Is your company adequately protecting its rights? This article provides a checklist for Employee and Intellectual Property matters. Our next article will do the same for Corporate and Contract matters. These checklists cover many important points that often are overlooked, although no checklist can cover everything.


AT-WILL EMPLOYMENT. Make certain your employment agreements and any employee handbooks specify employment is "at will". If they do not, fired employees may file lawsuits on the basis that they were not fired for proper cause.

NON-COMPETE CLAUSES. Avoid non-competition clauses with employees (and with your customers) stating that your employees cannot compete with you or work for your competitors or customers after they leave your company. In California these restrictions on employees are generally invalid and can lead to lawsuits by employees alleging restraint of trade. Confidentiality agreements, on the other hand, are generally upheld and may cover customer preferences and sometimes customer lists.

INDEPENDENT CONTRACTORS. If you use independent contractors, be sure you can justify your decision not to make them employees if the government enquires. One rule of thumb: an independent contractor must earn at least one-third of his/her income from sources other than your company OR be incorporated. Have a written agreement with each independent contractor stating that he/she is an independent contractor and is responsible for his/her own taxes etc..

CONSISTENCY IN POLICIES. Apply your company policies consistently to all employees. If you don't have one already, consider creating an employee handbook to make it clear what the exact rules are and to ensure consistency. If you have an employee handbook, follow its provisions and have it reviewed periodically for changes in the law and in business conditions. The handbook should state that it may be amended by the company at any time. Have each employee sign an acknowledgment of receipt of any employee handbook and any major amendments to it. Consider having employees sign a separate agreement to arbitrate (rather than litigate) all disputes regarding employment. If you do this, either have them sign it at the time when they first start work or give them additional consideration (small amounts of stock or money) as consideration for signing. If existing employees are not given additional compensation to sign, the agreement may not be enforceable.

DISCIPLINARY PROCEDURES. Follow disciplinary procedures consistently with each employee. Before terminating any employee, give repeated oral and written warnings over time if at all possible. Write up your conversations and place them and the written warnings in the employee's personnel file.

SEXUAL HARASSMENT POLICIES. Have a written policy prohibiting sexual harassment as well as discrimination concerning race, gender, age and, in California, sexual orientation. Expressly give the employees several different people in the company to contact if they believe there has been a violation. Distribute all of these policies to your employees and have each employee sign an acknowledgment of receipt for them. Where an employee alleges harassment or discrimination, investigate and take appropriate disciplinary action if warranted. If you fail to adequately investigate, your company may be held liable for acts by its employees.

COMPUTER-USE POLICIES. Have an express computer-use policy which states that:

  • employees may only use your computer systems for purposes related to your business.
  • employees may not use the e-mail or on-line access for objectionable materials or messages of any kind.
  • employees may not use the e-mail or on-line access for any material protected by copyright law, trademark law etc. without the permission of the owner.
  • e-mails and materials sent or received with the company's equipment may be subject to review by the company.

REQUIRED POSTINGS. You must post all required federal and state employment notices. If you are in California, the California Chamber of Commerce has all the employment posters that must be posted, plus required Unemployment Insurance and State Disability Insurance pamphlets and required Sexual Harassment pamphlets. To order, go to http://www.calchamberstore.com/calchamber/, click on Required Notices and then on Required Notices Kit. Prices are currently $35 to $55 dollars per kit, less expensive than many other vendors.


NON-DISCLOSURE AGREEMENTS. Have signed non-disclosure (confidentiality) agreements with the employees and principals of your company as well as with independent contractors and other businesses where appropriate. Be certain that your definition of what constitutes confidential material is specific enough to identify the confidential information without disclosing it. Vague or overly broad definitions of what constitutes proprietary material may nullify non-disclosure agreements. Have your confidentiality agreements with employees signed at the time when they first start work and give existing employees additional consideration small amounts of stock or money as consideration for signing the agreement. If existing employees are not given additional compensation to sign, the agreement may not be enforceable.

INDEPENDENT CONTRACTORS. Ascertain that your "work for hire" agreements with independent contractors (such as programmers and Web designers) also include an assignment of ownership rights in the resulting product to your company. "Work for hire" clauses alone may not be sufficient.

EMPLOYEE INVENTIONS. If you are in California, your agreements with employees regarding inventions must comply with California Labor Code Section 2870. This means that inventions developed entirely on an employee's own time without using the company's equipment, supplies, facilities, or trade secret information must NOT be assigned to your company unless they relate to your business. Making invention-assignment clauses too broad will nullify the agreement.

DOMAIN NAMES. Registered the domain names (for example, www.yourcompany.com) for your company name and consider doing so for your important trademarks. Mere use of the names or trademark registrations may not be sufficient to prevent others from acquiring the corresponding domain names. Have a Web site however simple–up and running for each domain name you have. A recent case says that a Web site must be established in order to generate trademark rights in the domain name. An "Under Construction" notice on the site is not sufficient.

TRADEMARKS. Register your important trademarks with the federal government for nationwide protection, or at the very least register them with the state for state-wide protection. Register your trademarks with each foreign country where you do (or plan to do) a substantial amount of business. For trademarks and service marks registered with the federal government, use an "R" in a circle after the name to show it has been registered. For other trademarks (names for goods) and service marks (names for services), use a superscript "TM" for trademarks and a superscript "SM" for service marks to show you are claiming rights in that name. Check periodically to see whether any of your trademark or service mark registrations are coming up for renewal.

NAMES. Before investing significant time and money in a new product, service or company name, do the following: *have a trademark search conducted. *check the availability of the domain name for the .com version of the name. *perform an Internet search on the name. *and, where appropriate, check with the State for availability as a corporate or limited liability company name.

COPYRIGHTS. If your business uses copyrights, register them with the Copyright Office. Registration PRIOR to infringement allows attorneys' fees and statutory damages.

PATENTS. With potentially patentable ideas, be sure to contact an attorney early enough so that a patent application can be filed within one year of the earlier of a) the publication of the invention in any patent or printed publication anywhere in the world by anyone and b) anyone placing the invention in public use or on sale. Otherwise patent rights are lost.

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Methven & Associates
2232 Sixth Street Berkeley, CA 94710
Phone: (510) 649-4019 Fax: (510) 649-4024
Web Site: www.methvenlaw.com
Copyright 2004 Bruce E. Methven, All Rights Reserved.

The foregoing article constitutes general information only and should not be relied upon as legal advice.