Overly Broad Intellectual Property Agreements

I don't have any problem with a company wanting to own the work that it has hired me to produce. That's what I'm being paid for.

I also don't have any problem with a company wanting to protect itself from being screwed by a former employee who wants to take back all the work he's ever done for the company when he quits or is fired, either if that means taking it back by lawsuit, or by sabotage. I don't have a problem with a company wanting to keep former employees from taking its customer database or patented ideas or other things to its competitors. IntellectualProperty agreements can protect the employer from such situtations and if I were an employer I would want to be protected, too.

But some IP agreements are evil. It seems that every company wants to get every new hire to sign a contract which says, basically, "All your brains are belong to us." [Note to the person who attempted to correct the poor English in this quote by removing the word "are", the poor English is intentional. Please read: AllYourBaseAreBelongToUs for an explanation.]

"Did the employment contract include giving the company rights to works created outside the scope of employment? I am not a lawyer, but I think that if this is not the case, then as long as what you do on your own time doesn't relate in any way to what the company does or what you do for the company, you should own the work you create. -- MichaelJames" [If this is incorrect, correct me on this page please.]

Sometimes a company will decide to ask its current employees to sign these, too. They may offer a bonus. I have known people who, by being valued employees, have refused to sign in that case, with no adverse effect. -- DanielKnapp [So the employer is just "trying it on" then?]

They'll say things like, "Whether or not the idea is patentable or copyrightable... whether you come up with it at work or at home... at any time when you are one of our employees... you'll surrender your ideas to us... and you'll help us take action to secure them legally..."

If I end up signing one of these agreements, then I find myself in MentalHandcuffs -- because this affects not only the ideas which the employers ask me to come up with, but also ideas I might want to volunteer to them, or ideas I might want to use for myself. If I volunteer an idea to them, they can not only refuse to use it, they can use patents to prevent it from being used by anyone else either. (I guess that's just a major blow to the ego. "You know that idea you're not allowed to use, because the company that owns the patent won't use it or license it? I invented that." "Thanks a lot, buddy.") And ideas I have for my own use are locked up, too.

The net result is that I have to either conceal unsolicited ideas, or avoid coming up with them in the first place.

I don't think companies are insisting on broad IP agreements to seize lots of IP that they wouldn't otherwise get. I think they are insisting on broad IP agreements to prevent the IP from ever being created -- which is the effect that such agreements have. After all, I'm not required to volunteer unsolicited ideas or have ideas at home, and if I do, the company is not required to give me a raise, or recognition, or anything for it... so why bother creating those ideas?

What possible benefit is there to a company, though, in stopping the minds of its employees?

It is my understanding that federal and state laws may make certain parts of these contracts unenforceable, but I would still prefer the contract to say what it really means, so that I don't have to sign it under the assumption that parts of it are unenforceable and void. (On the other hand, why should a company refuse to hire me for crossing out part of a contract which is unenforceable anyway? "Well, it may become enforceable later. We have lobbyists working round the clock.")

Recently, too, I've been hearing from potential employers that I'm overqualified, and that they're afraid I would get bored at work. What's it to them if I get bored at work? Obviously they think that an idle mind is the devil's workshop and that "well, if he gets bored, he might start getting ideas. Can't have that."

There is a legitimate reason for a company to try to avoid hiring overqualified people: They may be concerned that an overqualified person is viewing the job as a temporary thing until he can find a more interesting, higher-paying job elsewhere. They do not wish to incur the probable expense and difficulty of finding someone to replace that employee in a few months. A dedicated employee who wants the job being offered is better than a genius for most purposes. -- DanielKnapp

It might be a good idea to move this overqualified stuff to a page called BeingOverqualified?, although the idea that employers might not want overqualified employees "getting ideas" should probably stay here.

What the hell is going on?

If you had the nerve you could overwhelm a company with ideas. Email the legal department that you have had an idea to have stew for tea tonight, but since this idea belongs to them ask for permission to actually have stew. Then you might think of an alternative way home, a list of fiction books you must read and so on. They would soon review the idea of "Whether or not the idea is patentable or copyrightable...". If anybody tries this, I'd be keen to hear the results.... The contract is a set of rules. Programmers are accustomed to finding bugs in rules, then either patching the bug or writing an exploit.

