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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?"
IANAL, but the document itself would be proof of Prior Art, allowing for easy invalidation of their patent... right? But then again, not everyone has laywers, time, and money to chase patents with... :(
Either bend over backwards to please your customers or bend over forwards to be pleased by your customers.
How will you decide?
Film at 11!
(Every time someone puts you in a position where you have to choose between two lesser evils, take the third one or make one up yourself.)
"All you have to do is be fragile and grateful. So stay the underdog." Chuck Palahniuk, Choke
It's tough to say without seeing the clause whether you really have the problem you imagine. And, ob. disclaimer, IANAL. TINLA.
I've solved this in the past by making sure that their ownership of my ideas is restricted to items produced in the course of (as opposed to during the term of) working for them. This gives them ownership of IP created as a result of executing their project and no more. In terms of the "Prior Inventions" clause, I'd attempt to rename it "Prior published inventions" and give them a good list if they won't strike it. If they really want a list of unpublished inventions as well, maybe you could extend the term of their NDA to something insane like 10 years?
If your ideas are valuable, they won't strike the prior inventions clause and won't amend it as I describe, and they won't restrict the IP transfer clause to items produced in the course of your contract, you may be dealing with a client that you should turn down. Those exist, and, though it's painful to turn away business, sometimes it's good sense to do so.
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I asked my would-be employer about it, and they pointed to the sentence that constrained the clause to inventions applicable to what the company produced. Since the company sold health care software I didn't feel threatened. My personal inventions don't deal in that area.
Odds are they are using boilerplate language and have even less desire to hear about your velcro detachable sideburns than you have to tell them. Just ask them if they're wedded to having that clause in the contract, and if not strike it. Alternately, specify that the clause only applies to a certain problem domain (e.g. "With respect to image processing, we warrant that the following is an exhaustive list of our IP: blah blah blah" and then your Sideburns 2.0 get to remain your own secret.)
IANAL, DTAYROS (don't trust anything you read on Slashdot).
Help poke pirates in the eyepatch, arr.
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.
IANAL - and that's really the crux of the matter, neither are you, neither are 95% (ass pluck statistic) of Slashdot. If you're worried, take the contract to a lawyer (preferably experienced in intellectual property things), explain to them your concerns, have them examine and make any proposed alterations they think would be necessary.
Don't be pressured into signing something you're not satisfied with, in most civilised countries a (potential) employer cannot hand you a contract and say sign now or sign out, you can and should take the time you need to properly examine the contract, by professionals if necessary.
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Just add a similar clause for them on to the contract and see them groan... why should you bear the burden of discovery alone? You've got ideas you want to develop later right? So they need to disclose ALL of their ongoing development efforts in all areas of their business and don't let them off easy... if it looks like they're skimping on areas you know they're doing work in call them out.
Or you could follow the letter of the law and disclose a bunch of dumb ideas you had when you were ten and let them know that it might take you a while to get up to the present day.
Hmmm I once had this idea about how to train a monkey by dipping his feet in red paint so he'd know not to climb on the table anymore, then there was my GIJOE para-glider apparatus... it almost worked too!
A fool throws a stone into a well and a thousand sages can not remove it.
This is probably a naive suggestion, but if your business is specialized enough, you might be in a relatively small pool of entities competing for these contracts. Perhaps you could take a few of your competitors out to lunch and ask what they think about these clauses?
If enough people in your market find them distasteful and decide to stop accepting such contracts, the contracts will probably become more mutable than they seem to be now. A vocal minority willing to tighten their belts for a few months and offering lucid objections to the clause might be sufficient to effect some flexibility in your clients.
Of course, that will involve passing up work/money. Might be cheaper to just document the stuff.
I ran in to this situation. The company made me the offer, we negotiated and I said yes. They handed me the contract to sign. I read it. The employment contract had some wording about helping them secure intellectual property rights following the end of my employment. It was badly worded: as spelled out it created an indefinate obligation to do work for free following employment. So I said, "Look, I see what you're getting at here but this is bad wording. We should tweak it a bit." They said, "No, everybody signs it."
Not everybody. I didn't. And a month later I got a much better job at a much better salary.
My advice to you is this: If you're not important enough that they're willing to negotiate the contract then you're not important enough and while you work there you'll never be important enough. Walk away. Its a bad deal.
Moderating "-1, Disagree" is simple censorship. Have the guts to post your opinion.
