How to protect your IP being stolen by your employees
How to protect your IP being stolen by your employees
It is true to say that the majority of people are not thieves in the sense that they will plan to steal someone else’s property. However, it is surprising to learn how many of us are opportunistic thieves. If a wallet was left lying on a table containing a wad of cash how many people would pocket the cash and how many would hand it in to the police station in the hope of a reward?
It is the same with an business’s intellectual property. If you leave your IP totally unprotected the most innocent of employee will see no wrong in using that property for their own gain to set up in competition. The chances are that they were partly responsible for creating that IP, so in their own minds they can justify the theft. It is then a small jump to walking out the door with your most valuable assets.
That is, unless you very clearly tell them that it is yours and mustn’t be stolen.
How to protect your IP
The best way to protect your IP is with properly drafted contract clauses in your employment agreements. There are various types of clauses each of which serves a very different purpose:
• Non competition clause – this is the clause which protects you from employees working for your competition whilst they are still employed by you. Clearly, if an employee holds a concurrent job with your competition then the risk of IP passing hands is very great.
• Confidentiality clause – the law only offers limited protection to employers from unauthorised disclosure of confidentiality. However, it is possible to strengthen that protection by drafting a tighter clause in your employment agreement.
• Protection of Intellectual Property Clause – this clause spells out who owns any IP created by the employee during the employment and puts in place a procedure for ensuring that ownership of that IP is registered in the name of your business.
• Non solicitation clause – this type of clause prevents your employees stealing your clients or other employees when they leave your employment. Your client base is probably your most valuable asset alongside your employees. Both assets deserve a special clause to protect them in your employment agreement.
• Restraint of trade clause – sometimes you will need greater protection than all the above clauses can offer. It that is the case then a restraint of trade clause is the way to go. What this says is that an ex employee cannot work for a competitor after leaving your employment. Such clauses are usually limited by a time period or a geographical locale. Such clauses can be combined with a long notice period and an ability for you to require that the employee not come not work during the notice period (“a garden leave clause”) for added protection.
Does your employment agreement have all of these clauses and are you sure they adequately protect your interests?
Do I need all these clauses?
There are lots of burglar alarms on the market each offering different functionality and priced accordingly. Some simply sound an alarm on break in, others have movement sensors all around the house, while others are linked to the local police station or security firm offering round the clock protection. Which you chose to protect your valuables will depend on how much value you put on your possessions and your assessment of the risks.
Contract clauses are the same. The type of clause you need will depend on how sensitive the information is you want to protect and the type of employee who has access to it.
For example, an office administrator may have access to sensitive information indirectly through his work but may pose a low risk of setting up in competition to you or passing on information. In that case you may decide that only the following clauses are necessary:
• Non competition
• Confidentiality
A person employed in research and development however poses a greater risk. You may want the following in this case:
• Non competition
• Confidentiality
• Protection of Intellectual Property
• Restraint of trade
For a sales person with regular access to your client base you would include all the above plus a non solicitation clause.
Why they need to be well drafted
People invest in burglar alarms for two reasons:
1. To keep intruders out – the deterrent effect;
2. To catch the culprits.
Your contract clauses must do both too. They must be worded sufficiently well not only to stop the opportunistic thief but also to hold up in court should you ever want to enforce them.
There are a number of laws surrounding protection of IP and what you can and cannot say – for example, all restraint of trade clauses must be reasonable. If your clauses fall foul of the law they may act as a deterrent to the ignorant employee but certainly won’t hold up in court.
But I don’t have that many secrets
If you are thinking that you may not need well drafted contract clauses at this stage of your business, think again. As your business grows so will your IP. However, your original employees (those that can cause the most damage) will continue to be employed under their original employment agreements. Plan for the future and make that investment now.
Don’t invest in cheap contract clauses
So, if you want to avoid the shock, rage and then regret when an employee steals your intellectual property, invest some or all of these well drafted contract clauses:
• Non competition clause
• Confidentiality clause
• Protection of Intellectual Property Clause
• Non solicitation clause
• Restraint of trade clause
Carry out an audit of your agreements now to see whether you are properly protected.
How to protect your IP being stolen by your employees - To learn more about this author, visit Michael Smyth's Website.
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My employee’s would never do that!
It is true to say that the majority of people are not thieves in the sense that they will plan to steal someone else’s property. However, it is surprising to learn how many of us are opportunistic thieves. If a wallet was left lying on a table containing a wad of cash how many people would pocket the cash and how many would hand it in to the police station in the hope of a reward?
It is the same with an business’s intellectual property. If you leave your IP totally unprotected the most innocent of employee will see no wrong in using that property for their own gain to set up in competition. The chances are that they were partly responsible for creating that IP, so in their own minds they can justify the theft. It is then a small jump to walking out the door with your most valuable assets.
That is, unless you very clearly tell them that it is yours and mustn’t be stolen.
How to protect your IP
The best way to protect your IP is with properly drafted contract clauses in your employment agreements. There are various types of clauses each of which serves a very different purpose:
• Non competition clause – this is the clause which protects you from employees working for your competition whilst they are still employed by you. Clearly, if an employee holds a concurrent job with your competition then the risk of IP passing hands is very great.
• Confidentiality clause – the law only offers limited protection to employers from unauthorised disclosure of confidentiality. However, it is possible to strengthen that protection by drafting a tighter clause in your employment agreement.