(Results are likely to be, "You're fired!!!")

Well if anyone wins the lottery and decides to give it a go, it would be interesting to see them justify firing someone for complying with their rules.

Oh, they wouldn't fire you for that. They'd fire you for "coming up with too many ideas" or something like that.

Even worse, the legal department is full of lawyers. They might sue you, like, say, for harrassment. If you like wiggling your fingers in the water of the piranha tank, hey, go ahead...

Anyone under such a contract who doesn't do this is breaching their contract.

When my employer was bought by Lucent, they passed out one of these OverlyBroadIntellectualPropertyAgreements for us to sign "as a condition of continued employment". A co-worker remarked that under the terms of the agreement, if Lucent ever got into the Web content-provision business, it would own the contents of his personal Web site.

I simply crossed out a few words, so that the contract wouldn't cover anything I created on my own time, initialed the change, signed the contract, and turned it in. They didn't fire me. --SethGordon

If that contract ever pops up in court, there might be a problem. You can say that you only signed the contract on the condition that the changes you made were approved, but they can say that they didn't initial the changes, and that they thought you were signing the original contract. They might say that you acted in bad faith, and charge you with fraud -- but that's assuming they decide to take you to court over IP in the first place. Otherwise your signed and altered agreement will just sit in a file somewhere, unseen. And the fraud charges might not hold up, since you didn't conceal the changes you made, and they could have looked at them. -- IANAL

My understanding is that the first person to sign a contract can make a change and initial it. The second person is free to either accept or refuse to sign at that point or provide a new contract. I have seen this done with employment contracts. The guy crossed out the part he didn't like. The administrative person gathering the papers took no notice. A few months later the company cried, "Violation of contract." He just had them pull out his actual contract and show him where it said he had to oblige them. When they did, there was the crossed-out item, and the company was silenced. -- TerryLeeMoore

Keep a copy of what you've signed, especially if you cross out parts of the agreement.

How they might try it on

I'm not a lawyer, but my understanding is that some states restrict what can go into IP agreements. A company I worked for removed the "work you do on your own time belongs to us" condition from its standard IP agreement because they discovered it was at odds with the laws of California.

Well, I'm not a lawyer, either, but as far as I know, a company that is incorporated in another state, such as Delaware, can just write "This agreement shall be governed by the laws of the state of Delaware." Then they could sue you in a Delaware court and you wouldn't be able to use California law. Also, this California law might violate Article I Section 10 of the US Constitution, which says "No state shall... pass any... law impairing the obligation of contracts..."

I believe the above is incorrect. Employement relationships are almost(?) always goverened by the law of the state where the employment relationship exists; one cannot subvert the minimum wage law in Oregon, for example, by incorporating in Alabama and claiming that "Alabama law applies" to Oregon-based employees. Also, article I section 10 means that states may not, via force of law, invalidate EXISTING contracts (or change the terms thereof). States are free to regulate the terms of NEW contracts; so the California law would only have an issue with article 1 section 10 if applied to employement relationships that existed before the law was passed. (And even then, that's questionable; how much of a contract exists in an employment-at-will state is debatable). --ScottJohnson

A couple of jobs ago (I was working as a Network / Systems administrator for a small, locally-owned Internet Service Provider) I was handed an "Employee Contract" when we were acquired by another local company. This contract included a couple of paragraphs written in the style of these OverlyBroadIntellectualPropertyAgreements, but since coming up with ideas was part of my job I didn't worry about the IP part (I should have).

The part I was fixed on was where it stated that for a period of 2 years after my employment with this company I would not work for a competing company or even in the field! I understood this to mean that if I quit, was let go, or was fired, I would not be able to work as a Network / Systems Administrator for 2 years. I was outraged and was even more outraged when I found out that every one of my coworkers had signed this agreement without a second glance. When I went to my boss, I was told that my concerns weren't vaild and that the paragraph was "unenforcable" under Florida law.