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.
If you're really consulting, not becoming a psuedo-employee, you definitely don't want to sign that. That's an employee kind of thing, where the assumption is that you have no other customers. If you do have multiple clients, you don't want to limit the areas in which you can work. Such NDAs must be very narrowly drawn. You can work this out. Ask them what NDAs they ask from, say, McKinsey people.
I once turned down consulting at Xerox PARC for that reason. They wanted an overreaching agreement for a part time deal.
Your good ideas are your lifeblood. If you have been honing and developing methods and techniques over the years, then you've been building a priceless (or at least highly valuable) personal resource, to be metered out in small, controlled, and non-exclusive amounts to your clients.
For any single client to want the whole lot, nicely gift-wrapped and handed to them on a plate, is the height of impertinence, even if they say that they are going to use the document merely as reference and to give you proper accreditation. This is the real world --- that won't happen. And you probably don't want to spend 6 figures in court to enforce it.
By all means produce such a comprehensive document. I suggest that the MINIMUM price under which you would offer it to a client should be US$50,000, under non-exclusive NDA and with all your rights reserved. And that would be utter peanuts for this kind of thing.
You might like to consider the lengths to which companies go in search of valuable advice or ideas, in the form of hiring consultancies or even industrial espionage. Useful information is not cheap, so don't undersell your own.
"The question of whether machines can think is no more interesting than [] whether submarines can swim" - Dijkstra
I've seen such contracts frequently. In every case, I simply rule-out (scratch through) those lines. And sign the resulting contract. I have NEVER had it become an issue or come back for negotiation; it has always been accepted.
You'll never know until you try.
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
I've had to sign documents like that a couple of times. I have never had a problem in practice; my feeling is that the intent of the document is to give them a basis to fuck with you if they feel you did something bad. Since you'd generally have to do something extraordinarily bad to get a company to actually try to go after you -- there's a lot of burden of proof on them, and it would involve significant legal costs -- they probably won't ever do anything and it may not be worth worrying about.
That said, after receiving significant doses of reality early in my career, I prefer to cover my ass when dealing with large corporations. And I agree, most of the forms I've seen are bullshit. (Some even assign all ideas you've EVER had, even before being employed, to the company. Insane.) So I have a general technique that I've adopted.
The basic gist is that you fill out the form, but list a bunch of projects and use codenames for them. "Homer", "Olivia", "Butter", whatever. Throw in nice vague and general descriptions that cover a very broad field that you think you might ever be interested in -- "multimedia application", "browser", "engineering tool" -- and there you go. Put in a good half dozen or more. Don't worry: whatever you put on there, they'll sign it! Your manager doesn't give a crap. It's only the lawyers that want it filled out, and conveniently the lawyers aren't the ones signing off on what you put in there.
Later on, in the unlikely event that they do decide to go after you for something you create, which I've almost never seen, it will be trivially easy to claim that this "multimedia application" was already disclosed to them as "Homer", is thus exempt from the agreement, that you therefore retain all rights, and nyah nyah nyah.
Vagueness is a contract weasel's best friend.
This is what's sometimes called an "adhesion" contract. Take it or leave it, and if you don't look the terms the other guys go home with the ball. If you refuse to sign the other party can walk away, but if you sign the thing (in some juristictions) the adhesion is a potential reason for calling the whole contract poop.
This kind of thing distorts the very reason that contracts exist - so two parties can formalize a "meeting of the minds" over a certain expectation of performance. When one party has absolute power to dictate terms, then what we have isn't really a contract in the classical sense at all. But that doesn't mean it is unenforceable.
IAMAL
(but I will be one soon!)
Dear Bender,
Take the advice of my good friend Gary Kildall and refuse to sign anything like an NDA. Nothing good can ever come from it.
Sincerely,
Bill Gates III Esq.
So, find a couple clients that both want that NDA executed.
Execute with both of them.
Do some work, foment a crisis, get them both
hammering on each other, stand aside a watch
the fireworks.
I have a patent on this, by the way.
emt 377 emt 4
They aren't under any obligation to hire you, just as you aren't under any obligation to work for them. In general though, it doesn't matter. The main reason being that they probably WON'T say that is they are honestly interested in you. Taking a hard line with new recruits is an excellent way to not get the people you want. Now maybe they have a ton of people lined up and you are just here because your name came first in the stack, but usually it's because they like you best. Also you'd have to ask yourself if you really want to work for someone who says "Do this now with no thought or we fire you"? If they are going to give you such shitty treatment in the hiring process, it's not likely to get any better later.
