We advise Maryland employers on protecting trade secrets and confidential information, on ownership of what their employees and contractors create, and on drafting non-compete and non-solicitation terms that will actually be enforced. We also act for employees and contractors on their rights under these agreements. For a free consultation call 410-752-9300.
For many businesses, intellectual property is now worth more than the physical assets. Designs, methods, customer relationships and know-how rather than inventory and premises. An IP agreement can stand alone or sit inside the employment agreement, and either way, having one that holds up is often what protects the business’s future.
The four components of an employment IP agreement
A workable agreement addresses ownership, confidentiality, non-competition and non-solicitation. The concerns divide into information employees can reach, and intellectual property employees create.
1. Ownership of what your people create
Define this before anything is created, because the default rules may not give you what you assume.
Work created by regular employees within the scope of their employment will generally belong to the company. Work by independent contractors generally will not. Absent a written agreement addressing ownership and assignment, the contractor typically holds the copyright in what they produce. The practical consequence catches employers out. You may use what you commissioned, but the contractor may retain control over how it is distributed and reused, and the right to make derivative works. If contractors produce design, copy or photography for you, get the assignment in writing.
Copyright is a bundle of rights, covering copying, making derivative works, performing and displaying, distributing and licensing, and they can be dealt with separately. An employer might grant a contractor the right to reuse a piece in their portfolio while retaining everything else.
Patents work differently again. Rights vest by default in the inventor, so an employer wanting to own employee inventions has to address assignment expressly.
Two further points are worth building in. Define what an employee created before they joined, so there is no argument later with them or with a previous employer. Then consider how inventions conceived shortly after employment ends are treated, particularly where company resources or knowledge contributed. Courts scrutinize provisions of that last kind closely, so their scope needs care.
2. Confidential information
Employees and contractors encounter customer lists, customer financial data, trade secrets, manufacturing processes, forecasts and internal policies. A confidentiality clause or a standalone agreement should cover it, and its most common weakness is vagueness. An agreement that gestures at “confidential information” without identifying it is hard to enforce, because you have to prove eventually what was breached. See confidentiality agreements and protecting trade secrets under Maryland law.
3. Non-compete agreements, and Maryland’s statutory limit
A non-compete restricts how an employee or contractor may compete after the relationship ends. The rationale is that the employer gave something of value, whether training, skills or access, in exchange for the employee agreeing not to use it against them. Such agreements typically specify a duration and a geographic area, and sometimes restrict approaching customers the employee dealt with.
A great many agreements still ignore the statutory limit. Under Md. Code, Labor & Employment § 3-716, non-compete provisions are unenforceable against lower-wage employees, measured against a multiple of the State minimum wage. If your workforce includes people below that threshold, a non-compete in their contract is void. It protects nothing regardless of how it is drafted, and it may give employees a misleading impression of their own obligations.
Past the statutory bar, Maryland courts enforce non-competes but do so cautiously, and only so far as they are reasonable and necessary to protect a legitimate interest. Overreaching on duration or geography is a common way to end up with a restriction a court will not apply. Where the real concern is confidential information rather than competition as such, a well-drafted confidentiality agreement is frequently the more reliable protection.
4. Non-solicitation
Non-solicitation is the close cousin of non-competition. The employee agrees not to solicit the company’s customers during or after employment. Take a simple example. A remodeling company’s employee working at a customer’s home learns the customer wants further work, and offers to do it privately as a side job. Employers’ appetite for policing this varies, and the clause should reflect what the business actually cares about rather than being copied in wholesale.
Both sides need advice
We act for employers drafting and negotiating these agreements and for employees and contractors asked to sign them, and we have represented both in disputes arising from breaches and misunderstandings. A signed agreement is worth very little if its terms are unenforceable, which is why the drafting and the law governing it cannot be separated.
For broader employment matters or complete employment agreements, the firm has attorneys who specialize in that area. Contact David L. Hankey at (410) 752-9300.
See also trade secret misappropriation claims and IP strategy and due diligence.