Patent assignment agreements are made between employers and employees for invention patents. These agreements usually happen in instances when an employee is developing a patent invention with the employer’s resources and may sign an agreement signing over the rights of the patent invention to the employer.
But patent assignment agreements between employer and employee don’t come without complications. An employee may choose to resign from their position or leave due to any reason during the development of the product. When the employee leaves the company, the information and trade secrets related to the invention belong to the employer. Therefore, it cannot be shared or sold to competitors of the future employer.
This may have a negative impact on the former employee seeking new employment as a new company would be hesitant to hire him. Therefore, California’s law under the Business and Professions Code section 16600 states:
“Every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.”
According to this law, any contracts between the employer and the employee will be void if they hinder the employee from practicing his profession legally. This law puts the former company’s trade secrets at risk if the employee reveals them to his new employer.
However, the California Uniform Trade Secret Act states:
“A court shall preserve the secrecy of an alleged trade secret by reasonable means, which may include granting protective orders in connection with discovery proceedings, holding in-camera hearings, sealing the records of the action, and ordering any person involved in the litigation not to disclose an alleged trade secret without prior court approval.”
The above law dictates that the trade secrets of a company cannot be disclosed without court approval, thus, protecting the rights of the employer.
The following case demonstrates the use of the above laws and how they affected the court’s ruling on a patent invention agreement.
Applied Materials, Inc. v Advanced Micro-Fabrication Equipment Co
Applied made employees sign a patent invention agreement that stated that all inventions conceived within one after the termination of the employment contract belonged to them. The agreement did not take into account research and work done independently by the employee and ascertained that the sole ownership belonged to Apllied for one year after the contract ended.
The Court held that the terms of the patent invention agreement were too broad. It assigned inventions to Applied even though it was not based on a trade secret and were developed after the contract termination.
The Court also found that the clause in the Applied invention assignment agreement was in direct conflict with the Business and Professions Code Section 16600. They also held Applied liable for unfair business practices under Business and Professions Code 17200.
Conclusion
California has laws protecting both employers and employees against unfair business practices and contracts. It is the responsibility of employers and employees to respect these laws and contract clauses. They should not take advantage of clauses in patent invention agreements to restrict employees from practicing their profession or share employer trade secrets with third parties,