In a competitive business environment, where innovation and new ideas are essential, companies must protect themselves against loss. Intellectual property rights refer to products such as copyrighted works, trademarks, patentable inventions, and industry knowledge or trade secrets. If such proprietary knowledge or products are lost, it will be detrimental to the owner or originator.

Nolo Law for All advises that businesses often assume that work undertaken by independent contractors, such as writing or designing a logo, automatically becomes the hiring company’s property. However, without a written agreement, this may not be the case. The Copyright Act states that any work that is part of an individual’s employment belongs to the employer. However, if the work was produced by an independent contractor, the employer does not retain the rights to the work.

The Greater Lansing Business Monthly recommends that companies use written agreements that address intellectual property rights of new work with employees and contractors to avoid intellectual property loss. The agreement should state that a company employee transfers the property that was created during work time and using work resources to the employer and will retain confidentiality. This prevents the employee from taking the intellectual property to a new job. Independent contractors particularly should be required to sign a confidentiality agreement and an agreement that transfers the work to the hiring company.

Companies are advised to consult an experienced attorney to ensure that valid agreements are signed and that the company is adequately protected.

  • Employees and employers should sign a “work made for hire” transfer agreement that adheres to the Copyright Act.
  • Independent contractors who are assigned the rights for work should sign an agreement that transfers the work to the hiring company.
  • Both types of agreement, “work made for hire” transfer or an assignment, should broadly define the ownership rights of the intellectual property and should include any “derivative works” that may result from the original work.

The departure of employees from a company can increase the risk of loss of intellectual property. Therefore, departing employees and contractors should undergo exit interviews and be reminded of the terms of their agreements.

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