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Employment contracts & Intellectual Property

I am about to start a new job in Pennsylvania.  They gave me the employment contract, which I haven't signed yet.  What concerns me are the parts that say that anything I create while employed there belongs to them.  The contract goes on to say that anything I create within the scope of employment and during my time with the company belong to them as well.

As I understand it, scope of employment means that as long as what I create has no relation to what the company does or what I do for the company then what I created belongs to me.

My reason for concern is that if I am wrong about the scope of employment, then any software that I may want to write on my own time outside of work (open-source or shareware) would belong to them and not me.

The contract also has parts that say I cannot work for any possible competitor or work with any former co-workers for 2 years after I leave.

I know Joel said in an earlier article that you shouldn't allow your employer to get away with things like this, because software developers are a hot commodity.  However, I think that article was posted in 2000.  Do you think that still applies today in 2004?

Has anyone asked their employer to change the employment contract to allow for them to own any work that they create on their own time and with their own resources?  Were you successful in this?

I really want the job, but I am not comfortable with signing away my rights.

Any help or advice would be greatly appreciated.

anonymous
Friday, August 06, 2004

I used to work for the R&D division of a mega-large corporation and they had the same sort of restrictions. You are paid to invent and innovate, so any innovation regardless of what field it's in belongs to them. Even if it's in a totally unrelated field from what you are currently working on, you could possibly make this new invention into a new product or venture for the company.

Then I went to another company where I was not in R&D but product support services, so I got a clarification from the divsion counsel and the same does not hold true for those not in the R&D category. So if I build a better mousetrap now, since this company and my function within it have nothing to do with mousetraps, I can claim that as my own. I'm paid to deliver a product, not innovate by developing new products.

There's a lot of case law on the better mousetrap scenario and you'll find regardless of what the employment agreement they hand you says that there are some pretty solid legal precedents similar to the above. But it all hinges on your job definition.

old_timer
Friday, August 06, 2004

The first part, from the way you describe it, sounds like they're saying they own your work done for them, but they don't own your hobbies done on your own time.  Typical and reasonable.

But the second part, which restricts your future employment, sounds unreasonable.  If the job pays well enough to merit it, you ought to check with a lawyer to confirm whether or not it's actually enforceable.

You can certainly also solicit opinions here; my personal non-lawyerly opinion is that it's probably not enforceable, as it's too restrictive.  But law is not always the same as common sense, so take a copy of the contract and get a professional opinion.

And if the place has a problem with you taking a copy of the contract to run it by a lawyer, then I think that says it all right there.

Kyralessa
Friday, August 06, 2004

I don't think I would ever sign a contract containing those two clauses, especially the one that forbids you from working in your field. 

Perhaps you can get the clause about intellectual property clarified to state that software created on your own time remains your own property (perhaps with an understanding that you won't moonlight on anything that would compete with your employer).

Personally, I would not sign the 2-year noncompete clause.  I know these things are fairly enforced, but maybe a company that is unwilling to bend on this is going to be a bear to work with later, too.

I would try to explore the company's underlying interests behind these clauses, and see if you can come up with something that protects your right to work and development your own software, while also satisfying their fear of being ripped off.

I like the book "Getting to Yes" by Fisher, Ury, and Patton for this approach.  I haven't had a real opportunity to try these principles in a situation like an employment contract, though, so take this advice for what it's worth!

Jesse Smith
Friday, August 06, 2004

I wrote "I know these things are fairly enforced..."

Should be "rarely", of course.

Jesse Smith
Friday, August 06, 2004

Cross out the lines about anything you do outside of work belonging to them, cross out the 2-year non-compete clause, cross out anything else that sets off your inner alarm bells (trust them - they're nearly always spot on), initial the changes, return the contract to them. If they balk, walk - no, run. You do *not* want to work for these sorts of people, period.

wmeconsulting.us
Friday, August 06, 2004

There was an interesting thread on exactly this topic on the PerlMonks site:

http://perlmonks.org/index.pl?node_id=153046

Lot of text there, but worth perusing.

Brad
Friday, August 06, 2004

The two year, or any number of years, months or weeks of non-compete in such contracts are totally unenforceable. Most states have "right to work" laws that supercede such nonsense and those which do not still abide by the legal precedents set elsewhere. The fact they have it in there is for intimidation purposes only. They know full well that it is bullshit but they'll always try to get you to sign it because there might be one case in ten thousand where it could apply.