• Protection of Intellectual Property Clause – this clause spells out who owns any IP created by the employee during the employment and puts in place a procedure for ensuring that ownership of that IP is registered in the name of your business.
• Non solicitation clause – this type of clause prevents your employees stealing your clients or other employees when they leave your employment. Your client base is probably your most valuable asset alongside your employees. Both assets deserve a special clause to protect them in your employment agreement.
• Restraint of trade clause – sometimes you will need greater protection than all the above clauses can offer. It that is the case then a restraint of trade clause is the way to go. What this says is that an ex employee cannot work for a competitor after leaving your employment. Such clauses are usually limited by a time period or a geographical locale. Such clauses can be combined with a long notice period and an ability for you to require that the employee not come not work during the notice period (“a garden leave clause”) for added protection.
Does your employment agreement have all of these clauses and are you sure they adequately protect your interests?
Do I need all these clauses?
There are lots of burglar alarms on the market each offering different functionality and priced accordingly. Some simply sound an alarm on break in, others have movement sensors all around the house, while others are linked to the local police station or security firm offering round the clock protection. Which you chose to protect your valuables will depend on how much value you put on your possessions and your assessment of the risks.
Contract clauses are the same. The type of clause you need will depend on how sensitive the information is you want to protect and the type of employee who has access to it.
For example, an office administrator may have access to sensitive information indirectly through his work but may pose a low risk of setting up in competition to you or passing on information. In that case you may decide that only the following clauses are necessary:
• Non competition
• Confidentiality
A person employed in research and development however poses a greater risk. You may want the following in this case:
• Non competition
• Confidentiality
• Protection of Intellectual Property
• Restraint of trade
For a sales person with regular access to your client base you would include all the above plus a non solicitation clause.
Why they need to be well drafted
People invest in burglar alarms for two reasons:
1. To keep intruders out – the deterrent effect;
2. To catch the culprits.
Your contract clauses must do both too. They must be worded sufficiently well not only to stop the opportunistic thief but also to hold up in court should you ever want to enforce them.
There are a number of laws surrounding protection of IP and what you can and cannot say – for example, all restraint of trade clauses must be reasonable. If your clauses fall foul of the law they may act as a deterrent to the ignorant employee but certainly won’t hold up in court.
But I don’t have that many secrets
If you are thinking that you may not need well drafted contract clauses at this stage of your business, think again. As your business grows so will your IP. However, your original employees (those that can cause the most damage) will continue to be employed under their original employment agreements. Plan for the future and make that investment now.
Don’t invest in cheap contract clauses
So, if you want to avoid the shock, rage and then regret when an employee steals your intellectual property, invest some or all of these well drafted contract clauses:
• Non competition clause
• Confidentiality clause
• Protection of Intellectual Property Clause
• Non solicitation clause
• Restraint of trade clause
Carry out an audit of your agreements now to see whether you are properly protected.
How to protect your IP being stolen by your employees - To learn more about this author, visit Michael Smyth's Website.
Like this article? Share it with your friends
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Leanne Hoagland-SmithAre your sales where you want them to be? Will you be one of the few who achieves sales or business success or one of the many who have failed to change? Are you tired of being told you are like everyone else? Then you may find my first book on sales of interest. Be the Red Jacket in the Sea of Gray Suits, The Keys to Unlocking Sales available at Amazon or at http://www.processspecialist.com/red-jacket.htm. This book is a reflection of my no-nonsense approach to improving sales to overall business results. If you are truly committed to making sustainable changes, then I can help you secure a positive return on your investment because I focus on executable solutions not telling you the problems you already know you have. From training to corporate (group) coaching to executive one on one coaching, my approach is to assess, create awareness, build a goal driven action plan and then execute. The bottom line question is "Not do you or your employees know it, but do you or they want to do it?" Please call for a free strategy session at 219.759.5601. - Visit Leanne Hoagland-Smith's Website |
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Cheryl MatthynssensCheryl is a life skills coach, licensed Chemical Dependency Counselor and a 20 year entrepreneur. Cheryl's dedication to achieving a life of balance led to her expanding her teaching from the simple managing of life's daily challenges to adding financial well being as well. A direct marketer with DrinkACT, she is gaining ground in the online community with her concepts of making sure business owners, entreprenuers and employees have well rounded life styles. She opened up a small affiliate site - The Balance Guide- to help others find resources for mental and emotional well being. Visit Cheryl's blog to see more of the diversity beyond business she has began offering online at www.thebalanceguide.blogspot.com - Visit Cheryl Matthynssens's Website |
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Dianne CramptonDianne Crampton is an executive leadership coach, team culture consultant, author and president of TIGERS Success Series, Inc. Dianne has been helping CEO's and Executives connect their employees to their core values and goals for over 20 years using the trademarked TIGERS team culture process, which stands for trust, interdependence, genuineness, empathy, risk and success. To download a free white paper on behaviors that build strong teams and behaviors that will predictably tear them down go here. Dianne's contribution to the 2010 Pfeiffer Consulting Journal (an imprint of John Wiley and Sons Publishers) entitled TIGERS Hearted Teams is available in November 2009. Her new book TIGERS Among Us: 5 Winning Business Team Cultures And Why, Three Creeks Publishing will release in March 2010. To receive publishing discounts, subscribe to the free TigerTracks Newsletter here. - Visit Dianne Crampton's Website |
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