Today, many employment agreements, particularly in the tech industry, include a clause assigning to an employer all discoveries, improvements, ideas, processes, developments, designs, know-how and formulae the employee develops while working for the employer, whether or not protectable under other intellectual property regimes. These provisions are referred to as proprietary information and invention assignment agreements (PIIAAs).
Invention assignment agreements nominally prohibit an employee from competing against a former employer based on an idea conceived during that employment. Yet, at the same time, many states strictly limit the use of contractual non-compete agreements. As the use of PIIAAs rises, this doctrinal tension will be a source of continuing conflict, particularly in states like California, where non-compete agreements are almost universally unenforceable.
If a prospective hire subject to a PIIAA approaches your company with a new business idea, general counsel must understand when it was developed using what resources. If a prospective employee comes to you with a presentation of ideas developed when she was subject to a PIIAA, do not rely on a document describing it. Instruct the employee to start from scratch after being hired. Incorporating suspect documents into your ongoing development will only give the former employer ammunition for its PIIAA claim. Whether an employer brandishing a PIIAA can lay claim, months or years later, to the fruits of an employee’s unarticulated ideas, remains an open question. In the meantime, be cautious, ask questions and protect your company.