Employment Agreements

copyright 1997 Donald M. Cameron , Aird & Berlis

Contents

• The Form of the Contract

1. Consideration
2. Scope of Employment
3. Record Keeping
4. Trade Secrets and Confidential Information
5. Covenant not to Compete
6. Ownership of Copyright
7. Ownership of Inventions and Patents
8. Confirmatory Assignments
9. No Use of Unauthorized Programs or Data

The "best" form of employment contract is one that is in writing, which clearly sets out the ownership of the intellectual property created by the Employee. A written employment contract also gives an Employer the opportunity to set out procedural rules for the Employee to follow in handling the Employer's intellectual property.

Set out below are sample clauses from an employment agreement dealing with intellectual property rights. Each clause is discussed separately below. The "I", "me" or "my" refers to the Employee.

All contracts require there to be some "consideration" being exchanged by the parties. In many cases, the "consideration" given by the Employer is the employment of the Employee.

Ideally, an Employment Agreement will be signed when the employee arrives at the job. The negotiating position of the Employer is at a maximum ("Do you want to work here or not? If so, sign here.") and the Employee is more likely to sign the Agreement. The Employer must be cautious not to overreach in the Employment Agreement and obtain clauses that look good on paper but are unenforceable later in Court which go farther than is necessary to protect the interest of the Employer).

Where the Employment Agreement is an afterthought, the Employer can take the position with the Employee that the written Employment Agreement is doing nothing more than recording the terms of agreement that already exist between the Employer and Employee in "unwritten" form. If that strategy does not work, the Employer can discover later in Court what were the terms of the unwritten Employment Agreement.

In consideration for my [continued] employment by my Employer and my salary, I hereby agree with my Employer to the terms and conditions of this Employment Agreement.

If the ownership of the intellectual property rights is determined by whether the work was done "in the course of employment", then the Employee's job description is important. In this clause the Employee acknowledges that part of his or her job is to be creative and that the results of the creativity are to belong to the Employer. If a more specific job description can be provided, it should be; if the job changes, so should its description.

I acknowledge that I have been employed, in part, for the purpose of creating ideas and material that are useful for the business of my Employer. In particular, I have been employed to (insert job description defined by tasks). I acknowledge that my Employer is the owner of the Intellectual Property rights associated with these ideas and materials and I will sign any assignments necessary to transfer or confirm the assignment of such ownership.

This clause also serves to give notice to the Employee that the Employer - and not the Employee - is the owner of the intellectual property.

I shall disclose promptly to my supervisor, all trade secrets, confidential information, inventions, designs, copyrightable works and trade marks ("Intellectual Property") I may create, either by myself or in cooperation with others, during the course of my employment.

Depending upon the type of intellectual property, different steps must be taken to protect it. In the case of trade secrets, they must be marked and physically maintained as confidential or only disclosed under a confidential disclosure agreement in order to be protected. Patent applications must be filed for inventions in a timely fashion, preferably before the invention is made public in order to gain world-wide protection. Industrial designs must be applied to be registered within one year of the design being made public. Copyrighted works should be marked as such and, in some cases, should be registered. Trade marks should be deliberately chosen so as not to infringe on the rights of others as well as to be sure that one is investing in a trade mark that has long-term value.

A system should be set up within each Employer-Company to manage and maintain intellectual property. The ultimate obligation falls upon the Employee to advise his or her superior about the creation of new intellectual property.

I shall keep written or electronic records of the Intellectual Property I create at the offices of my Employer and I acknowledge that such records are the property of my Employer.

It is sometimes necessary to have evidence as to when an invention was created, when a literary work was created or when a trade mark was first used in commerce. For example, laboratory notebooks can be considered as "business records" under the Evidence Act and be used to prove an invention date without further proof.⁽¹⁾

Each company should have a document retention policy and a system for recording documents in an organized fashion. The record keeping should be the overall responsibility of the person in charge of the intellectual property of the company, however, the Employee should understand that retention of these records is important.

In order for a company to protect its confidential information, it is critical for a company to ensure that its employees protect the confidential information they learn or create on the job. An Employee Agreement should include clauses found in a Confidentiality Agreement to protect the trade secrets and confidential information. The licence to use trade secrets and confidential information runs with the employment and is to be used only for the purpose of carrying out the job. Any other use is not permitted.

The definition of confidential information set out below strikes a balance between the interest of the Employer in protecting its trade secret and the interest of the Employee in being able to use information which has never been confidential or which later falls into the public domain through no fault of the Employee.

Definitions

"Trade Secrets" and "Confidential Information" means the information provided by and designated as a trade secret or as confidential information in writing by my Employer.

Confidential Information does not include information which is:

1. publicly available or becomes so other than by acts of the Employee;
2. received by the Employee prior to it being provided by the Employer to the Employee;
3. received by the Employee from a third party without restrictions as to its use; or
4. independently developed by the Employee,

except where such information is in the public domain, or falls into the public domain other than by disclosure by the Employee.

Trade secrets are protected best when they are specifically identified and marked as such.

Merely saying that something is a trade secret or confidential information, however, does not make it so. If the information is otherwise readily available without restriction, then it is neither a trade secret nor confidential information.

