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How To Structure Your Business Contracts To Protect Your IP and Reputation

Commercial Law

Taking the time to draw up a comprehensive and detailed contract can protect the IP, rights and interests of your company. When was the last time you looked at your legal documentation? Ensure your contracts are airtight and make sure you have included these essential terms in your agreements.

All business owners will agree that when running a company, it is imperative that you have well-drafted contracts in place with your employees, contractors, vendors, customers, suppliers and shareholders. For many, contracts mainly function as an agreement to exchange goods and/or services, however they can (and should) also be used to protect your intellectual property (IP) and brand reputation. As your business grows, so too does the importance of your branding, processes, inventions and other intangible assets. However, the risk of other businesses infringing upon your IP will also increase.

A carefully-considered contract will ensure a clear and trusting relationship for all parties involved, as well as protecting your rights and interests, so it is crucial to include airtight wording. Investing in an experienced IP lawyer who can account for confidentiality provisions that are specific to your business, will give you this peace of mind.

That said, it is still important that you familiarise yourself with some essential terms needed in specific agreements to ensure the longevity of your IP and reputation.

Confidentiality and Non-Disclosure Agreements

Also known as a Non-Disclosure Agreement (NDA), a Confidentiality Agreement is a formal agreement that protects against the misuse of your information and IP. It will lay out the information you wish to protect, what would be considered a breach of the contract, and the repercussions of this. When looking at an NDA, we recommend focussing on the following terms in particular:

  1. The Parties to the AgreementThis generally refers to the disclosing party and the recipient of the information. However, also consider if any other companies or individuals may be involved (such as affiliated companies, partners or agents) and cover those parties as well.
  2. What is deemed “Confidential Information”?In order to fully protect your business, you will want to ensure your definition is broad and encompasses a wide range of information formats. This can include: oral conversations, written conversations, documents, equipment, and other materials that are not explicitly labelled or identified as confidential.
  3. Purpose and ScopeDefine the purpose of disclosing the information in the most specific terms possible. This will add further safeguards that the recipient can only use the information for its intended purpose. It also clarifies the obligation for the recipient to keep the information confidential.
  4. Permitted DisclosureCommonly, the recipient may be allowed to disclose the information to their directors, employees, advisors or partners. However, include boundaries within your NDA that ensure this information is only disclosed in line with the original purpose set out in the agreement, when the recipient legally required to do so, or if the information will become publicly available.
  5. Term of the AgreementThis refers to the length of the NDA and will vary depending on your particular industry and information involved. Remember to include a clause which states that even if the term has ended, you are not releasing any other rights under current patent, copyright, or IP laws.

Employment Agreements

Standard employment agreements will include confidentiality and IP clauses that protect sensitive business information. The contract should make it clear that employees are not to use confidential information for personal or commercial needs, and that this obligation will extend beyond the term of employment. When creating an employment contract, we highly recommend paying attention to the following terms:

  1. Ownership of Intellectual PropertyClarify that all IP created during the term of employment is owned by you, the employer.
  2. Signing Documents to Record the Employer’s Ownership of Intellectual PropertyThe employee will sign any document reasonably required by the employer to establish the employer’s IP. This applies during the term of employment as well as after employment has ended.
  3. Scope of Confidential InformationEnsure this definition is fairly broad and includes all reasonable examples including IP created by the employee during employment, IP belonging to the employer (including that created by other employees or licensed from another person), and all other business information such as finances, market research, and customer databases.
  4. Waiver of Moral RightsIn most cases, the creator of a work will retain “moral rights” to their work (this includes things like the right to attribution). This clause will waive the moral rights of the employee for IP created during their term of employment.
  5. Restraint on CompetitionThis prevents the employee from competing with the employer for a set duration over a specific geographic area. Do not make this definition too broad (for example, non-operation for five years in Australia) or it will be found invalid and your employee will not be bound by it.

Take the time to review your current agreements to ensure you are protecting your company’s IP and reputation, and get in touch with the team at AV Lawyers today.