The two most important assets
for most technology companies
are their intellectual property
and their employees. These assets
need to be protected, and there
are a variety of legal tools and
principles that can assist employers in doing so.
Intellectual property
A first step toward protecting
intellectual property (IP) is to
own it. The employer will generally own all copyrightable work
created by employees in the
course of their employment,
although the law relating to
ownership of patentable inventions is less clear. It is therefore
important to deal with IP ownership in the employment agreement, before the IP is created.
The agreement should also cover
related issues, such as disclosing
existing IP to the employer,
maintaining records regarding IP
creation, maintaining confidentiality, etc.
Employees
Employees of technology companies have a wealth of knowledge
and skills that are critical to their
employers’ success. Many tech
companies attempt to protect this
value through the use of contractual language, including non-competition and non-solicitation
clauses, IP ownership clauses and
confidentiality provisions.
This is not without controversy.
For example, several years ago, a
CHRIS
BENNETT
&SUZANNE
KENNEDY
general manager at Electronic
Arts sent a letter to Ubisoft’s general manager condemning the latter’s practice of requiring employees to sign non-competition
agreements. The letter said Electronic Arts had hired a former
Ubisoft software developer in defiance of the non-competition
agreement. The parties had been
involved in litigation over
employee non-competition clauses
in the past, with Electronic Arts
arguing that Ubisoft’s non-competition covenants were too restrictive on developers trying to make a
living in the industry, and that
copyright and confidentiality protection should suffice.
Restrictive covenants
In general, restrictive covenants in the employment area
are considered to be contrary to
public policy in that they
restrict individual freedom and
prevent competition in a free
and open marketplace.
However, courts have recognized that restrictive covenants
may be enforceable against
employees and others in appropriate circumstances.
In deciding whether to enforce
a restrictive covenant, courts will
generally consider:
Clauses also can be struck
down for a variety of other rea-
sons, including when they are
uncertain or obtained under dur-
ess, undue influence or without
adequate consideration. Restrict-
ive covenants must be drafted
precisely, and may encompass
only those activities that must be
restricted in order to protect the
employer’s legitimate interests.
Notwithstanding the care and
scrutiny that is required to craft
them, there is no question a post-
employment restrictive covenant
can be a very useful tool to
employers. With or without one,
employees generally owe their
employers duties of good faith,
loyalty and fidelity, which pre-
vents them from competing
against their employers or
engaging in activities that are
directly contrary to their employ-
ers’ interest during the period of
employment. For most employ-
ees, however, after employment
ends, so do such duties.
IP ownership clauses
Another valuable tool to
employers in the tech area is the
inclusion in the employment
contract of an IP ownership
clause. The Copyright Act already
vests copyright ownership in an
employer when IP is created in
the course of employment.
Employment agreements often
go further, and state that any IP
created by the employee at any
time during the period of employ-
ment will be owned by the
employer. There is case law in
Canada that supports the
enforceability of these clauses,
even if the IP was created on the
employee’s own time. When an
employee’s responsibilities
include the use of his/her creative
skills, courts appear to be willing
to enforce even very broad con-
tractual provisions vesting
ownership interests in the
employer — unlike restrictive
covenants, which are only cau-
tiously enforced by the courts.
Confidentiality clauses
The law also imposes obligations on employees to maintain
the confidentiality of their
employers’ confidential information, including proprietary information, client lists, etc. This obligation applies to both the
employment and post-employ-ment periods. However, many
tech companies have chosen to
craft specific contractual provisions addressing confidentiality
to avoid any dispute about what
type of information falls within
the scope of this obligation.
Conclusion
The law provides a reasonable level of protection to
employers in connection with
their human and intellectual
capital; however, that protection can be enhanced through
the use of a carefully drafted
employment and IP rights
agreement, which specifically
defines the employees’ duties
and obligations during the
employment and post-employ-ment periods. n
Chris Bennett is head of Davis
LLP’s technology law group and
a member of its intellectual property group. Suzanne Kennedy is a
member of Davis’s corporate commercial group, practising in
employment law.
An oddity in
Information
Technology Law Law Lawddities
Lawddities
Legal Oddities in (Blank) Law What’s
to like?
If public scrutiny is not to your
liking, think twice before clicking
“Like” on Facebook—especially if
you decide to challenge how the
company uses it to market other
firms’ brands.
Seattle seamstress Angel Fraley
and four other like-minded
aggrieved Facebook users filed a
class action, taking issue with the
company’s “Sponsored Story” cam-
paign. Fraley didn’t like that she
might be used to flaunt Singer Sew-
ing Machines to her Facebook
friends because she indicated a
“Like” for them. But as the case
proceeded in a California court, she
really didn’t like the fact that Face-
book, armed with a treasure trove
of information about her gleaned
from the website, would publicly
air her potentially embarrassing
likes and posts.
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