This, my friends, was unacceptable. I refused to sign the contract until it was altered. My boss tried the "Sign it now and we'll change it later" gag. I said no. She got her boss involved. I was again pressured to sign the agreement and was told that I was "holding up the merger." Nope, I wasn't signing. He then said I could cross out the paragraphs I disagreed with, initial, and sign the document and he would run it by the company's lawyer (the writer of the contract). At this point I was happy. I was told by the same boss a few days later that the contract was "acceptable" in that form.

Moral of the story: You can stick to your guns and win.

I later learned that these paragraphs were included to screw me if I ever decided to screw the company and that they do not stand up in (Florida) court unless you screw the company.

--TW

A good book about IP law, written by a real attorney in the US (and thus focusing on US law), is ISBN 0-941968-04-9 .

A possible reason why so many companies are requiring such broad IP agreements just occurred to me: it's "corporate responsibility." I'm probably just paranoid, and IANAL, but anyway, here goes.

Imagine this scenario: you work for the XYZ corporation. You write a controversial novel. Since the XYZ corporation didn't make you sign an IP agreement, you own it. So you sell it and start to make some money. Most novels only sell a few thousand copies. Meanwhile, somebody gets offended by it. What does this offended person do? They sue XYZ corporation. After all, the XYZ corporation is your employer. If XYZ corporation allowed you to do this stuff by failing to get a proper IP agreement, then XYZ corporation was irresponsible and has to pay. The judge agrees. The fines go into the millions.

If you ran a corporation and you were told that you can be successfully sued because one of your employees produces a controversial piece of IP on his own, then you would have no choice but to attempt to exert some control over the actions of your employees. Since you can't just coerce like a dictator, you'd have to get employees to agree to that control -- or stop being employees. You'd have to fire (or not hire) any employees that didn't agree to it.

The employee who wishes not to agree to such terms, though, finds himself in a quandary. Since ANY corporation is subject to the same threat of being sued, ALL corporations end up having to set up the same IP terms. Thus, there is no capitalistic competition; the IP agreement does not present any competitor with an opportunity to snatch up creative employees by offering more IP freedom, since such a competitor would be exposing itself to immense liabilities, and would shortly be sued out of existence.

No contract can bind a third party (or a judge). The employee cannot contractually agree to take responsibility away from the corporation, because the employee has no means of requiring offended people to sue him instead of his employer. The employee can agree to pay any civil penalties that are levied against the employer, but many judges and juries tend to amplify civil penalties levied against "rich" corporations, and there's no way the employee could afford to pay such penalties.

Your contract could include an agreement to indemnify your company against those sorts of lawsuits. The angry book-burner would still sue the company, however, you would carry the can if your company lost. This would give you, I believe, about the same effect. --Law Student.

My personal experiences, YMMV.

Two jobs ago, I was given a OverlyBroadIntellectualPropertyAgreement? that had a few lines where I was to put prior technologies, etc. that I had worked with and thus were not covered. I filled in those lines, and then continued it on the back of the page (filling most of the blank space), where I legitimately named every conceivable technology to which I had doodled, coded, improvised, reviewed, read, etc. Basically I covered everything possible past, present and future. (Ok, maybe not everything future, just what I could think of.) Rendered the assigned rights essentially useless. The CTO looked at it (I made him initial the back), with a frown, but accepted it.

Last job I was given the contract to sign in Word format. So while reading, I deleted offensive paragraphs, sub-sections, and one entire section. I then printed two copies, initialing each copy with blue ink, and turned them in with the instructions that I was to receive one original back after it was executed by the corporate authority. Received it back without a blink. (I wonder if they read what they signed?)

Of course I haven't developed anything on the side recently which would be worth suing me over, so I can't claim total victory. I'm just doing what I can to give it back to the system.

-- DerekWoolverton

External Resources

A friend of mine once worked at a company with one of these OverlyBroadIntellectualPropertyAgreements, and he told them he wanted to propose modifications to the contract. "Sure, we'll be happy to run it through legal," they said. But they wanted him to sign the contract as soon as possible, and he couldn't think of exactly what changes he wanted to make, so after several days of being badgered without being able to think of anything, he ended up bowing to pressure and signing the contract unmodified.

