What is the difference between an Employee Proprietary Information Agreement and a Confidentiality and Inventions Assignment Agreement?

Trick question.  They are the same thing.  These agreements that protect the companies confidential information and ownership of intellectual property go by several names.  Here are a few names for the same type of agreement:

  • Employee Confidentiality and Inventions Assignment Agreement
  • Proprietary Information Agreement
  • Employee Intellectual Property Assignment Agreement
  • Protection of Company Interests Agreement.

Startup companies should require all employees and contractors to sign a proprietary information agreement that, at a minimum:

  • puts the worker under covenant to keep the employer’s proprietary information confidential and use it only in furtherance of the company’s interests
  • provides that all intellectual property created during the employment is “work-for-hire”
  • assigns to the company all inventions created under the employment relationship.

Other provisions frequently found in worker proprietary information agreements include

  •  a covenant not to solicit company employees and consultants upon termination,
  • recitation of the at-will nature of the relationship,
  • a covenant to return of company materials upon termination,  
  • recitation of company ownership of (and lack of privacy) in emails and other digital communications,

Problems with the Preexisting Inventions List

Most of these agreements have a provision that requires the worker to list personal inventions that shouldn’t come within the scope of the assignment of inventions.  Some of these agreements overreach, in my view, and put an unfair burden on the employee to list all of their inventions, even if they were before the employment with the current employer or unrelated to the current employer’s business.   There is inevitable tension here, because many workers do in fact pick up ideas from the work they are doing. 

Here are three examples:

Example A:  I represent that all matters which I have created or otherwise developed prior to my Relationship with the Company or my signing this Agreement, which may lawfully be excluded from my obligations to the Company under this Agreement, are listed in Schedule 2(a) attached hereto.  If no items are listed in Schedule 2(a), I represent that there are no such matters to be excluded.

Example B:  I am not obligated to assign any Company Invention that qualifies fully under the provisions of the Revised Code of Washington Section 49.44.140 (“RCW 49.44.140”), which is included below.  In addition, I will advise the Company promptly in writing of any Inventions that I believe meet the criteria in RCW 49.44.140 and are not otherwise disclosed on Exhibit A.

Example C: I have attached hereto, as Exhibit A, a complete list describing with particularity all Inventions (as defined below) that, as of the Effective Date, belong solely to me or belong to me jointly with others, and that relate in any way to any of the Company’s proposed businesses, products or research and development, and which are not assigned to the Company hereunder; or, if no such list is attached, I represent that there are no such Inventions at the time of signing this Agreement.

All of these examples have been used by major law firms.  Examples A and B, while protective of the Company, overreach in my view.  Example A probably isn’t enforceable.  It overreaches because everything the Employee has ever created in the past — everything the employee has written, illustrated, coded, snapped with a camera – everything would have to be listed to be eligible to be excluded.  Clearly the employee is not going to list everything they have created in the past, so Example A requires the employee to make a false representation: “If no items are listed in Schedule 2(a), I represent that there are no such matters to be excluded.”

Example B is better, but still problematic.  (For reference see RCW 49.44.140 below.)  Example B has the employee promising to list any Inventions that meet the criteria for exclusion.  All of the employee’s writings, drawings, photos, etc.  not related to the Company’s business and created on the employees own time fit the exception.  (Inventions is always defined broadly to pick up any copyrightable work.)  So Example B has the employee promising to do something they will not realistically do.

Example C is best in my view.  It is fair to the employee and sufficiently protective of the Company.  It requires the employee to list only creative works that related to the Company’s business, products or research.  It’s fair to ask the employee to identify those works and to represent that there are none if not listed. 

Both Companies offering up these documents and employees asked to sign them should review the pre-existing inventions listing requirement carefully for fairness and the employee’s realistic ability to do what is asked or required.

RCW 49.44.140 of the Revised Code of Washington is as follows:

(1)        A provision in an employment agreement which provides that an employee shall assign or offer to assign any of the employee’s rights in an invention to the employer does not apply to an invention for which no equipment, supplies, facilities, or trade secret information of the employer was used and which was developed entirely on the employee’s own time, unless (a) the invention relates (i) directly to the business of the employer, or (ii) to the employer’s actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by the employee for the employer. Any provision which purports to apply to such an invention is to that extent against the public policy of this state and is to that extent void and unenforceable.

(2)        An employer shall not require a provision made void and unenforceable by subsection (1) of this section as a condition of employment or continuing employment.

