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Key Issues With Confidentiality and Invention Assignment Agreements With Consultants

Insurance & Risk Management Legal

If your business works with consultants, these individuals may have access to a lot of your company’s confidential information. And you may expect these consultants to come up with ideas, work product, and inventions useful to your business.

In areas where you are particularly sensitive about confidentiality and the company’s ownership of the product developed, a company should require consultants to sign a Confidentiality and Invention Assignment Agreement. This agreement deals with the confidentiality issue, but can also provide that the ideas, work product, and inventions that the consultant creates in connection with services performed for your business belong to the company (not the consultant).

A good Consultant Confidentiality and Invention Assignment Agreement covers the following key points:

  • The consultant may not use any of the company’s confidential information for his or her own benefit.
  • The consultant must promptly disclose to the company any inventions, ideas, discoveries, and work product related to the company’s business that he or she makes during the period of work.
  • The company owns such inventions, ideas, discoveries, and work product.
  • The consultant’s work with the company does not and will not breach any agreement or duty that the consultant has with anyone else, nor may the consultant disclose to the company or use on its behalf any confidential information belonging to others.
  • The consultant’s confidentiality obligations under the agreement will continue after termination of the relationship.

Venture capitalists and other investors in companies usually expect to see that consultants of the company have signed such agreements. Prospective M&A buyers of the company will also perform due diligence to determine that consultants have signed such agreements.

A sample form of Consultant Confidentiality and Invention Assignment Agreement can be found at the Forms & Agreements section of AllBusiness.com.

RELATED: Key Issues with Confidentiality and Invention Assignment Agreements With Employees

Copyright © by Richard D. Harroch. All Rights Reserved.

Profile: Richard Harroch

Richard D. Harroch is a Strategic Advisor to CEOs, management teams, and Boards of Directors. He is an expert on M&A, venture capital, startups, and business contracts. He was the Managing Director and Global Head of M&A at VantagePoint Capital Partners, a large venture capital fund in the San Francisco area. His focus is on internet, AI, legaltech, and software companies, and he was the founder of several internet companies. His articles have appeared online in Forbes, Fortune, MSN, Yahoo, Fox Business, and AllBusiness.com. Richard is the author of several books on startups and entrepreneurship as well as the co-author of Poker for Dummies and a Wall Street Journal-bestselling book on small business. He is the co-author of the 1,500-page book “Mergers and Acquisitions of Privately Held Companies: Analysis, Forms and Agreements,” published by Bloomberg Law. He was also a corporate and M&A partner at the law firm of Orrick, Herrington & Sutcliffe, with experience in startups, mergers and acquisitions, and venture capital. He has been involved in over 200 M&A transactions and 250 corporate financings. He is an advisor to Stella Legal and a number of legal and tech companies. He can be reached through LinkedIn.