Know Your Rights

Intellectual property agreements can pose significant concerns.

By Dirk Willard, Contributing Editor

You've got to admire lawyers for turning a subject like intellectual property into fodder for PhD candidates, I thought as I reviewed a 10-page confidentiality agreement required of contractors. The project looked interesting but I didn't want to sign away my life if things didn't work out.

A confidentiality agreement is easier to defend in court than a non-compete agreement.

The agreement seemed to indicate that the company owned every idea I'd ever had that it deemed pertinent to its manufacturing. The text had a threatening tone, suggesting I alone bore the burden of proof. I had a vision of confronting the law firm of Payne and Fear in court. So, I put off signing this form until I reviewed the current state of intellectual property rights. I eventually did sign after getting some clarifications.

In my research, I found you might face two documents when starting with a new company: a confidentiality agreement and a non-compete agreement.

A confidentiality agreement defines information you can exchange with a third party and who owns what if you invent something for an employer. Defending a confidentiality agreement in court is easier for companies; it's more binding than a non-compete agreement. Usually, the confidentiality agreement has no time limit.

A non-compete agreement is more sinister. It says you can't work for a competitor. Courts usually decide that a non-compete agreement bars employment for no more than a year, as in the1999 case of Earthweb versus Schlack; after all, the skills of the defendant, a software engineer, might be considered outdated or even obsolete after a period longer than that. Rulings in Texas, California and Michigan generally concur. Obviously, you may want to decline such an agreement unless it's amended to loosen the noose around your neck.

I've known a victim of a non-compete agreement. Shelly worked for a newspaper in Boston in the advertising department. She signed an agreement that virtually chased her out of the East Coast. When I met her she was living in poverty in Chicago.

Now, let's move on to the question of what are intellectual property rights. This has real world consequences. I remember working with the owner of a company on this very question. As a subcontractor for a large U.S. engineering firm he was concerned by the agreement he was asked to sign. This story was repeated at a different company on a later contract with the same engineering firm.

There basically are two camps: those following Massachusetts law and those following Minnesota law. Massachusetts law says that if you have an idea, even if completely unrelated to what your employer manufactures, the company owns it; some states restrict the period of time this draconian restriction applies. Minnesota law, in my opinion, is more lenient: a company only owns an invention if it pertains to its production operations. Given the complicated nature of modern manufacturing and the intricacies of the chemical process industries, it seems unlikely that an idea would be of much use outside of a particular area. But, then again, a revolutionary concept appeals specifically to a competitor. And it's often easy to reverse-engineer a process — hence fewer and fewer are patented. It's tempting, I suppose, to find an easy solution in the patent office. Industrial espionage is a dirty business.

On numerous occasions, companies have used recruiters to line up engineers for the sole purpose of fishing for trade secrets. In one interview I was brought in for, the firm seemed more interested in what my current employer was doing than in my accomplishments. When I mentioned this, the interview was over. While I was with a cereal maker, a process engineer was secretly recruited and hired away from a competitor, in part because of the detailed knowledge he'd acquired.

Another technique is to initiate bidding on a project that will never be built. The Chinese have used this technique against American engineering companies. Actually, the Chinese have gone much farther. I've seen them bring in a competitor to complete a chemical plant after the constructor quit because the Chinese were building an identical plant next door!

In the end, intellectual property agreements are only as good as our word. Of course, engineers will feel a stronger bond to companies that treat us with decency and respect. Perhaps creating an honest rewards system for successful new ideas would be more of an incentive than the elusive suggestion of a 2% raise or a mythical 10% bonus after a productive year.

DIRK WILLARD is a Chemical Processing Contributing Editor. You can e-mail him at