(3)        If an employment agreement entered into after September 1, 1979, contains a provision requiring the employee to assign any of the employee’s rights in any invention to the employer, the employer must also, at the time the agreement is made, provide a written notification to the employee that the agreement does not apply to an invention for which no equipment, supplies, facility, or trade secret information of the employer was used and which was developed entirely on the employee’s own time, unless (a) the invention relates (i) directly to the business of the employer, or (ii) to the employer’s actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by the employee for the employer.

Why should I get a trademark registration?

 

Clients often ask me why they should bother with getting a trademark registration.  Heck, it’s a good question!  Do you have to have a trademark registration to get legal protection?  Or, is simply using the brand enough?   (As a quick preface, the answers to these questions are based SOLELY on U.S. law.  Believe me, things work very differently in other parts of the world.)  

In the U.S., you have have trademark rights in a brand as soon as you start using that brand in connection with a good/service in commerce.  Brand + goods or services + commerce = trademark rights.  So then, why register?

Here’s an important difference between “common law” rights (simply using the mark without a registration) versus having a registration: without a registration, your rights only extend as far as the reach of your brand.  With a federal registration, your rights are nationwide.  Let’s look at an example.  You are the purveyor of “Homework is Awesome” robots – small robots that will do your math homework for you.  (Come one kids, let’s dream big here.)  You’re bootstrapping, so right now you’re only selling your robots in “educational” (ahem, “toy”) stores in Washington, Oregon, and Idaho.  Without a trademark registration, you’ve only got rights to “Homework is Awesome” robots in those three states.  Someone in New York could start selling “Homework is Awesome” robots in Brooklyn and you’d have a tough time stopping them.  Now, with a federal registration, you get nationwide exclusivity to that brand.  See the difference?

Some other important reasons to register, per the United States Patent and Trademark Office’s “Basic Facts About Trademarks” guide:

  • Public notice of your claim of ownership of the mark;
  • Listing in the USPTO’s online databases;
  • The ability to record the U.S. registration with the U.S. Customs and Border Protection Service to prevent importation of infringing foreign goods; 
  • The right to use the federal registration symbol “®”;
  • The ability to bring an action concerning the mark in federal court; and
  • The use of the U.S. registration as a basis to obtain registration in foreign countries.

Got questions!  Drop me a line at [email protected]

When can I file a trademark application?

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Brand owners often wonder when they are permitted to file a trademark application.  Do they have to file it before they launch the brand, or wait until after they’ve launched?  The answer is…either!  There’s no “have to” when it comes to timing on a trademark application filing.  You can file after you’ve launched.  You can file before you launch.  The “when” depends on your brand and your IP strategy.

There are two types of trademark filings for U.S. based applications: use based and “intent-to-use.”  (We’ll touch on the overseas applicant options in a future post.)  The first filing type is for those trademarks whose goods or services are already moving through  interstate commerce.  Pay attention to the “interstate” requirement.  You cannot file a use based application unless your goods/services are available to consumers in more than one state.  

The second type of filing is the “intent-to-use” (“ITU”) basis.  This means that you are filing for a mark which you intend to use in interstate commerce within a reasonable amount of time of the filing date.  (Without getting into too much legalese, think no more than 3 years from the application’s filing.)  The ITU filing goes through the same process as a use based filing.  However, a registration for an ITU application cannot issue until you provide the USPTO with confirmation that the mark’s goods/services are moving through interstate commerce.  

What if you’re close to launching your brand?  Should you wait to file a use based application, or get underway with the ITU option?  This is where the IP strategy discussion comes into play.  The answer depends on your specific brand and the products/services associated therewith.  If in doubt, ask for help from a trademark expert.  Remember, it’s better to spend a little bit of time getting the job done right in the first place than in is to spend a whole lot of time (and $$$) fixing problems down the line.  

Does my U.S. trademark registration protect me in other countries?

globe

Trademark rights are determined on a country by country basis.  As such, your registration in the U.S. will not protect your trademark rights in the EU, Canada, etc.  Furthermore, simply using your trademark in another country doesn’t necessarily mean you have rights to the mark there.  More often than not, foreign registrations are required to protect your mark abroad.

Most countries in the world are “first to file” countries.  No evidence of use is required before a registration can issue.  Quite simply, the first applicant to apply for a mark is the first to registration.  (Take, for example, the recent iPad dispute in China.)  Trademark rights in the U.S. are developed on a “first to use” basis.  You can’t obtain a registration for a trademark in the United States until that mark is moving its product or service through interstate commerce.  However, unlike the U.S., you may not be able to enforce your trademark rights in other countries absent a government issued registration for the mark.  

