Protecting Your Company When Inventors Leave

By Brian J. Hubbard // August 23rd, 2017

Changes in employment are a fact of life in corporate R&D.  That’s not necessarily a bad thing.  An exiting inventor (“departing employee”) gets to experience different groups, technologies, and/or approaches, leading to greater expertise.  Whoever steps into the departing employee’s role gets a growth opportunity.  The corporation can benefit from cost reduction or from the inevitable fresh viewpoint associated with carrying on through new people.  However, a departing employee scenario is associated with risks that include potential purloining of valuable information and a drain on legal resources.   Here’s why:

They take a little piece of you with them

By virtue of their position, a departing employee may have had access to a great deal of your proprietary confidential information.  Confidential information is any non-public information that gives your company a competitive advantage.  Confidential information abides on a sliding scale of importance, based on the character of the information.  Generally, the greater the cost to develop, or the greater the competitive advantage, the more important the confidential information.

Unfortunately, the sanctity of confidential information is not widely respected.  For example, half of employees who left their jobs kept confidential corporate data, and forty percent planned to (illegally) use it in their new jobs (Global survey from Symantec 2013).  Confidential information in tangible form (e.g., lab notebooks, draft invention disclosures, documents in document management systems, emails, flash drives) can be controlled with effort.  What’s harder to quantify is the information that the departing employee carries off in her head.  “You can’t un-ring the bell.”  Once an inventor knows a piece of confidential information, it’s impossible to make them forget it.  And, from the inventor’s perspective, it’s sometimes difficult to catalog where you know something from, or whether it’s proprietary (confidential information) or free to use (skill).

You still need them occasionally

Patent documents routinely require listed inventors to sign paperwork.  Whether signing assignments or executing declarations, there are times when an inventor’s signature is the fastest, least work intensive path forward.  There are procedures that can be implemented if the inventor refuses to sign a declaration.  For example, if the application was filed before The America Invents Act, you must file a petition detailing attempts made to contact inventor, and ideally, attaching written refusal to sign.  In my experience, petitions were occasionally rejected for insufficient evidence.  If the application was filed after The America Invents Act, you may submit a substitute statement alleging that the inventor has refused to execute the declaration or cannot be found after diligent effort.  The substitute statement is signed by the patent applicant (assignee or party to whom inventor has obligation to assign) or her joint inventors.  Either way, this requires more legal time than if the inventor cooperated.

They know what you taught them

This is why training matters.  All employees should be trained regularly on IP theft awareness and the duty to protect confidential information.  Confidential information should not be publicly disclosed nor used (except for its intended beneficiary, your company).  These non-disclosure and non-use obligations can arise from various sources (e.g., employment agreement, severance agreement, various torts, trade secret law).  Train R&D employees that they have ongoing duties to assist in patenting.  The duties survive termination of employment.  For example, the employment agreement creates an obligation to assign.  The assignment typically has the inventor covenant to execute all lawful papers.  If your company has non-compete clauses in the employment agreement, it is good to highlight those obligations as well.

So, faced with the challenges above, what are some key steps toward protecting your company when inventors leave? 

Expedite – Expedite patent application filing on any in-progress applications or approved invention disclosures.  Dealings with the departing employee are easiest before they leave, while they are still cooperative, drafts to them can be sent to the company email address, and they are not distracted by a job search or new opportunity.  Moreover, the departing employee is not yet “contaminated” with new information from her new company.

Exit Interview – A company should routinely identify individuals with knowledge of “high value” confidential information.  Such an individual’s imminent departure should result in an exit interview with an IP attorney (i.e., above and beyond an HR/manager checklist).  Selection of the right interviewer is important, because the tone of the exit interview should be friendly but serious.  Purposes of the exit interview are to gather information (some employment contracts require inventors to inform the company of a new employer) and to remind the departing employee of her obligations:

  • Non-retention duty – return all company information and property, wherever stored
  • Non-disclosure duty – protect confidential information after exit
  • Non-use duty – not exploit confidential knowledge; “unharvested” ideas still belong to the company
  • Non-solicitation / Non-compete duty (if applicable)
  • Duty to assist in patenting

Offer to stay in contact and answer follow-up questions.  Obtain the employee’s contact information and address.  Once the duties have been explained, touch on enforcement – a no-nonsense tone is important here.  Finalize the exit interview with a letter for the departing employee to sign reminding her of her obligations.

Enforce – Enforcement actions can vary from a conversation, to a warning letter, to suing to enforce your rights.  If you have a concern, it’s a good idea to audit for inappropriate access and/or downloading of confidential data.  Is the departing employee joining a competitor?  Consider negotiating restrictions from working in specific technological areas for a time period.  Also, you may choose to put the future employer on notice of your concerns.    How you handle these matters will give you a reputation (good or bad) with competitors, current employees, and perhaps future hires, so be deliberate, fair, and consistent.

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