If you're going to counter-offer on an IP agreement, you should know what changes you want to make. Thus, I propose the following:

Fine Arts Waiver. The company waives all IntellectualProperty rights to all novels, plays, poetry, short stories, speeches, essays, books, articles, screenplays, musical compositions, musical performances, choreography, paintings, drawings, sound effects, sculptures, carvings, photographs, motion pictures, videos, animations, models, game levels, or portions thereof which (a) the employee produces on [her] own time and initiative with [her] own materials and equipment, and which (b) do not include the company's intellectual property.

(Substitute the pronoun, "he" or "she," appropriate to the employee.)

This waiver should be easy for most software or hardware companies to accept, and it would allow creative people to explore a large number of hobbies, without having to keep their hobbies secret, or live in fear of success. (Success makes you a big target in case you were counting on the the company to never enforce the IP agreement which gives it all your creative stuff. They probably won't enforce it, as long as you never succeed, but sign a million-dollar deal and watch them move in.)

(I've been revising this clause over the last few months and some modifications may still be possible. For example, maybe clause (b) should be eliminated entirely; you would still not have any special priveleges with regard to use of the company's IP. Changing clause (b) to say that the work must not infringe the company's IP rights does nothing but award them ownership in the event you do (accidentally) infringe. "Include" is even broader; if you describe a device which the company owns a patent on, you are not infringing the patent, but you may be "including" their IP. On the other hand, you might want to promise that you will protect the company's reputation by not using its trademark to promote your work, etc.)

Unfortunately it's harder to write a waiver for people who write programs at work and want to write other programs at home. What makes it harder is the possibility of mixing code and ideas between home and work. If you write generally useful code, overlap is more likely to occur: if you write an implementation of quicksort at home, or an implementation of Forth, or a super-fast factoring algorithm, can you copy the code onto a disk and take it to work? If you do, then do you then lose the right to use it at home? What if you leave the code at home but end up writing substantially similar routines at work because you know only one way to implement quicksort or whatever? In practice, you have to divide all programs into three categories: what's yours, what's the company's, and what you both must share.

However, maybe this will work:

Hobby Programming Waiver. The company waives all intellectual property rights to computer programs which (a) the employee produces on [his] own time and initiative with [his] own materials and equipment, and which (b) do not infringe the company's intellectual property rights, and which (c) would not appear in the eyes of the company's customers or competitors as equivalent replacements for, or equivalent alternatives to, any of the company's products or services which the employee helps to produce during [his] employment with the company, and which (d) the employee does not include in work [he] creates for the company.

(Again, substitute the pronoun appropriate for the employee.)

Both of these clauses protect the company from (a) you working on your own stuff during work hours or using work equipment, and (b) you stealing the company's intellectual property and sticking it in your own stuff. The hobby programming waiver also protects the company from (c) you finding a way to compete with your own employers, and (d) you planting your own stuff in your employer's codebase so that you can sue them later.

Therefore, it seems that the company is quite well protected, and is perfectly able to keep whatever ideas they ask you to produce for them. However, in all other respects, you, the employee, are given free reign.

Of course, these waivers are designed to be incorporated into an existing agreement, i.e., they would be followed by something like this:

Except for IntellectualProperty falling under either or both of the aforementioned waivers, the employee hereby assigns to the company all title to and ownership of any intellectual property [she] creates during the term of [her] employment...

This is pretty much the traditional agreement. But now it's no longer "overly broad."

(Since the list contains more than five or six fine arts, I probably missed some. I'd like to generalize this to simply say that all IP I produce outside the company is mine, regardless of whether it's a fine art or a not. Add in some clauses to protect the company, such as by promising that I won't compete with the company while I am still working for them, and promising not to hide my own IP in the company's stuff as a "booby trap" that I can sue over later, and everything should be fine. I hope.)

This same friend of mine is in the job market again, and he reports that some companies are now requiring you to sign an IP agreement even in order to be considered for a position. The agreement doesn't take effect until you get hired, of course; it goes something like this: "I agree that if I am employed with this company, I will hand over all intellectual property I create, whether at work or at home, whether on company time or my time..." This makes negotiation impossible, because the employee no longer has the stronger bargaining position of having already been hired. Bad news.

