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Are NDA 'Prior Inventions' Clauses Safe to Sign?
BenderMan asks: "I own a small consulting company. Today I was asked by yet another corporate customer to sign an NDA with the increasingly popular 'Prior Inventions' clause. The gist of it is they want you to provide a list of all your past and current inventions and/or ideas so they can define and protect the intellectual property that they have hired you to build. Like many of us that lay awake at night, whilst the hamster wheel spins new ideas, I've got a number of un-patented works in various stages of development. Given that mutual NDAs only provide one year of protection, I don't feel obligated, nor do I have sufficient time and energy, to fully and properly document my inventions for an NDA. While these clauses are written with good intentions, the reality is that these valuable ideas would be placed in the hands of people that could potentially profit with impunity (Have you priced patents lately?). Unfortunately many companies are not willing to strike this clause from their contracts. Does Slashdot agree that this is a concern, and how have you dealt with these situations?"
I was co-owner of a small company that was bought by a larger company for some technology we designed. They hired us to further develop it. I had to sign one of these prior inventions things.
The main thing I was worried about was that these guys were going to buy our company to get our techology then fire us. The project we were working on before we were bought was based off some hobbyist stuff I had built before starting the company. In fact, the core valuable parts remained exactly the same in both the hobby projects and the project we were selling.
Without going into details, I listed the hobby projects as prior inventions. They never really thought twice about it because they looked so inocuous.
The customer does not have ownership of anything not directly applicable to the work they are paying for. They acknowledge that they have no IP rights to anything you may invent on your own time, with your own equipment.
I have had customers demand ownership and license of all our prior work. After I stopped laughing, which really pissed off the purchasing agent, I pointed out that they really didn't want to test that in court, so that clause was declined. They try other ways as well.
Each customer will do their best to stake out territory in your mind. My approach has been to define for them what they may stake out, and what the limits are on it. If you control that conversation, they need to negotiate your terms. They claim they won't, but most reasonable ones will at the end of the day.
For this reason, we don't sign non-competes, and we require mutual NDAs. We have been burned a number of times with others NDA documents, so if we find them insufficient, we force the customer to sign one of ours, or we simply refuse to discuss confidential material with them. Non-competes between organizations are funny, but some customers try to require this. Our response is uniformly that we will sign the non-compete under the requirement that the customer requesting the non-compete execution pay full wages, business expenses, etc. for the entire duration of the non-compete. When they tell you how ludicrous that is, it lets you tell them how ludicrous it is to request that your company not work in its field for a period of time, and if they are going to demand it, they are going to need to pay for what they ask for.
We have had customers steal from us, "partners" lie to us and stab us in the back. It is part of business. Ethics and morality take a back seat to egos, and the pursuit of the almighty dollar.
Your job is to demand certain core rights, and stick to your guns. Have a few you can negotiate away and get something in return for this, but if the customer understands that there are some red lines not to be crossed, well, they will either respect you for it and negotiate, or leave you for some other pushover.
You create something outside of the contract domain, scope, with your own stuff, even if it was during the contract, as long as you did it on your own time and with your own stuff, you own it. You need to demand that. If you don't they are going to insist on owning everything in your head. If you let them push you around here, well, your compensation is going to suck as well.
No other company is going to sign something that one-sided. Where are they going to find staff? It's not going to end until NDA's and assorted silliness get to the point no one wants the job. I have slid piles of paper like that back at customers and said we're either going to trust each other or we're not doing business. Surprisingly effective, but not 100%. If they're that stupid about their paperwork, how are they going to be smart about development? YMMV but I've never seen a contract worth having that had that much paperwork involved.
Drug tests are another one. One company I interviewed with, a telecom in Arkansas, wanted one and I said it was no problem if I could have access to the drug test results of everyone on the management team all the way up to the CEO. That was a head scratcher, no one had asked for that before. I responded that if they wanted to look behind my kimono, I wanted to see behind theirs. Then they had to fess up that the execs didn't get drug tested. Ha! No tickey, no washy buddy. If they didn't, I didn't. Told them to call me when the CEO decided to get tested. They went out of business a couple years later...see what happens when you don't hire me? ;)
It's all really quite insane. I mean I'm sorry that somewhere back in the past you got burned by some former employee but I'm not paying that tab. And if you let lawyers run your life you're not someone I want to work for anyway. People leveraged to the hilt and desperate for a job may have to eat shit like that, but, fortunately, I don't.
That's our life, the big wheel of shit. - The Fat Man, Blue Tango Salvage
How can they claim that there is any meeting of the minds or that all terms in the contract were fully understood by the 'employee' if it comes up in court later. Can the employers insist that you sign it without giving you time to properly review it (even without a lawyer)?
Because I would consider an employer insisting I sign a contract and denying me the opportunity to review it an abusive employer. But moreso, such conduct would seem to render the contract unenforceable. Can such employment contracts signed under such conditions be upheld by US courts?
I would never specify in a contract what my prior art is. My contracts always specify that anything belonging to the client prior to the contract remains theirs and anything belonging to me prior to the contract--or that I come up with during the contract but not materially related to the contract--remains mine. No lists are necessary. If there's a dispute over who owned what when, that's what courts are for. I'm not going to enumerate my property because it then implies nothing else was mine. No way. Let the contract stipulate the spirit of the contract (that no-one is trying to rob anyone else's idea) and if someone believes that spirit was violate, take it to court and let it get worked out there.