Case Study: Talent and Intellectual Property in a Knowledge Firm
In a Knowledge Firm, a talent, during their tenure with the firm, remained a star performer. Over time, there was dissonance in terms of finances. The talent was promised a certain amount to deliver a product that was never built, and consequently, the talent left in a huff.
Years later, the firm continued to showcase the documents created by the talent. The talent moved on to newer firms and continued to use the documents as Knowledge Capsules created for the ex-employer.
It's easy to infer that the ex-employer can claim and even ask the talent to either stop using those documents or issue a penalty if they were used for monetary gain.
Best Course of Action for the Ex-Employer
If the ex-employer wants to avoid legal hassle or a conflict, what should be their best course of action?
Should they acknowledge the talent for the documents created and make it public to claim that they are still owned by the ex-employer?
Or, should they speak to the talent and request a footnote reference, mentioning that the documents were created for the ex-employer?
What else could be done, considering that ex-employees are ambassadors to the talent pool and should remain so?
I am eager to hear your views and look forward to a solution from you.
From India, Mumbai
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1872In a Knowledge Firm, a talent, during their tenure with the firm, remained a star performer. Over time, there was dissonance in terms of finances. The talent was promised a certain amount to deliver a product that was never built, and consequently, the talent left in a huff.
Years later, the firm continued to showcase the documents created by the talent. The talent moved on to newer firms and continued to use the documents as Knowledge Capsules created for the ex-employer.
It's easy to infer that the ex-employer can claim and even ask the talent to either stop using those documents or issue a penalty if they were used for monetary gain.
Best Course of Action for the Ex-Employer
If the ex-employer wants to avoid legal hassle or a conflict, what should be their best course of action?
Should they acknowledge the talent for the documents created and make it public to claim that they are still owned by the ex-employer?
Or, should they speak to the talent and request a footnote reference, mentioning that the documents were created for the ex-employer?
What else could be done, considering that ex-employees are ambassadors to the talent pool and should remain so?
I am eager to hear your views and look forward to a solution from you.
From India, Mumbai
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Employee Agreement on Confidential Information
An agreement should be made with employees that they will not use the company's confidential information after leaving the job for a specific period, say 2 or 3 years. If the company finds that the employee is not honoring this agreement, it can take legal action against the employee. Of course, the company should have solid evidence that the employee is using its information, resulting in a loss for the company.
I have heard of instances where employers make an agreement with employees that they will not work in the same sector after leaving the job for a specific period.
Regards,
From India
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An agreement should be made with employees that they will not use the company's confidential information after leaving the job for a specific period, say 2 or 3 years. If the company finds that the employee is not honoring this agreement, it can take legal action against the employee. Of course, the company should have solid evidence that the employee is using its information, resulting in a loss for the company.
I have heard of instances where employers make an agreement with employees that they will not work in the same sector after leaving the job for a specific period.
Regards,
From India
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Thank you, Sharaat, for contributing this solution. To me, this case remains very unique, as the employer doesn't want to get into a nasty fight and resolve it amicably. It's a knowledge firm where most of the members are from Tier-1 institutes with years of professional experience. The founder of the firm wants a positive approach to the situation and a corrective measure that will set an inspiring example.
Looking forward to hearing from our experts and mentors.
From India, Mumbai
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Looking forward to hearing from our experts and mentors.
From India, Mumbai
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I hope your query will be clearer if we replace "talent" with "employee"; that will make it easier to understand. As mentioned by Sharad, many companies enter into agreements with employees regarding innovation and new discoveries. However, no employee will keep on reinventing the wheel again and again. If I have prepared some documents on my own for my ex-employer, I won't hesitate to keep the documents with me even after I resign from the company. I am free to use the documents by editing a little here and there. I am not able to understand exactly what a knowledge firm does with those documents. Could you please mention what exactly those documents contain? Are they training documents or something else? It would help me to get an idea.
Leave aside employees vs. employers. I hope you have read the case of Apple vs. Samsung, wherein Apple sued and won against Samsung. There were memes about good guy Motorola; Motorola invented the world's first flip phone but did not sue others for using the flip phone design, whereas Apple sued Samsung for using similar logos. Since I am not exactly sure what a knowledge firm does, I am unable to advise you.
If you are going to construct a house and an architect designs a plan for you, you can't stop that architect from selling the same plan designed for your house to others. When that architect worked for you, he prepared a plan (documents) for your needs, and when he is working on other people's houses, he is preparing documents for their needs.
If you could provide more information about the documents, it would be helpful.
