Human Resources and Intellectual Property: Creating Effective Hiring Practices

This is Part One of a two-part blog series on the role your human resources department can play in implementing your company’s IP policy. (Read Part Two)

Any business with valuable intellectual property (IP) assets needs to protect its confidential information and prevent trade secret misappropriation. In particular, if confidential information becomes public or ends up in the wrong hands, you may lose the right to file for patent protection or claim trade secret status.

As a practical matter, when confidential information is improperly disclosed or used, it’s typically through people — specifically, your employees. Possible scenarios include:

• A departing employee shares confidential information with your competitor.
• A well-meaning employee publishes confidential information online (for example, through social media), and unknowingly destroys IP protection.
• A current employee carelessly leaves documents in a public place.
• A current employee intentionally shares confidential information with your competitor. 

And the risks related to “leaks” go two ways. Your company’s IP could be compromised when you lose key employees; likewise, your company could become liable if you improperly obtain IP through employees hired from competitors. 

It’s very common to see legal disputes escalate quickly when employees move between competitors, especially high-level employees how have access to sensitive confidential information.

Given this relationship between confidentiality and personnel, it’s clear that your human resources (HR) department plays an important role in maintaining the integrity of your intellectual property. In the context of bringing on a new employee, implementing your company’s IP policies begins with the interview and hiring process — here’s how your HR department can step in.

How to Implement Proactive Hiring Strategies

By having strong employment agreements and record-keeping policies, you’ll ensure that your IP rights are legally enforceable, and also reduce the risk that you will be held liable for misappropriating third-party information in future.

1. Signing NDAs During the Interview Process

You need to talk with people before you hire them, and this might include sharing some of the company’s confidential information. For example, you’ll want to have candid and thorough interviews with multiple candidates; and to recruit the good ones, you’ll need to tell them some of the details of the company’s work and vision. In that type of scenario, you should have all job candidates sign a non-disclosure agreement (NDA) before they’re allowed to interview. 

Generally, NDAs restrict use and limit disclosure of your company’s protected information. NDAs offer you legally enforceable protection against confidentiality breaches by third parties — whether those breaches are accidental or intentional.

In the hiring process, an NDA serves a couple of purposes. First, it puts candidates on notice that any company information shared with them during interview must be kept confidential, even if they aren’t offered the position. And second, it shows candidates that the company strongly values its IP — so when candidates become employees, they’re already in the mindset of protecting confidential information.

Some companies take the additional precaution of using third-party information NDAs during the interview process to prohibit candidates from sharing confidential information from other sources (such as a current employer). This establishes ethical expectations up front, and can also help protect your company and the candidate from liability to the candidate’s current or former employers.

2. Employment Agreements

Every employee who might contribute to the company’s intellectual property should sign an employment agreement before they start work. The employment agreement should clearly define what IP is owned by the company; usually, this encompasses all IP developed by the employee over the course of their employment. 

To properly effectuate ownership, the employment agreement should include a present assignment, stating that the employee “hereby assigns” to the company all IP that the employee creates while employed. (Not to be confused with a future assignment, where an employee states that they “will assign” all IP to the company.)

The employment agreement should also make clear that employees should not bring or use any confidential information from former employers or any other sources. This can protect the company from inadvertently violating another company’s IP rights.

Next, the company’s confidentiality policy should be implemented in the employment agreement. Even if the new employee signed an NDA during the interview process, the employment agreement should include an obligation to protect the company’s confidential information throughout and beyond the term of employment. 

The confidentiality provisions in an employment agreement might further include specific obligations regarding the handling of company information or materials upon termination. For instance, employees may be required to return or destroy all materials and delete all company files from their personal devices when their employment ends.

Finally, the employment agreement should state that the employee has an ongoing obligation to provide necessary information and execute documents related to the IP they created while employed — even after their employment ends. For example, inventors’ signatures are often needed for patent applications long after the inventor has left the company. Informing employees of this obligation upfront in the employment agreement can save the company significant time and expense later on.  

Enforcing IP Policies During Employment

By clearly setting employee expectations and establishing the company’s approach towards IP policy upfront, you can reduce the risk of getting tangled up in complicated IP disputes — whether because your confidential information was misappropriated, or because you improperly acquired third-party IP.

But over time, these expectations may slip your employees’ minds — especially if they’re only presented in an employment agreement. That’s why it’s important to periodically remind your employees of those agreements and policies. Keep an eye out for the second post in this series, where we’ll discuss the best strategies for reinforcing your policies beyond the hiring process!

Have more questions about maintaining the confidentiality of your company’s IP? Henry Patent Law Firm’s attorneys have extensive experience partnering with large and small businesses to build secure, tech-oriented patent portfolios — we’d love to hear from you!