Startup Legal Topics Open Q&A

Our next Startup Law Talk workshop (Monday, October 14th at Eastside Incubator) will be an open Question and Answer session with Carter, Deniz and Tahmina.  Bring your burning questions relating to formation documents, equity compensation, fund raising, tax, or immigration.  If you want to give us a head start let us know via the comment section which topics/issues you would like to discuss.

 Lecture and discussion from 6 to 7:30.

Participation fee is $10.  Register through Eastside Incubator.

East Side Incubator is located at 2711 152nd Ave NE – Building 6, Redmond, WA.

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.

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?

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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.