From India, Madras
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Leave aside employees vs. employers. I hope you have read the case of Apple vs. Samsung, wherein Apple sued and won against Samsung. There were memes about good guy Motorola; Motorola invented the world's first flip phone but did not sue others for using the flip phone design, whereas Apple sued Samsung for using similar logos. Since I am not exactly sure what a knowledge firm does, I am unable to advise you.
If you are going to construct a house and an architect designs a plan for you, you can't stop that architect from selling the same plan designed for your house to others. When that architect worked for you, he prepared a plan (documents) for your needs, and when he is working on other people's houses, he is preparing documents for their needs.
If you could provide more information about the documents, it would be helpful.
From India, Madras
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I agree with Karavi and Sharat. Organizations infuse new blood into their systems and processes to make their organizations more productive and profitable. Employees gain and use their knowledge from previous organizations in the new one and so on.
Confidentiality and Commitment
However, there is always a bond, agreement, or moral commitment on the part of both parties that the employee shall not disclose confidential information in the new organization. This is especially true in critical positions, such as in the case of competitors. If the work of the ex-employer is suffering because of the technology transfer by the ex-employee to the new organization, then this is the real problem that must be sorted out through amicable solutions.
On the part of the employee, he/she must be true to their commitment with the ex-employer; otherwise, he/she will lose credibility in the eyes of the new employer. The employer may sue the ex-employee if his business is truly suffering.
With Best Regards
From India, New Delhi
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Confidentiality and Commitment
However, there is always a bond, agreement, or moral commitment on the part of both parties that the employee shall not disclose confidential information in the new organization. This is especially true in critical positions, such as in the case of competitors. If the work of the ex-employer is suffering because of the technology transfer by the ex-employee to the new organization, then this is the real problem that must be sorted out through amicable solutions.
On the part of the employee, he/she must be true to their commitment with the ex-employer; otherwise, he/she will lose credibility in the eyes of the new employer. The employer may sue the ex-employee if his business is truly suffering.
With Best Regards
From India, New Delhi
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Ravi has mentioned very apt and relevant points—the Apple vs. Samsung legal tussle is and will be a classic reference case with respect to knowledge-based usages/applications, which is quite different from regular patent protection cases. In fact, Apple used this argument very effectively to win the suit.
Clarification on NDA and Patent Protection
Coming to the situation you mentioned, please confirm/clarify the terms mentioned in the NDA and patent protection clauses of the appointment letter—I presume they do exist.
You mentioned that the 'ex-employer wants to avoid the legal hassle'—any specific reason(s)? I am sure there must be strong reasons for such a decision when legally any company would be within its rights to go legal in such situations, presuming they have evidence of whatever they would be claiming about the ex-employee.
Another point—has the company broached the issue with the ex-employee, either directly or indirectly [through someone else]?
While reserving my final opinions pending your clarifications on the points mentioned above, these are my comments.
Evaluating Conflict Resolution Options
I am not sure if your line ".....even pick up a fight" is an option at all. In such situations, picking up a fight could only aggravate the situation rather than resolve it. And frankly, I don't see any need for exercising such an option at all.
Regarding the option "..........make it public, to claim that they are still owned by the ex-employer?" that you mentioned, it could be tough to implement practically unless the company has the proper documentation framework in place [NDA, etc.] that contains clauses with very unambiguous terminology.
Please elaborate on the issues for better solutions to come across from the members.
Clarifying the Role of Ex-Employees
However, there's one thing that I think we should be ABSOLUTELY CLEAR on—let's NOT CONFUSE between "ex-employees being an ambassador to the talent pool" and "a breach of trust/agreement," if it was that in this case.
The risk—if you see such situations from the brand-ambassador-prism, there's a genuine danger of other employees taking things for granted and situations going beyond control in the future.
In a single line: suggest discriminating situations where thinking through the head and through the heart is more appropriate.
Regards,
TS
From India, Hyderabad
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Clarification on NDA and Patent Protection
Coming to the situation you mentioned, please confirm/clarify the terms mentioned in the NDA and patent protection clauses of the appointment letter—I presume they do exist.
You mentioned that the 'ex-employer wants to avoid the legal hassle'—any specific reason(s)? I am sure there must be strong reasons for such a decision when legally any company would be within its rights to go legal in such situations, presuming they have evidence of whatever they would be claiming about the ex-employee.
Another point—has the company broached the issue with the ex-employee, either directly or indirectly [through someone else]?
While reserving my final opinions pending your clarifications on the points mentioned above, these are my comments.
Evaluating Conflict Resolution Options
I am not sure if your line ".....even pick up a fight" is an option at all. In such situations, picking up a fight could only aggravate the situation rather than resolve it. And frankly, I don't see any need for exercising such an option at all.
