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With job hopping being the rule (not the exception) in the labor market, employers must address insider threats to their intellectual property (IP) assets related to this mobile workforce, such as ensuring departing employees don't also depart with the employer's valuable IP.
This is especially important in the technology and life sciences sectors, where software engineers may take key source code or biotech engineers may take confidential manufacturing know-how, written or created in the course of their previous employment, to a competitor.
But insider threats to an employer's IP aren't limited to just intellectual property theft and may include the employee's failure to assign rights in created IP to the employer, loss of trade secret protection in employer IP, unintentional incorporation of third-party IP into the employer IP, or the unpermitted use of artificial intelligence tools in employer IP creation.
Below we discuss how the use of employment agreements, technical/organizational/administrative safeguards, and AI policies may help combat some of these insider threats.
Employment Agreements
During the employee onboarding process, all employees, and in particular those involved in IP generation activities (e.g., software/biotech/pharmaceutical engineers, scientists, etc.), should sign an employment agreement that includes, but is not limited to, the following terms:
IP assignment provision
While copyright law generally vests ownership in works of authorship created in the course of employment by an employee author in the employer, there are circumstances in which the work may instead vest in the employee author. Meanwhile, patent law is more restrictive than copyright law in this regard, and, if the employee has not been hired for specific inventive activity, inventions conceived or reduced to practice will vest in the employee inventor.
So, to avoid any such vesting, as a backstop employers ought to include a present assignment of future rights in any works or inventions created on the employer's premises, using the employer's tools, during the employer's work hours, or related to the employer's business. But be sure to review local law, as states have passed statutes restricting what employees can assign to their employers.
Confidentiality obligations
The employment agreement should also impose non-disclosure and non-use obligations on the employee, covering the employer's confidential or proprietary information. The obligations should extend beyond the period of the employee's employment (and, for trade secrets, such obligations should last as long as the trade secret remains one under applicable law).
Restriction on the use of third-party IP
A well-drafted employment agreement will also include a prohibition on the use of any third-party IP by employee inventors and authors, unless expressly authorized by the employer in writing. By including this restriction, employers may avoid unintentionally allowing an employee to incorporate unlicensed, third-party IP into inventions or works created by the employee. And to the extent such third-party IP is critical to the employer's IP, an employer's invention or work may be heavily encumbered by the third party's rights and subject to injunctive relief.
Technical, organizational, and administrative safeguards
To aid in mitigating the threat of employees misappropriating the employer's IP assets, employers should consider implementing technical, organizational, and administrative safeguards to limit access to only those employees who have a need to know.
For example, employers may, in consultation with their information technology departments, use technical implementations to restrict access to networks/databases/drives that store the employer's IP assets, including any confidential and unpatentable know-how protected by trade secrets. In addition, employers may encrypt their confidential and proprietary information related to their IP with leading encryption technologies.
And by rolling out these measures, coupled with including confidentiality obligations in employment agreements as noted above, the employer will be able to demonstrate that it has taken reasonable measures to protect its trade secrets, an element generally required for protection under federal and state trade secret law.
Creation of AI policy for internal use by employees
Given the rising prominence of artificial intelligence (AI) tools and the evolving regulatory and IP landscape, employers ought to compose AI use policies that restrict its employees' use of these tools. Specifically, while the United States Patent and Trademark Office and Copyright Office have each issued guidance on AI patents and copyrights, there's still some ongoing uncertainty regarding the amount of human involvement required for an invention to be patentable or a work to be copyrightable.
To protect IP assets most effectively, IP departments and/or general counsels must be aware of when and how such AI tools are used (e.g., whether such tools are used in the creation of an IP asset). So, AI policies should include restrictions on who may use AI tools and how these tools may be used.
If you or your company would like to discuss protecting against insider threats to its IP, please contact A.J. Zottola or Ben Myers.
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