EMPLOYMENT LAW BULLETIN

Vol. 01, No. 07

Courtesy of Eskridge Law, Attorneys at Law

Businesses often develop valuable inventions and other trade secrets. Steps should be taken to protect these assets.

A trade secret is any information, including a formula, pattern, complication, program, device, method, technique, or process, that:

1. Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and



2. Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Civil Code § 3426.1(d).

Who owns the invention - the employer or the employee?

The general rule is that a trade secret created by an employee will be the property of the employer if the employee was hired especially to do research of the type that lead to the creation of the trade secret.

Employers should address trade secret ownership and confidentiality issues at all stages of the employment relationship. This includes during the interview process, during employment, and at time of termination. Trade secret issues should certainly be covered in the company's employee handbook. Additionally, employers should require employees to sign agreements in advance, assigning to the employer all rights to any inventions or other trade secrets which may be created during the employment relationship. The agreement should also provide that the employee has a duty not to use or disclose the invention or other trade secret to any third party without prior written permission of the employer.

Employers should note, however, that know-how or general knowledge, skill, or experience acquired or developed by an employee (rather than supplied by the employer) is generally not owned by or assignable to the employer. Drawing the line between an employee's general knowledge and skill and the employer's trade secrets can be difficult, however.

Employers must also be cognizant of California Labor Code § 28720, which requires any employment agreement which contains an assignment of rights provision to include a notification to the employee that the assignment shall not apply to an invention that the employee developed entirely on his or her own time without using the employer's equipment, supplies, facilities, or trade secret information (with certain exceptions).

Get help from an experienced attorney! Because trade secrets laws and employment laws are both very complex, it is crucial that an employer consult a knowledgeable attorney to protect the ownership of its inventions and other trade secrets.

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