It should be appreciated that trade secrets or confidential information can consist of a collection of publicly available facts that have not been collected elsewhere.

I shall not use any Confidential Information or Trade Secrets which I may receive or create during the course of my employment for any other purpose nor disclose at any time [OR within (state reasonable period)] from the date my employment ends, unless I have the prior written permission of my Employer.

Disclosure of trade secrets or confidential information without "circumstances of confidence" renders the information "public" and destroys the secret or confidentiality. This clause reminds the Employee to protect secrets and confidential material to prevent their loss.

To protect the trade secrets and confidential information of my Employer, I shall not, for a period of (reasonable time) following the end of my employment, work in a (describe competing job description) for a competitor of my Employer.

A departing Employee is entitled to take with him the skill and training he or she receives while employed by his Employer. The Employee is not entitled to take trade secrets or confidential information owned by his Employer in the form of papers or computer disks.⁽²⁾ By necessity however, the departing Employee will take trade secrets and confidential information "in his or her head" and must be careful not to misuse this information in the new job.

The "doctrine of inevitable disclosure" assumes that, sooner or later, the confidential information will be disclosed or misused. To enforce the promise not to misappropriate the information or secret, a non-competition clause makes the departing Employee "remove temptation" by disassociating the Employee from the area of the trade secrets for a "cooling off" or dissipation period over which time the information or secret will lose much of its commercial value. The time period of non-competition must be reasonable in the circumstances to protect the asset while balancing the interest of the Employee to earn a living.

Exit interviews should be conducted to make departing Employees to remind them of their obligational of confidence and to be aware of what confidential information and trade secrets they are not allowed to use in their new job.

Part-time work can be equally damaging to the Employer and the Employer should be notified of any part-time work that is related to the Employer's business.

I shall disclose promptly to my Employer any part-time work I engage in during my spare time which is in any way related to my Employer's business. I shall not do any such work without the prior written approval of my Employer.

The Copyright Act provides that if the Employee is employed under a contract of service and a work is created in the course of the employment, then the Employer is the first owner of copyright (See "Ownership if IP Rights: Copyright").

In order to ensure that the Employer is the owner of copyright world-wide, the clause contains a confirmatory assignment.

I acknowledge that I am employed under a contract of service with my Employer and that my Employer is the first owner of copyright in all copyrightable works I create in the course of my employment.

To confirm ownership in the copyright, I hereby assign to my Employer, my entire right, title and interest in Canada and throughout the world in and to the copyright as well as the right to receive copyright registrations for such works.

Moral rights allow an author to protect the "integrity of a work" where modifications or changes to it prejudice the honour or reputation of the author. If the work is "distorted, mutilated or otherwise modified or is used in association with a product, service, cause or institution" to the prejudice of the honour or reputation of the author, relief can be obtained.⁽³⁾

Moral rights exist independently of copyright and cannot be assigned. They can only be waived.

The waiver set out in the clause below protects the Employer but allows the Employer to have the Employee use his or her moral rights to assert them against a third party.

I hereby waive, as against my Employer, its successors, assigns and licensees, all moral rights which I have or acquire in respect of the copyrighted works. I agree to enforce the moral rights as against others as directed by and at the cost of my Employer or its successor-in-title of the copyright in the works.

The Patent Act does not contain any default provisions regarding ownership of inventions. In this clause, the Employee agrees that inventions made in the course of employment belong to the Employer and a confirmatory assignment is provided.

I acknowledge that my Employer is the owner of inventions I make in the course of my employment. To confirm this ownership, I hereby assign to my Employer my entire right, title and interest in Canada and throughout the world, in and to any such inventions, as well as my entire right, title and interest in and to any patent applications which may be filed with respect to such inventions including any and all divisional applications, and any and all patents which may issue or be re-issued for such inventions.

Sometimes patent, trade mark or copyright offices in different parts of the world require separate assignments of the domestic rights to those intellectual property rights. This clause ensures that the Employee will sign any further documentation necessary to record the ownership of the intellectual property in the Employer.

I agree to execute any further assignments, applications or other documents as requested by my Employer, its successors, assigns or legal representatives, to obtain any and all copyright registrations or patents for the inventions and transfer or record the transfer of their ownership to my Employer, its successors, assigns or legal representatives.

Copyright infringement of computer programs is rampant in most industries. Employers should set up in-house policies to prohibit unauthorized reproduction of computer software and data or else the Employer might be held liable for the wrongful actions of its Employees.

This clause will help protect the Employer from allegations of copyright infringement through the unauthorized acts of its Employees. It will also emphasize to Employees the importance of preventing software and data piracy.

To protect my Employer against any allegation of copyright infringement by the unauthorized use of computer programs or data of others, I agree that I will not use or copy any computer program or data on my Employer's computer system without the prior written authorization of my Employer.

1. Unilever PLC v. Procter & Gamble Inc. (1993), 47 C.P.R. (3d) 479 (F.C.T.D. per Muldoon J.).

2. Delrina Corp. (c.o.b.a. Carolian Systems) v. Triolet Systems, Inc. (1993), 47 C.P.R. (3d) 1 (Ont. Gen. Div.).

3. Copyright Act s. 14.1 and 28.2.

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