A Brief Introduction of Confidentiality and Invention Assignment Agreement
A confidentiality and invention assignment agreement is a contract that is created between a company and its business partners for handling any IP or inventions created during the course of the business. The agreement also deals with how proprietary information would be dealt with by the business partners. It is required to set the restrictions within which employees can use confidential information of the company. It also acts as an invention assignment agreement, which states that the company will own the rights to all inventions made by the employees. Hence this contract contains a provision for assignment of inventions.
Who Takes the Confidentiality and Invention Assignment Agreement?
A confidentiality and invention assignment agreement is entered into between a company and its employees. It is mainly taken by venture capitalist, investors and large scale companies where there is a requirement for handling IPs and proprietary information.
Purpose of the Confidentiality and Invention Assignment Agreement
The purpose of this agreement is to enforce the terms of engagement between the company and the business partners. These terms of engagement primarily define the work product and the inventions that the employees and other business partners are required to assign to the company during the course of business with disclosure restrictions on such assignments. The purpose of the contract is to make sure that the employee, or any other business partner, does not use any of his inventions for his profit.
Contents of the Confidentiality and Invention Assignment Agreement
Some terms that form part of this contract are
- Disclosure: This agreement should outline a mode for disclosing the inventions made and the IPs generated during the course of the engagement with the company. To enforce the clause, the agreement should include penalty clauses for non-disclosure.
- NDA: The non-disclosure terms in the contract should prohibit the employee from using his inventions for personal use. However, such NDAs should be overly restrictive so that it can be challenged in the court of law. It should also include the duration the NDA remains valid after the termination of the business partner’s engagement with the company.
- Assignments: The agreement should outline the unconditional assignment of the IP generated, inventions created, or proprietary information used to the company.
- Legal Fees: In case of any disputes, the responsibility of paying attorney’s fees, the jurisdiction and setting up of arbitration, and integration clauses should be mentioned clearly.
How to Draft a Confidentiality and Invention Assignment Agreement
The following are the steps to follow while drafting an agreement:
- The agreement must first identify the period for which this agreement would be applicable
- The employee must be made aware of the fact that all inventions and work products created by him will be the property of the company.
- It should define confidential information and IP generated during the business, and the eligible persons under the contract.
- The agreement must be reviewed by the parties and signed by them thereafter.
The negotiations in an agreement of this kind will mainly be regarding the conditions of employment and the duration for which the NDA would be applicable.
The stakeholders can also negotiate on what constitutes as invention during the course of business for business purposes, and what can be used by the employee for himself.
Contingent clauses could be introduced to accommodate unforeseen changes during the period. This protects the rights of all the parties involved.
Benefits and Drawbacks of the Confidentiality and Invention Assignment Agreement
The following are the benefits of an agreement:
- Since confidential information of the company can’t be disclosed to any third party, even after the termination of engagement, business interests of the company are protected.
- This agreement is necessary to prevent employees from misusing proprietary information.
- The assignment of inventions agreement also clarifies the assignment rights and responsibilities to prevent disputes about the ownership of the generated asset in the future.
Drawbacks of the Agreement:
- The validity of NDA even after the termination of engagement can prevent the employees from utilizing the full potential of their inventions for personal purposes.
- An excessively rigid agreement could be challenged in a court of law which would compromise the business interests.
What Happens in Case of Violation?
In case there is a breach of the terms of the agreement by either party, the injured party can approach the courts for a suitable remedy. Usually, the breach of any confidentiality obligation causes huge loss to the company, and any compensation may not be adequate relief. In such a case, the company may seek injunctive relief(1) and prevent the employee from committing any further breaches.
If the employee violates any obligations under this agreement, the company will have the option of terminating the employment agreement for such breach.
This type of agreement is mandatory in today’s times and is especially important in a technology company as employees are constantly producing and developing new forms of technologies. This contract is necessary to make sure that all intellectual property rights are retained with the company. It also ensures that the employees do not make any personal use of such information that relates to the business of the company.