Upon hearing this news, many brand owners shudder and ask, “Does that mean I have to get a trademark registration in every country I want to use my mark?”  No, not necessarily.  For example, the EU has agreements in place which allow a brand owner to file one application to obtain a registration covering the entire EU.  Other regions throughout the world provide similar multi-country filing structures.  Also, those entities with a commercial presence in the U.S. can utilize a filing system known as the Madrid Protocol, which allows the brand owner’s U.S. counsel to file applications throughout the world based on the applicant’s original U.S. filing.  This can result in a significant costs savings to the brand owner.  

Developing your international IP portfolio can be a complex task for a brand owner.  Though DIY legal work can be tempting for a startup business, international trademark filing is not something that should be undertaken by a non-lawyer.  Compare it to, say, remodeling your bathroom.  With enough time, money, and patience, you might be able to do it right.  But, how will you know if you’re doing it wrong?  Probably not until you realize you forgot to seal your bathtub and you’ve now got a wading pool instead of a nicely tiled (dry!) floor.*

Questions?  Feel free to call or email me at [email protected]

 

*Not based on personal experience.  I’m the daughter of a plumber.   My father would disown me if I engaged in such shenanigans.

Is having the .com enough to secure a trademark?

.com TM

No.  Absolutely not.  

Since I get asked this question quite often by very smart people, I figure it’s time to dispel this particular myth.  Securing the .com for the brand name you’re targeting is not enough to secure trademark rights in that brand.  Sure, you’ve got the domain name, but let’s discuss what you haven’t got.

Availability as a Brand:  Having nabbed the .com does not mean the brand name itself is actually available for your product or service. Someone else could have already established rights in this brand without ever needing to grab the domain name.  Let’s look at a hypothetical.  You secure the domain name www.daffodilsattack.com for your new iPhone game.  However, you didn’t think to check Steam to see if someone else was selling a game with the same name.  Turns out Big Corp Studio is already selling Daffodils Attack as a brand new RPG.  You get a cease and desist letter from Big Corp Studio, who thinks you bought the domain name in hopes of getting $$$ from BCS.  Mayhem ensues.  

Just because the .com/.co/.whatever is available doesn’t mean that you’re free to run with the name.  Always conduct a clearance search of relevant databases (USPTO, internet, etc.) to make certain you’re the first one to the party.

Rights in the Brand:  Check out www.daffodilsattack.com.  Nothing but a landing page.  This lack of content means that you having presented the necessary elements to turn Daffodils Attack website into a brand: words + goods = source.  You’ve got the words, but no goods to attach to them, and no indication of who you are so that consumers know you’re behind Daffodils Attack.  Trademarks are source identifiers.  Words are just words.

Questions?  Contact me at [email protected]

Do I have a trademark or a copyright?

You know you’ve got IP, you’re just not sure what kind.  Fear not!  People often confuse copyrights and trademarks.  Here’s some simple information that every entrepreneur should know so that they can accurately identify their intellectual property:

Copyright: A copyright is an expression of something – software code, sculptures, photographs – in a tangible medium.  Legalese aside, what does that mean?  The “expression in a tangible medium” refers to that place and time when an idea makes the leap out of your head and into the real world for all to see.  An idea is just that: an idea.  It’s the act of expression which gives you intellectual property ownership rights.

Trademark:  A trademark is something – a word, image, sound, smell (!) – that identifies a good or service with its provider.  For example, the “Swoosh” symbol is an image placed on athletic apparel that allows consumers to identify Nike as the provider of those goods.  The word “trademark” is often misused in everyday language.  Someone can claim they have a trademark on a certain phrase (e.g. “Cowboy Up!”), but until that phrase becomes a source identifier for a certain good or service, it in no way functions legally as a trademark.  It’s just the meme of the day.

The Intersection Between Copyright and Trademark:  Sometimes a thing can start as a copyright and then evolve into a trademark.  Let’s say I (poorly) draw a picture of a flame.  As soon as I’ve committed that image to some format – whether it be digital or paper – I now have a copyright in that image.  Now, let’s say that I like that image so much that I start using it wherever I advertise Ember IP’s legal services.  Now that flame image is used to help consumers identify Ember IP as a source of legal services.  It’s the transition from being a stand alone image to representing something more that is the dividing line between the copyright and the trademark.

