Employee Proprietary Rights Agreements – Be Careful
Some companies force employees to sign proprietary rights agreements under which the employee automatically assigns to the company any patent applications that the employee files within one year of separation from the company. I have always considered these provisions unjustifiable. California law apparently has reached the same conclusion.
In Applied Materials, Inc. v. Advanced Micro-Fabrication Equipment (Shanghai) Co., et al., case number 07-cv-05248, the U.S. District Court for the Northern District of California held that such a provision is unlawful under California Business and Professions Code Sections 16600 (which pertains to restraints on engaging in a lawful profession, trade, or business) and 17200 (which pertains to unfair competition).
Prudent California employers now should make sure that any post-employment provisions in proprietary rights agreements:
- Do not include automatic assignment of any post-employment inventions
- Limit provisions concerning post-employment inventions to those inventions that were conceived during the employment period based on the employer’s confidential information
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.
Dana Shultz is a business-savvy lawyer located in Northern California's San Francisco Bay Area (in the East Bay, near Oakland) who has in-depth knowledge of law, business, technology, and the needs of startup and early-stage companies.