This article was first published on 2 August 2021 by AMTIL.
Forward looking businesses know innovation is vital to securing a competitive advantage within their chosen industry. But how does a business ensure that it retains the intellectual property (IP) rights in their innovation?
Innovation to Commercialisation in years, losing your IP in minutes
A business may develop a strategic approach or just strike lucky in finding an unexpected technological breakthrough. To progress from this point, requires further research and development, securing government grants and tax breaks, and maybe applying for patents in Australia and overseas, with an eye on potential overseas markets.
Hopefully, before too long, commercialisation creates further growth and opportunities. Many start-ups and established corporations alike strive to achieve success after the ‘sweat and tears’ of enduring many late nights of endless research and experimentation.
The creators of innovation might work in an informal setting, like a start-up, made of a collection of friends and family members with a shared vision of making that imagined product a reality. Or in a large corporation, with the formal procedures, protocols, sign offs and KPIs.
Finally, the Eureka moment arrives, figuring out what works, and importantly what sells. But there is a vulnerability shared by small and large organisations alike: somebody leaves the organisation and takes not only that great idea with them, but the whole eco-system of suppliers, investors and customers’ data is gone in one little USB.
What can you do to make a difference?
A small organisation might be too informal with no safeguards in place. Large business might be too formal, lost in a myriad of policies, and repeatedly amended contracts that have long lost all sensible meaning – and nobody dares to alter the company employment contract template without a signed memo from head office!
Whatever your size, it is important to consider these seven things to protect your company’s innovation:
- List your key workers (employees and contractors) with valuable technical or sales knowledge. Who has key relationships with suppliers and customers? Can they be replaced within a week, a month, maybe a year? Consider not only those with specialist technical qualifications but also those who have a key understanding of the product. For example, a tradesperson who has maintained and upgraded a key piece of machinery might be the only one who knows how to fix it.
- What makes your business unique? A technical formula or a process? Is it protected by means of confidential information or a patent? Or is it the ability to source a particular specialist product at a price generally not known in the rest of your market?
- Who are your key customers? For many start-ups, there isn’t a known customer base. Finding private investors willing to invest may be more important than customers at the present time. If a departing employee canvassed your investors for scarce funds, is that a problem?
- Conduct an intellectual property audit to identify what assets are capable of copyright protection, patent protection or other specialist means of IP protection, and identify which workers have created those rights. Engage IP experts to ensure the appropriate legal protections and registrations are in place for your product.
- Have up to date employment contracts for every employee and review them regularly. Make it easy to read, especially the post-employment restraint clause, which must be reasonable. Length and complexity do not make an employment contact stronger and in fact, it may have the opposite effect. Importantly, do not download a template off the internet, there is no ‘one size fits all’. Ensure the employment contract clearly asserts ownership of all (IP) rights.
- Be clear as to what constitutes confidential information. If an employer cannot articulate what is truly confidential as opposed to the know-how a skilled worker in the industry would ordinarily possess, then a judge cannot work it out for you. This exercise can be complex. Disclose confidential information to only those employees who need to know it and obtain a signed acknowledgement that they will protect its integrity.
- Make sure contractors have a written agreement giving your organisation ownership of all IP rights to anything they may create during their engagement with your business. Otherwise, the default position is that the contractor will own all IP rights in their creations and ultimate commercial benefit.
The final word: Workplace Culture
You may have every IP right registered and the most effective employment contracts signed and in place for your employees.
However, if your employees dislike your workplace culture for whatever reason, you will find it difficult to retain them as soon as a new competitor enters the industry. This dislike or unhappiness may provide your competitor with the opportunity to hire your employees and use their knowledge and experience to move into your area of business. It is important to note that some employees place a high value on workplace culture and may take reduced salaries to work for an organisation with a more respectful workplace culture.
If an employee believes they already have a strong workplace culture and enjoy coming to work, where all staff are treated respectfully, the employee may never be tempted to leave your employment.
A positive, respectful and inclusive workplace with clear and fair leadership is just as essential as registering an IP right.
Rigby Cooke Lawyers has extensive experience working with clients in the manufacturing industry to ensure employment contracts and confidentiality agreements are up to date and protect intellectual property assets.
|Disclaimer: This publication contains comments of a general nature only and is provided as an information service. It is not intended to be relied upon as, nor is it a substitute for specific professional advice. No responsibility can be accepted by Rigby Cooke Lawyers or the authors for loss occasioned to any person doing anything as a result of any material in this publication.
Liability limited by a scheme approved under Professional Standards Legislation.
©2021 Rigby Cooke Lawyers