One other reason for OverlyBroadIntellectualPropertyAgreements. Some companies who hire FullTimeExempt employees, view overtime as a way of meeting schedule crunches; FullTimeExempt means that the employee will do whatever it takes to meet agreed-upon deadlines. Other (less enlightened) companies view FullTimeExempt as "we own your ass 24/7". Such companies may see an employee's programming hobby as competition--not competition in the marketplace between their products and what the employee produces; but competition for the employee's time. In other words, employees who spend time working on their own stuff are StealingFromTheCompany.

So far I haven't encountered a company with this attitude; but I'm sure they exist.

There are arguments that you can make to try to deflate this. For one thing, the fine arts waiver covers far more fine arts than you are actually likely to work with. More than likely you are trying to protect one or two specific fine arts without having to identify them specifically, and also you are reserving for yourself the right to maybe pick up one or two new ones over the next few years without having to decide in advance which ones those are going to be. The clause doesn't claim that you will do these things, only that you own the result if you do them. And you owning the results makes these tasks no different in principle from things that generate non-IP results which you own, such as spending time with your family, or doing personal activities such as, say, exercising.

However, some companies might not be amenable to persuasion, in which case there is only one option: run like hell and don't go anywhere near them.

Another point is, what if you work two jobs?

IANAL of course, but I did take a course from a lawyer about law and technology. This particular case didn't come up (he's an intellectual property lawyer primarily, although he did address other cases) but I remember him making the point that in general, the law interprets "such as" or "etc" clauses very broadly, to your benefit or detriment in various cases. So listing "artistic pursuits such as writing of fiction, composition of music, and choreographing of dance" means any good interpreter will assign all of the creative artistic pursuits under that area. Writing of code probably wouldn't be included, but painting a picture probably would be.

An example of what can happen if you aren't paying attention to what you sign (and possibly even if you are) is here: http://www.unixguru.com/.

Another concern, in the US, is the Internal Revenue Service.

There is a big tax difference between a person being an employee and a contractor. If you are an employee, your employer withholds some of your pay and forwards it to the IRS on your behalf. If you are a contractor, the employer is merely required to report the amount that they have paid you -- and even then only if the amount exceeds $600 per year. It's up to you to pay the entire amount you owe to the IRS. Usually quarterly.

The IRS strongly favors you being an employee, because they like having the withholding done for you. It's all too easy for contractors to work "under the table" from time to time, and since taxes can be as high as 40%, there is a powerful financial incentive for doing so. (Contractors and their customers can "split the difference.")

In Silicon Valley, many employers of computer programmers made the programmers into contractors because it simplified taxes. It was also a way of getting around labor laws. The IRS decided this was an abuse of the system, and stopped it.

The IRS has established rules to determine whether you are an employee or a contractor. For example, an employee is given an office and a work computer by the company; a contractor frequently provides his own office and his own computer. An employer controls where, when, and how the work is done, whereas a contractor is merely given an assignment and a deadline and is free to complete it during hours and by means of his own choosing. Also, an employee typically works for a single company, whereas a contractor may work for several simultaneous customers.

The rules are much stricter for computer programmers than for people in other professions.

It is very difficult for an individual programmer to prove to the IRS that he is a contractor. If he works as a contractor and gets paid as a contractor, and then the IRS determines that he was actually an employee, he and his "employer" will both end up paying substantial tax penalties. (It is much easier if you get a business license, lease an office, get multiple customers, and hire employees.)

However, there are also penalties if the IRS rules that an employee is actually a contractor.

If an "employee" is free to keep his own intellectual property and sell it to other customers on the side, then he begins to look more like a contractor.

Maybe allowing employees to keep their own IP is dangerous for tax reasons.

All the more reason for having an S-corp and billing corp-to-corp. Makes it a lot easier. But for those of you still doing 1099 contracting, don't forget the IRS 20 questions. They can really screw you up, so be careful.

There used to be a little essay here to the effect that US companies that take IP through IP agreements should have to pay tax on them; the essay was removed by its author.

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