Questions?  Please contact me at [email protected]

How do I protect IP created by contractors and volunteers before I incorporate?

Before any start-up is formally incorporated, there is always a period when the founders have developed intellectual property in the form of market research, the business plan,  perhaps trademarks, and often software code.   Sometimes formation of the business entity is delayed too long, creating unintentional claims on the ownership of the business or its assets.  But even when transition to the state-organized entity is timely, care should be taken beforehand not to create unintentional ownership claims on your intellectual property or your business itself.

First Caution: Don’t form an unintentional partnership. Unlike a corporation or a limited liability company, a partnership does not need to be formally organized with the state to exist as an entity.   Under Washington law, a general partnership is formed anytime two or more people associate as co-owners to carry on a business for profit, whether or not they intend to form a partnership.  A formal written agreement is not necessary.  See RCW 25.05.055.  As a founder, you will probably seek input and advice from many people as you are starting to form your business concept.  Friends and family may help you work on your business plan, create a web site, or even assist with writing code.  You may think they were donating their effort.  But they might think they were your partners.  Moreover, they will own the copyright to any work product , unless they assign it to you or the business.  A frequent issue arises when two friends start work on a project, but one loses interest and stops contributing.  The other keeps going but the relationship between them was never settled.  Then when the business grows and becomes valuable, the non-contributing partner comes back and wants a share of the business.  These kinds of situations are not unusual.  Indeed, the majority of start-ups probably experience them to some degree.

So what are your available strategies at the pre-formation stage?

  1. Don’t take any help.  (Not optimal and sometimes not even practical.
  2. Take help from only family members and close friends who you trust completely.  (Without taking further precautions, this strategy risks damaging relationships.  Any lawyer can give you examples of family members and friends whose relationships have been destroyed over business disputes.  If you do need to do business with family and friends, I advise more documentation rather than less.  Having an agreement in place beforehand can keep minor dissatisfactions from festering into real problems.)
  3. Use an independent contractor agreement with an IP assignment (see below), and pay the contributor a small amount for their work (even if payment is in something other than cash).
  4. In all cases, be very clear in your emails and other communications.  If you decide not to pay them for their work, state clearly in a written document that the contributor is donating the work to your project without expecting anything in return.
  5. Actually make them a partner.  If you do decide to make a contributor a partner, it may be a good time to consult an attorney or at least an experienced business person.  You should have a written agreement in place.   There are a host of issues that go into a forming a business with co-founders, not the least of which is how to divide up percentages in a fair way that leaves breathing room to issue stock in the future to financial investors, key employees, and other employees.  Other issues to work through are control, tax strategies, salaries and distributions, terms of departure, and so forth.  If you are ready to take on a partner, it’s probably worth the investment to consult a lawyer or accountant on entity choice.

Second Caution: Use Independent Contractor Agreements, even if you are not incorporated yet.   If you pay someone to develop software, you own the code, right?  Not necessarily so.  Non-employees (i.e., independent contractors), retain the copyright of works they create unless the work product falls into certain designated categories that qualify it as “work made for hire”.  17 U.S.C. § 101  Most software development projects don’t fall into one of the enumerated categories for work made for hire, which is why you should have the developer (or logo designer, etc.) sign an independent contractor agreement.   A well-drafted independent contractor agreement will have a work made for hire clause, and just to be safe, a backup clause that assigns the work product to the hiring entity.  If you are a founder who has not organized a business yet, you are the hiring entity.  The form of Independent Contractor Agreement that we have made available for downloading can be adapted to individuals who haven’t formed an entity yet.

Third Caution:  When you do form an entity, assign the assets and contracts to the entity.  One thing I see over and over again is that founders forget to assign their assets and contracts to the entity after it has been formed.  It is a fairly simple process to go to the Secretary of State website, set up a corporation or a limited liability company, get your business license, and start doing business.  But none of what you have created or produced before the company was formed is owned by the company unless it has been assigned to the company.  When it comes time to raise capital, sophisticated investors will look back to all of your material IP to see when it was created and by whom.   You will need to be able to show that it was created by employees of the company, or assigned by independent contractors to the company or to the founder, who in turn assigned it to the company.  Usually the founder assigns all of the IP of the business to the company at the time it is formed and initial stock is issued.   In addition to the business plan, market research, logos, trademarks, software and other IP,  other assets such as account balances, computer equipment, contracts and leases need to be assigned to the company at the time it is formed.