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Employer's Intellectual Property in danger as job losses mount

20 May, 2009

Employees made redundant due to the global economic downturn may be walking out the door with more than ill-feelings, according to a leading intellectual property lawyer.

Allens Arthur Robinson (Allens) Partner David Yates said understanding who owns the IP rights of work done by employees was vital to protect the potential loss of trade secrets, other valuable materials and intellectual property.

'While general know-how in an employee's head is something that the employee is entitled to use after their employment ends, an ex-employee is not allowed to use or divulge a trade secret.

An ex-employee is also not able to use materials created for one employer for the benefit of another employer simply because the ex-employee created them', Yates said.

'A redundancy process is typically a highly emotive situation for both the employer and employee and one that is never easy. The vast majority of those employees who go through it act responsibly and with dignity. A small minority take the opportunity to walk away with intellectual property which they don't own but which will help them set up as, or assist, a direct competitor,' he said.

Preventing IP from being stolen was easier than the cure and employers needed to be proactive in putting in place safeguards to protect their valuable property from being taken by rogue workers.

Yates said that relying solely on current legislation such as the Copyright Act 1968 and the Designs Act 2003 to claim ownership of employee-created IP may be a risky strategy.

While an employer might regard the taking of IP as a "crime", it could be very difficult to encourage the police to investigate a possible case of fraud.

'The clearest way for an employer to assert ownership over IP created by employees or confidential information disclosed to employees is to include express terms to that effect in the employment contract, and to be prepared to back that up with civil legal action if necessary to enforce statutory and contractual rights,' he said.

He said employers should consider:
  • including a clause in employment contracts under which all copyright, designs, inventions and all other forms of intellectual property created by the employee that relates directly or indirectly to, or that assists in the performance of, the role actually performed by the employee in the position of employment, is assigned to the employer;
  • updating the terms of employment contracts when a person is promoted (or demoted) to ensure that the IP clauses in the contract correlate with the role that the person will undertake; and
  • protecting confidential information (such as customer lists, commercial or technical information that is not publicly known) via 'restraint of trade' clauses.
Yates has written an article on this topic which expands on these recommendations, which was published on the Allens website. To view the article, go to: http://www.aar.com.au/pubs/ip/foipmay09.htm.

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