Regarding the option "..........make it public, to claim that they are still owned by the ex-employer?" that you mentioned, it could be tough to implement practically unless the company has the proper documentation framework in place [NDA, etc.] that contains clauses with very unambiguous terminology.
Please elaborate on the issues for better solutions to come across from the members.
Clarifying the Role of Ex-Employees
However, there's one thing that I think we should be ABSOLUTELY CLEAR on—let's NOT CONFUSE between "ex-employees being an ambassador to the talent pool" and "a breach of trust/agreement," if it was that in this case.
The risk—if you see such situations from the brand-ambassador-prism, there's a genuine danger of other employees taking things for granted and situations going beyond control in the future.
In a single line: suggest discriminating situations where thinking through the head and through the heart is more appropriate.
Regards,
TS
From India, Hyderabad
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Thank you, Ravi, Ramesh, and Sateesh. Apple and Samsung are apt examples of this situation. Your contributions will help the founder find the best way out. I will share this thread, including all these discussions, with him. He is a very senior fellow who built the firm with a professional yet very caring approach. He paid the amount agreed for the product right when the candidate had joined in. That's how much he values his team. All his hires are among the best people from the sector. The internal document and the ones that the talent is sharing are almost identical; hence, they can run into copyright issues. He was keen to brainstorm for a positive approach. He remains sensitive to his firm's environment. I suggested taking the legal way or playing hardball; he wanted to set a right precedent. I'm glad I met such an employer.
Suggestions for a Positive Approach
Here's what I suggested:
- Acknowledge the talent to be a part of the company alumni.
- List all the ex-employees of his firm on LinkedIn and, if possible, on his website. That way, he will automatically declare the contribution towards knowledge capital in the market by his firm.
- Talk to that talent and acknowledge the situation. Open up the process for knowledge sharing through the company blog and e-books, with a declaration of the content.
- Encourage the reshare of the documents with a footnote.
- Adherence to the NDA would remain a natural result of the culture he is building. His positive approach will impact the environment, but only over a period of time.
- Help ex-employees build their careers with post-employment mentoring and outplacements. This will truly build the Employee Alumni culture and weed out every such situation that we have today.
I am really happy to find such a positive approach. Ideally, corrective measures are often fear-based. What are the other ways out that he can try out? Let's see how best this can be resolved.
Regards.
From India, Mumbai
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Suggestions for a Positive Approach
Here's what I suggested:
- Acknowledge the talent to be a part of the company alumni.
- List all the ex-employees of his firm on LinkedIn and, if possible, on his website. That way, he will automatically declare the contribution towards knowledge capital in the market by his firm.
- Talk to that talent and acknowledge the situation. Open up the process for knowledge sharing through the company blog and e-books, with a declaration of the content.
- Encourage the reshare of the documents with a footnote.
- Adherence to the NDA would remain a natural result of the culture he is building. His positive approach will impact the environment, but only over a period of time.
- Help ex-employees build their careers with post-employment mentoring and outplacements. This will truly build the Employee Alumni culture and weed out every such situation that we have today.
I am really happy to find such a positive approach. Ideally, corrective measures are often fear-based. What are the other ways out that he can try out? Let's see how best this can be resolved.
Regards.
From India, Mumbai
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Understanding Trade Secret Protection and Employee Misappropriation
If that former employee had been covered by an appropriately restrictive, written employment contract, you could find your remedy in there. But let's not make this too easy. Let's say you had no written employment contract with this employee. Let's also say that you terminated the employee. If this is the case, you aren't likely to find your remedy in contract or employment law. Now what?
Ohio, along with nearly every other state in the US, has enacted a substantially similar version of the Uniform Trade Secrets Act. The concept of a "trade secret" is very broad; much broader than that of a copyright or patent. Furthermore, while the government decides what qualifies as "copyrightable" or "patentable," you (largely) decide what constitutes a trade secret.
Criteria for Trade Secret Protection
Trade secret protection can extend to essentially any "information," so long as that information meets the test for protection. Whether your information is covered depends on two things: if you treat that information as confidential (you protect it as such), and if the "secrecy" of that information is what makes it extra valuable.
Furthermore, trade secret protection extends to information whether or not you could copyright or patent that information. It even applies to information that you may not want to patent or copyright. Think about it: if you send something out for copyright or patent protection, you have to reveal it to the world. You may not want to do that, for obvious reasons. Additionally, if you are going to be changing your customer database every day, the copyright on your database from October 2010 is going to be pretty worthless. Most of the valuable information you use in your business on a day-to-day basis isn't going to be patentable or copyrightable. Even if it is, there won't be any value in obtaining that protection; therefore, most of the information you deem valuable in your organization is going to be best protected under trade secret law.
