The Colorado Supreme Court recently made implementation of certain intellectual property policies and protections a bit easier for companies with staff, who, in the past might have taken their employers’ intellectual property and used it to compete with them.
Over the years Leyendecker & Lemire has worked with a number of established businesses to implement policies and procedures to protect these companies’ intellectual property and protect against potential employee competition. Generally, these policies are covered in a set of contracts, known as Proprietary Information and Inventions Agreements. Most times these agreements with employees include provisions concerning confidentiality of information, non-competition, non-solicitation and obligations to assign any work product or inventions created during or in the course of the employee’s employment. These agreements are especially important when dealing with trade secret information. If an employer sets up these policies from the get go, it is usually a simple process. Things can get more complicated when dealing with an established business that already have employees on staff.
Under the old law, continued employment could not be used as consideration for the contract. The term “consideration” is a legal term for the reason or material cause of a contract. In short, the employee is giving up the right to conduct certain activities or obligate themselves to certain conduct. Consideration is what the employee receives in return, or what the employer gives up. Therefore, prior to the change in the law, an employer had to provide additional monetary compensation to the employee in exchange for the employee signing the contract. This was always a tough analysis – the employer wanted to minimize its out of pocket costs, but didn’t want to offer an amount that would insult its current employees, lessening the chances the employee would sign the contracts. Depending on how many individuals the company employed, the dollar figure could add up quickly. For example if a company has 40 employees and decided that it would need to pay each employee $100 in order to get the employee to sign the agreement, the company is looking at spending an additional $4,000 just in additional payments to employees.
With the new decisions from the Colorado Supreme Court, the employee’s continued employment is sufficient consideration to support the contract, so there’s no need for additional payment to existing employees. Basically, the court states that since the employer is forbearing their right to terminate the employee, the employee’s continued employment is determined to be adequate consideration to uphold a non-compete agreement. Therefore, an employer wishing to implement proprietary information and inventions agreements doesn’t need to give the employee additional compensation(which in our example is a savings of $4,000); they just need to make the employee’s continued employment conditional upon signing the agreement. With this change, even companies on a shoe string budget can effectively implement intellectual property protection strategies without worrying about breaking the bank with extra payments to employees. In this day and age, the ability to be able to secure your hard earned intellectual property through employee agreements is essential, even for the smallest of enterprises. Luckily, it just got a whole lot easier.
