it impacts with your employment contract.

Depending on how much value you will create with your startup, I don't believe any employer would give up their own interest to protect you. So, please connect all the dots and protect yourself.

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