So if you take reasonable steps to keep your customer list secret (it is stored on your server, which is password protected, for example), and it is clear that the list would be worth much less to you if all of your competitors had access to it, it is likely your customer list qualifies for trade secret protection.
Addressing Employee Misappropriation
Returning to our example, your former employee is using your customer database to solicit new clients. While you might call this "theft," under Ohio law, this is called "misappropriation." There are quite a few different activities that constitute misappropriation, but in this example, the former employee was under a common law duty to you to maintain the secrecy of the information (or so you would argue). By taking that information with her after she left, she is now misappropriating it.
In certain circumstances, you may also be able to force the former employee to "take affirmative acts" to protect the information (i.e., returning or destroying all copies).
Depending on how much damage has been done, you may also sue for damages. Damages may include both the actual loss caused by misappropriation and certain damages for unjust enrichment (assuming your former employee has been raking in the dough by using your list). If it would be impossible to calculate these types of amounts, you have the opportunity to persuade a court to award you a reasonable "royalty" for the former employee's use of the information. That royalty would be calculated based on your loss, and/or the former employee's gain. This is kind of like requiring the employee to pay over the money that she made by using your list. In more egregious cases ("willful and malicious"), you might be entitled to punitive damages. You would have a stronger case for this type of claim if the employee had been siphoning your information for weeks before leaving, with the intention of using it to his own advantage after leaving.
You should also be aware that this law applies not just to employees, but also independent contractors, even your vendors and strategic partners.
From India
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If that former employee had been covered by an appropriately restrictive, written employment contract, you could find your remedy in there. But let's not make this too easy. Let's say you had no written employment contract with this employee. Let's also say that you terminated the employee. If this is the case, you aren't likely to find your remedy in contract or employment law. Now what?
Ohio, along with nearly every other state in the US, has enacted a substantially similar version of the Uniform Trade Secrets Act. The concept of a "trade secret" is very broad; much broader than that of a copyright or patent. Furthermore, while the government decides what qualifies as "copyrightable" or "patentable," you (largely) decide what constitutes a trade secret.
Criteria for Trade Secret Protection
Trade secret protection can extend to essentially any "information," so long as that information meets the test for protection. Whether your information is covered depends on two things: if you treat that information as confidential (you protect it as such), and if the "secrecy" of that information is what makes it extra valuable.
Furthermore, trade secret protection extends to information whether or not you could copyright or patent that information. It even applies to information that you may not want to patent or copyright. Think about it: if you send something out for copyright or patent protection, you have to reveal it to the world. You may not want to do that, for obvious reasons. Additionally, if you are going to be changing your customer database every day, the copyright on your database from October 2010 is going to be pretty worthless. Most of the valuable information you use in your business on a day-to-day basis isn't going to be patentable or copyrightable. Even if it is, there won't be any value in obtaining that protection; therefore, most of the information you deem valuable in your organization is going to be best protected under trade secret law.
So if you take reasonable steps to keep your customer list secret (it is stored on your server, which is password protected, for example), and it is clear that the list would be worth much less to you if all of your competitors had access to it, it is likely your customer list qualifies for trade secret protection.
Addressing Employee Misappropriation
Returning to our example, your former employee is using your customer database to solicit new clients. While you might call this "theft," under Ohio law, this is called "misappropriation." There are quite a few different activities that constitute misappropriation, but in this example, the former employee was under a common law duty to you to maintain the secrecy of the information (or so you would argue). By taking that information with her after she left, she is now misappropriating it.
In certain circumstances, you may also be able to force the former employee to "take affirmative acts" to protect the information (i.e., returning or destroying all copies).
Depending on how much damage has been done, you may also sue for damages. Damages may include both the actual loss caused by misappropriation and certain damages for unjust enrichment (assuming your former employee has been raking in the dough by using your list). If it would be impossible to calculate these types of amounts, you have the opportunity to persuade a court to award you a reasonable "royalty" for the former employee's use of the information. That royalty would be calculated based on your loss, and/or the former employee's gain. This is kind of like requiring the employee to pay over the money that she made by using your list. In more egregious cases ("willful and malicious"), you might be entitled to punitive damages. You would have a stronger case for this type of claim if the employee had been siphoning your information for weeks before leaving, with the intention of using it to his own advantage after leaving.
You should also be aware that this law applies not just to employees, but also independent contractors, even your vendors and strategic partners.
From India
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