I think you'll find most job offers have a bit of shelf life to them. You can say "Sounds pretty good, I just need a couple days to think about it," and the offer will probably be valid after those couple of days. If it's not, chances are that you probably didn't want the job. Either they are colossal assholes, or they are hiring you as a replaceable cog and they intend to use you up and throw you out.
Now of course the situation may be different if you are desperate for work, however in that case perhaps you are willing to put up with the crap so perhaps you are also willing to put up with the crappy contract with no thought. However if that's not the case you should ask for time to think and review it, and if they won't allow that, it's a pretty good sing you didn't want that job anyhow.
A "prior inventions" list is normally just a list of invention titles and a brief description of what the invention does. For example: "Invention: A method for exercising rodents via a wheel constructed from rigid wires. Description: The device is in the shape of a wheel. The rodent climbs inside the wheel and runs, spinning the wheel."
When signing a legal document, it's important to know why the company wants you to sign it. In this case, it's not so that they can take all the inventions you've thought of. Instead, it's to limit their liability to you. What they are trying to protect against is the scenario where you work for them on a contract, and without their knowledge, embed one of your prior inventions into their product, and four years later, when they've become the next Google, you step up and ask for a massive amount of money because they are infringing on something that you wound up patenting.
With that in mind, I suggest that this one isn't worth fighting over. The best way to deal with it is to list everything you've ever thought of, and let their lawyer decide whether he really wants to spend hours going over each one with you. In the end, the lawyer will probably decide that it's not worth while to do so, and you can get on with your work.
--Pat
While laid off from my software development job in 2001 and 2002, I saw two really excellent NDAs.
The one for my "night job" acknowledged that, like every programmer, I probably have a portfolio of commonplace utility routines that I will carry away from the job as long as it is not specific to the application being developed.
My full time employer's NDA allowed me to do any unrelated work, as long as it was not for a competitor and not directly applicable to the employer's field. I did in fact continue the Night Job for a while.
Both of these agreements carefully limited their IP interest to what was specifically related to the business and applications in question.
But -- while I was laid off during 2001 - 2002, I met the NDA From Hell, and this was for a clerical staffing-agency job for a prominent bank, at $12 per hour!
This little one-paragraph statement was delightful. I was to sign over exclusive rights to all software creations I had ever produced, or would ever produce in the future, under any circumstances.
The job in question consisted of phoning mortgage customers to fill in missing details on their applications. Um, hello?
Fortunately they did not ask for a list -- that could have been quite an exercise, since I've been coding for 35+ years. But actually the list is very short: everything I've written has been work for hire, copyrighted by the client company. I don't own anything I have produced.
Yes, I signed the silly thing. If I ever write anything that is of sufficient value, they may notice this and come after me.
I'm sure they are watching my every move.
I've been in a similar situation. I'd done some development work for a public (but non-government) body without any such NDA stipulations; the body was then taken over by a government agency which then tried to impose these kind of conditions retrospectively to complete the small remaining part of the work. As soon as I consulted a lawyer they freaked out because their procedures didn't allow for anyone to question their standard terms and conditions, even when they had not applied at the start of the contract.
They certainly had no intention of negotiating and ultimately attempted to redevelop the entire system for themselves (3 people for 2 years) before deciding that it wasn't the job of a government agency to be a software house and so scrapped their development effort. They then went out to buy a different package from a 3rd party over which they could assert no rights as it was entirely developed prior to their purchase of it. As I write they'are at least a year behind in the rollout of this new package.
So don't underestimate the stupidity of your potential clients. They may well be prepared to spend vast sums of time & money and have no ultimate stake in the IPR of their solution provided that they can demonstrate they have stuck to the standard terms and conditions their lawyers worked dilligently to produce.
From my point of view, the fact they walked away was a good deal in the short term: I got more revenue from supporting the original system than I ever expected to get out of the project simply because they couldn't afford to be without it while they figured out how to get rid of me. Bad news in the long term, though, because this is a part of the world where most work is government-funded in one way or another and you mysteriously stop being asked to tender for work if you seem to be "difficult".
How much of a business are you likely to have if you make it a policy not to accept contract of this kind? If you've plenty of other work, then fine; if not, it comes down to your need to feed versus your self-esteem.