I have seen it happen at the R&D place where I worked. There was a big RFP up for bids and two engineers ran outside and submitted their own bid. Since they did work in the group inside the comapny that was bidding and the RFP was released prior to their leaving, they were wrong to directly compete in a process they had their hands on while still inside. The company did have the right to shut them down in that instance.

However for the rest of us just going to get another job at another company, no way.

old_timer
Friday, August 06, 2004

This has been covered here several times before.

Cross out and initial what you don't like. Make a copy of it. Make sure that someone with executive  power at their company initials your changes as well.

If they really need the 2 yr thing, you must have them agree in writing to pay you full salary during these 2 yrs. That is fair and reasonable. This payment also needs to be REGARDLESS of teh reason for leaving. Otherwise, they 'fire you with cause' for picking your nose too many times and you are SOL.

If they really need your inventions during the hours you are not at work, then they need to pay you for those hours. So, if the job normally pays $80k, they need to pay you $240k if they also want all the work you do when you are not at work.

This is fair and reasonable to be paid for time during which you are under their control. If you answer to them during an hour, whether it is a 2 yr sabbatical or sitting at the beach knitting, they are morally and legally obligated to pay you for that time.

Give them a choice - remove the clauses where they control you for free OR agree to pay you for that time. One or the other - it's THEIR choice. but you working for free or being under control of them without a paycheck is NOT something that is reasonable.

They will tell you that the contract is standard. You tell them that being paid for your time is the REAL standard.

If they don't want to pay you fairly, or cut out the clauses asking you to work for free, you should find a different job. But you should explain to them politely and calmly why a person of your skills and knowledge would not want to agree to those terms unless being fairly compensated.

Scott
Friday, August 06, 2004

The part about "now working with any former co-workers for 2 years" is really interesting.  That seems to imply that you're expected to exercise control over who any future employer can hire just because you also work there?

I'm sure its just more intimidation language.

Jason
Friday, August 06, 2004

"The two year, or any number of years, months or weeks of non-compete in such contracts are totally unenforceable. "

I don't believe this is true, here's a quote from a New York State Supreme Court case dating July 18, 2004:

====
Lastly, the merits of the underlying cause of action for violation of the non-compete clause is questionable at best, given that the defendants contest the enforceability of the clause on the basis that the agreement was unreasonably forced upon Allen to his detriment in that he was allegedly informed of the non-compete clause after he had resigned from his position in Great Britain and uprooted his family and himself to the United States. In addition there is no reasonable geographical limitation on the non-compete agreement.

http://www.nycourts.gov/comdiv/Law%20Report%20Files/October%202003/East%20Coast.htm
====

The implication is, a well-worded non-compete, presented at the right time (before employment) *could* be enforceable.

www.MarkTAW.com
Friday, August 06, 2004

To the original poster, follow your instincts on this one. The advice here is not legal advice, and whether or not any part of the contract is dubiously legal doesn't matter - it can be used to make your life difficult after you leave, and asking you to sign a contract proves their intent to do so.

So if you're comfortable with the wording of the contract, sign it. If not, don't.

www.MarkTAW.com
Friday, August 06, 2004

* July 18, 2003

www.MarkTAW.com
Friday, August 06, 2004

anonymous, is this a staff job or a contract through a recruiter?

The restrictions are bad enough, but even more dangerous if it's just a contract job, since the employer is not even obligated to pay you for the period you're nominally employed. Nor does it have any other obligations to you. It could theoretically turn around tomorrow and tell you it didn't need you to work for the next six months, yet it still owns your work under such a contract.

To say this is indefensible is putting it mildly.

I encountered such a contract and insisted on changes so that the employer owned only the work I did on their premises while they were paying me.

Inside Job
Friday, August 06, 2004

It is a staff job.  I can send an email to the HR person at the company and ask about modifying the employment contract.

Does anyone think it is better to ask for a change up front before I sign anything, or do I do as some of you have said and cross out anything I don't agree and with and initial these changes before I sign?  I would like to add a clause to the contract that explicitly states that work I do on my own time belongs to me, but I am not sure if I can add that myself or if I have to ask the company to do it.

