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The standard employment contracts of many large companies state that any intellectual property (IP) developed by an employee while in employment - even outside of working hours - belongs to the company.

This is fine if said employee has limited experience or hobbies/interests that are entirely divorced from their job. A problem arises with more experienced hires who may have developed IP in their personal capacity and intend to use that IP in the fulfillment of their employment duties.

How should the IP agreement be structured so that:

  • the employer gets to keep unique IP developed by their employees in the course of their work;
  • employees get to maintain their ownership of IP developed prior to starting work but which may continue being developed while employed, and which may be used to support their job?

Adding to the mix is that the employee may be relying on passive income from this IP to supplement their income. There is no conflict of interest between licensees of the IP and the employer. Lastly, no patents cover the IP, they're simply "trade secrets" and software.

Anyone have any experience of this? I imagine it's happening more often as people shift backwards and forwards between employment and self-employment.

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    even outside of working hours - belongs to the company. Really? Since when? I don't see how this could hold up. If I use my resources to create code, on my time, it is mine. Just because I am an exempt employee does not mean that the company actually owns me. (Though, it may come to that, figuratively.) – George Marian Oct 5 '10 at 22:29
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    It's not an unusual clause in the UK; I've seen it several times and had several contracts altered for that exact reason as that's something I refuse to sign. – Timo Geusch Oct 6 '10 at 0:39
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    @chris Ah yes, the exception that proves the rule. A situation like that, where you're getting a pretty good deal for it (high pay, exposure, fistfuls of equity), would be acceptable. Otherwise, I would have to be very desperate to sign away my right like that. – George Marian Oct 6 '10 at 22:57
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    @tim I do not have any sources handy, but I occasionally read business stories that point to the difficulty of enforcing even non-compete clauses/contracts. Generally speaking, the courts take a practical approach, realizing that people must be allowed to make a living. Similarly, I believe I have read news stories where such onerous IP clauses did not hold up in court. Not that I would take that chance. It is much easier to amend the contract at the beginning of the relationship. – George Marian Oct 6 '10 at 23:02
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    Thanks, good answers everyone. It's quite clear that while this may affect few people, those it does affect are the alarming creatives companies need but struggle to accommodate ;) I'll agree that avoiding overlap is best but, where one's interests and job are similar, that may be unavoidable. The application of a general case (hobby) is the specific case (job) - or vice versa. Best to get that cleared up at the beginning and not to make it a "personal" thing. However, just as work leans on your historic experience, how do we "pretend" that work doesn't affect your future ideas and approach? – Turukawa Oct 7 '10 at 7:12
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First and foremost, be up front about your concerns and wants/needs/desires. It will do you no good after you have signed something to say "but..."

The further away your hobby project is from your work, the easier time you are likely to have. A friend had a restaurant review site but worked at a financial company. Not too much overlap there. If instead he had been selling financial planning software or something, I suspect there would have been more of an issue.

If the company you are applying to is adamant about their contract, and will not change it, you may need to be prepared to walk away. Barring that hard-line a stance, you are, given good negotiating skills, likely to keep what you are asking for in terms of owning what you have done previously.

The "developed while working for us" can be a little more complex. What they are trying to guard against for the most part is the use of their own resources/time or the time that you owe them being used for their own projects instead of your own. Again - patient discussion and negotiation are your friends here - pointing out how reasonable your requests are and at the same time, how your skills make you a valuable employee to them.

Good Luck

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Unfortunately it is not uncommon for a company to own everything you create while an employee. So if you have existing IP prior to signing an employment agreement it needs to be documented. In my experience companies that require this sort of thing are used to excluding items. If your request for documenting your exclusion is met with a blank stare I might take that as a sign they really don't understand what they are asking you to sign.

One part of your question does concern me, "which may be used to support their job." This has potential to muddy the waters. I would not use any part of your existing IP at work unless your employer licenses it. If push came to shove, how would a judge determine what IP you owned before employment and what was enhanced while an employee for the benefit of your employer?

List prior inventions as exclusions to the contract and keep them completely separate from your work at your job.

  • +1 Good answer, thanks. However, see my comments above, sometimes it just isn't going to be possible to keep the two things apart. – Turukawa Oct 7 '10 at 7:16
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If an employee created IP with his own resources, not in working hours and outside the workplace, then there is no reason for the employer to claim the IP. But in some cases, some companies want to own IP created outside work if the employee develops IP from the knowledge he has acquired while working, or if the IP developed can be used by competitors, to their advantage.

In most cases, employers create an agreement with the employees such that employees are not allowed to engage in any outside projects under the same scope of business as the company without the companies permission.

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