Intellectual property (IP) protection for employers
Entrepreneurs need to understand that in Canada, there is no presumption of favour to the employer when it comes to ownership of intellectual property (IP). To retain ownership rights over IP generated by their employees, Canadian employers must indicate with an explicit clause in the employment contract that IP developed while working at the company is the company’s property.
In the absence of such a clause, the courts apply a test that asks the following questions:
- Was the employee hired for the express purpose of inventing?
- At the time of hiring had the employee previously made inventions?
- Did the employer have incentive plans encouraging product development?
- Did the conduct of the employee once the invention was created suggest ownership was held by the employer?
- Was the invention the product of the problem the employee was instructed to solve?
- Did the employee’s invention arise following consultation through normal company channels?
- Was the employee dealing with highly confidential information or confidential work?
- Was it a term of the employee’s employment that he or she could not use the ideas that he or she developed to his or her own advantage?
Intellectual property protection and independent contractors
If an independent contractor creates an invention while fulfilling a contract with an employer, the ownership of the invention will default to the employer, unless the invention falls outside of the scope of the agreed-upon contract. It is therefore important to craft independent contractor contracts carefully to take IP ownership into account.
Employers have three tools they can implement to protect sensitive information and inventions from being misused by employees:
- Confidentiality agreements: These outline each party’s understanding that certain information will be secret and held in strict confidence. They define the confidential information and describe the legal repercussions in the event of a breach of the terms of the agreement.
- Invention non-disclosure agreements (NDAs): Inventors can use these to protect their unpatented creations. They are similar to confidentiality agreements in that they define the invention and outline the legal consequences of a breach of confidentiality.
- Restrictive covenants: These prevent the disclosure of confidential information or trade secrets and ensure that a departing employee will not seek to compete with the employer.
In the case where an employee may have inappropriately disclosed a trade secret, the courts will examine the following in order to establish wrongdoing:
- Whether the information was confidential
- Whether it was conveyed to the employee in confidence
- Whether it was misused by the party to whom it was communicated
Codjoe, Esi A. (2009, May 4). Establishing Intent to Control; Intellectual Property in the Employment Context. Ontario Bar Association Continuing Legal Education.
- Limited partnership agreement: Sample template
- General partnership agreement: Sample template
- Intellectual property (IP) assignment agreement: Sample template for Ontario startups
- Term sheet template (angel or venture capital investors): Ontario startups
- Angel or seed investing: Angel term sheets for startups