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Key Issues With Confidentiality and Invention Assignment Agreements With Employees

Insurance & Risk ManagementLegal

Employees often have access to a great deal of their company’s confidential information, which especially in a technology company can be information that is highly valuable. Companies also expect their employees to come up with ideas, work product, and inventions that are useful to the business.

To make sure that the employees keep their employer’s proprietary information confidential, the company typically requires them to sign a Confidentiality and Invention Assignment Agreement. This agreement deals with the confidentiality issues, but it can also provide that the ideas, work product, and inventions that the employee creates which are related to company business belong to the company—not the employee.

This seems fair, doesn’t it? Because the company is paying the employee to produce such items, you want to make sure that the company has the legal right to those developments.

A good Employee Confidentiality and Invention Assignment Agreement will cover the following key points:

  • The employee may not use any of the company’s confidential information for his or her own benefit or use.
  • The employee 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 employment.
  • The company is the owner of such inventions, ideas, discoveries, and work product.
  • The employee’s employment with the company does not and will not breach any agreement or duty that the employee has with anyone else, nor may the employee disclose to the company or use on its behalf any confidential information belonging to others.
  • The employee’s confidentiality obligations under the agreement will continue after termination of employment.
  • The agreement does not by itself represent any guarantee of continued employment.

Venture capitalists and other investors in startups expect to see that all employees of the company have signed such agreements. In an M&A transaction where the company is sold, the buyer’s due diligence team will also be looking for these agreements signed by all employees.

A sample form of Employee 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 Consultants

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

Profile: Richard Harroch

Richard D. Harroch is a Senior 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 venture capital fund in the San Francisco area. His focus is on internet, digital media, AI and technology companies. 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 a 1,500-page book published by Bloomberg on mergers and acquisitions of privately held companies. He was also a corporate and M&A partner at the international law firm of Orrick, Herrington & Sutcliffe. He has been involved in over 200 M&A transactions and 250 startup financings. He can be reached through LinkedIn.