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Key Considerations in an Invention Assignment, Confidentiality, Non-Solicitation, and Non-Compete Agreement

An invention assignment, confidentiality, non-solicitation, and non-compete agreement is a multifaceted agreement that protects a company from certain actions of its employees and consultants during or following their employment or engagement with the company.

The key terms in this type of agreement are:

  • Assignment of intellectual property rights. An assignment of intellectual property rights ensures that any invention or idea created by an employee or a consultant during their employment or engagement will be owned by the company. By signing this agreement, the party agrees to transfer any and all rights to the invention or idea to the company. This provision ensures that the company obtains all rights to the intellectual property (i.e., patents, trademarks, copyrights, trade secrets, etc.) it may use in its business and protects the company from an employee taking an invention or idea that was created using company time or resources and forming a competing business.

 

  • Confidentiality. To protect the company’s proprietary or secretive information, a confidentiality provision ensures that any proprietary information given to an employee remains confidential. Specifically, it prevents an employee from sharing any confidential information with a third party or using such confidential information during or following their employment without the company’s written consent.

 

  • Non-solicitation. A non-solicitation clause prevents an employee from directly or indirectly soliciting the business of any current or prospective customer, supplier, or employee of the company. The geographic and temporal scope of a non-solicitation clause varies from case to case, depending on the jurisdiction in which the employee or consultant is located.

 

  • Non-compete. A non-compete clause prevents an employee from engaging, operating, or working with any other company that is considered to be a competitor of the business while he or she is an employee of the company and for a specified time period thereafter. This protects against employees using what they learned while working for the company to better the business of its competitors. Similar to the non-solicitation clause, the geographic and temporal scope of a non-competition clause varies from case to case, depending on the jurisdiction in which the employee or consultant is located.

Ideally, a company should have each employee and consultant sign an agreement with all of the provisions described above, but all of the provisions need not be in one document, and certain ones may be incorporated in other documents the employee or consultant signs. Employees or consultants who pose little risk of starting a competing business or stealing away the company’s employees likely don’t need to be required to sign a non-compete or non-solicitation provision. In addition, if an employee or consultant is not hired to produce any intellectual property, personal property or other work product for the company (e.g., marketing professionals or sales executives), it may not be absolutely necessary for that employee or consultant to sign an assignment of intellectual property rights provision.

All employees and consultants, however, should sign a confidentiality agreement to protect the company’s trade secrets, financial information, customer and vendor lists, software code, and other non-public information.

For more information, please contact a member of our Early Stage & Emerging Companies practice group.