I thank all of you for your advice.  It's a real shame that business has come to the point where you are guilty until proven innocent.

anonymous
Saturday, August 07, 2004

anonymous, there are no simple answers, but it helps for you to know how things are. If there's an HR department, they probably won't be interested in adding special clauses just for you. Why would they? It just makes their lives harder. If you ask, they would probably fob you off until you've started work, and then you're committed and have to take their contract.

If you just change the contract, then you must make sure they sign the changed contract and give you a copy. This gives them a problem. They can't take the easy way out and just fob you off. It might be easiest for them to just sign your contract. If they don't do that, they have to confront you about it. There's a bit of a risk that they might decide you're too much trouble, but it's probably minimal.

Just be firm and fair. Change the contract to protect your interests without threatening theirs. If they're decent, it should not be an issue.







Inside Job
Saturday, August 07, 2004

Noncompetes can be enforceable in general.
Various states have imposed various restrictions on them (for example, Virginia has held that a noncompete longer than one year is unenforceable)

HOWEVER, I would never sign a contract I didn't agree with "knowing" that the part I didn't like was unenforceable. Who wants to spend all their money being a test case in front of the state supreme court? (not to mention the fact that one stroke of a legislative pen and your contract may suddenly be enforceable)

FWIW, the company *does* have one very good reason for the "no coworkers" clause - people leaving and taking half the office with them. You may argue "but then it's in their interest to keep people happy" but that's not always possible proactively. And how many people sit in misery quietly without telling anyone that something is wrong?

Anyway, if the job is worthwhile, call an attorney and ask. It may cost you $200 or so - consider that against the income of the job.

Philo

Philo
Saturday, August 07, 2004

"FWIW, the company *does* have one very good reason for"

Companies have good reasons for everything in those contracts, or else they wouldn't put them in.

www.MarkTAW.com
Saturday, August 07, 2004

If companies could make money killing people's grannies, they'd have good reason to do it too.  That doesn't mean it's right or that we should accept it.

T. Norman
Saturday, August 07, 2004

Here's an idea. Say you were to agree, then you write some software that lots of people use. They own you, so they get the cash. Then something goes wrong, lots of unforeseen problems happen, people sustain losses because of your software. People sue. Does your prospective employer intend to pick up the tab on this ?

If they don't like this, by offering you unlimited indemnity (which they can't for sensible dollars), then why would you agree to it. You get all the risk and they get all the bucks. No thanks.

Nemesis
Sunday, August 08, 2004

Nemesis,

I'm not sure I follow you. Are you saying that if they own everything you do during off hours, then they are as responsible for those things as if you had done them at work under their direction? And that if he were to write a virus that caused $100 billion damages, that they would be responsible for them?

Doogie
Sunday, August 08, 2004

Doogie, exactly that. If the (potential) employer wants the upside of any work their (prospective) employees do, even in their own time, why shouldn't they bite the downside too ?

With all clauses in a contract, you have to carefully examine the consequences of the clause being there. Unless there is some other clause that provides the employer with indemnity, then this is one of the possible outcomes.

It is unlikely that there is such an indemnification, as employees are generally deemed to work on the employer's behalf, so the employee would not be expected to hold PI cover. There may be exceptions to this, such as doctors/surgeons working for hospitals, but I don't think this is common practice in IT.

Nemesis
Monday, August 09, 2004

My point really, is that the O/P should use this scenario to negotiate out the clause that is causing concern.

Nemesis
Monday, August 09, 2004

Get a lawyer.

Don't ask for legal advice from software engineers, especially when you don't publish the actual text of the contract.

WoodenTongue
Monday, August 09, 2004

You want to lose your lawyer hero worship thing. Many lawyers actually don't know this type of stuff well at all.

They're used to dealing with company-to-company stuff in ways that are often inappropriate to the ways IT contractors work. When HR screams and throws you out the door, the lawyer explains that it worked for MegaCorp.

Or the lawyer will think corporates should get their way anyway, and scum workers do what they're told, and will tell you to just sign because it's a "normal employment agreement." Then he will give you a bill for $1,500. After that he will ring your employer and offer to do their legal work for them.

So drop the lawyer worship.


Monday, August 09, 2004

"Many lawyers don't know this stuff well" is different from "No lawyers know this stuff".  Find a lawyer who does employment contracts, not one who deals with intra-company patent issues.

Foolish Jordan
Monday, August 09, 2004

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