One of the things too few people allow for in their business plan is the "fuck you" factor. Businesses tend to be highly geared to secure growth and it can be difficult to walk away from potential clients because you need the money to service your borrowing and pay for your staff. I've always made sure there was a reserve account to make it easier to say "no" now and again. However, there's always some stuff you just have to swallow if you want an income: having a business is worse than being employed in that respect because at least an employee has rights...
Of course no one here knows the specifics of your case, but this type of clause is in place not to steal your inventions, but to protect both parties.
The company's side: They pay you to help them develop a widgit or process that the company hopes to commercialize. During the process of your helping some valuable intellectual property is developed. Hopefully before the relationship you both decided who "owns" that property and how the company will get to use it - either by taking ownership from you or by getting a license from you for a reasonable cost. Now, what the company doesn't want to happen is to get that far and then have you pull dominating prior Invention #2 from your ass that you've kept hidden from them that prevents the company from practicing the art you've developed with them. This will gum up the whole commercialization process. - this happens a lot and several companies have been burned by it. Thus the company wants you to document related art up front so that the company can take into account that they'll have to negotiate the license of dominating prior Invention #2 in the work contract.
Your side: You have lots of stuff running around in your head or in progress, but it's not protected by a patent or copyright or whatever. You are now entering a relationship with a company that could use those ideas, but are paying you for something else, i.e., the *field* of the NDA does not cover the field of these ideas. If you never disclose these other ideas, there's no issue. But if you do disclose them - they aren't covered by the NDA and you could be screwed. However, if those ideas are specifically stated in the NDA, even if they are outside the field, then you'll be OK as identifying them as covered - the ideas will still be "yours".
The term of the NDA can be longer than 1 yr. That's negotiable. There's also usually two terms - one term during which you both can disclose info (if it's a two-way)- this usually is 1yr with some renewing mechanism. But there's a second term that is the length of time both of you need to hold the information secret - which is usually 5 yrs, sometimes as long as 10 yrs. The company cannot "steal" your ideas after the term. If you disclosed these ideas to the company *properly* you have now forever "poisoned" the company with respect to that idea. Proper disclosure should be explicitely defined in the NDA but usually means in writing on paper (not electronically) with CONFIDENTIAL written on the page and you keeping a copy. If the company tries to patent it without including you, you can go after them. However if you never patent the idea in a reasonable period, the company can, of course practice it - but they can't ever get a patent on it to exclude others without you being named as an (or the only) inventor. I work in R&D in a big company and we are paranoid at getting poisened in this fashion. It's one of the risks that needs to be managed before entering a relationship with smart people like you who can often greatly shorten development time. Of course, if the NDA is two-way the company can "poison" you in the same way - although this is rare since companies don't like disclosing anything outside of the NDA's field.
Disclosure through an NDA does not start the clock ticking for getting a patent - it's a private disclosure, not a public disclosure. However, you do have the risk that the company will publically disclose the idea - they've violated the NDA and can be sued, but you will now not get a patent unless you apply within a year.
In the end, the NDA is just a piece of paper - a good working relationship requires trust on both sides. If you feel the company is going to screw you, don't work with them. If the big company thinks you won't hold their disclosed IP confidential, or will not be upfront in disclosing potentially blocking ideas or art, they won't work with you.
My company does exactly the opposite, with one clause: Any code we produce under contract is owned by the customer, but we reserve the right to excerpt algorithms or functions for reuse in other code (under contract or not). There are a couple of big advantages to that:
Because you signed it. If you sign a contract, it is presumed you understood what you were doing and becomes your burden to proove otherwise. This is a difficult, expensive, and time-consuming level of proof to meet. You can't just say, "I didn't understand it" and expect a court to rule in your favor.
Can the employers insist that you sign it without giving you time to properly review it (even without a lawyer)?
They can. They shouldn't, but they do. And if you give in to that pressure you might have an argument in court, but you'd still have a hell of a time proving it. And the deck would begin stacked against you because you had signed.
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?
Yes. Don't work for sleazebags. You are correct that some kinds of high-pressure tactics can render a contract unenforceable, but the person breaking the contract has to prove their case. How do you think you'll be able to prove it if it's just your word against theirs, and they have a contract you signed?
I am a lawyer. This is not legal advice. If you have a legal problem, discuss your situation with your own lawyer.