Employment Agreement Landmines: IP Assignment and Non-Solicits
Starting a new job is exciting. You're focused on the opportunity, the team, the salary, and the career advancement. The employment agreement seems like administrative paperwork standing between you and your first day. This enthusiasm is precisely why so many professionals sign documents they haven't fully read—agreements that can have profound long-term consequences for their intellectual property, future employment, and professional relationships.
Employment agreements contain provisions that extend far beyond job descriptions and compensation. Understanding these clauses before signing protects your creative output, preserves your career mobility, and prevents unpleasant surprises when you eventually move on.
The Pre-Employment IP Problem
One of the most consequential yet frequently overlooked provisions in employment agreements is the intellectual property assignment clause—and specifically, how it treats work you created before joining the company.
Standard IP Assignment Language
Typical employment agreements include language like:
"Employee hereby assigns to Company all right, title, and interest in and to any and all inventions, discoveries, improvements, innovations, designs, developments, know-how, trade secrets, and intellectual property, whether or not patentable or registrable, that Employee has conceived, developed, created, or reduced to practice, either solely or jointly with others, during the term of Employee's employment with Company."
On its face, this appears to cover only work done during employment. But read carefully—some agreements go further.
The Pre-Existing Work Trap
More aggressive agreements include:
"To the extent applicable": Language claiming pre-existing work that relates to the company's business
"During the term": Reasonable on its face, but some agreements define "term" to include periods after termination for certain types of work
"Relating to Company's business": Broad definitions that might capture work done years before employment
"Using Company resources": Captures work done on company time or equipment, even if created before employment started
California Section 2870: A Model Protection
California Labor Code Section 2870 provides a template for reasonable pre-employment IP protections. It states that employment agreements cannot require assignment of inventions that:
- Were developed entirely on the employee's own time
- Were developed without using the employer's equipment, supplies, facilities, or trade secret information
- Do not relate to the employer's business or anticipated R&D
- Do not result from work performed for the employer
Even if you're not in California, negotiating for similar carve-outs protects your pre-employment intellectual property.
Disclosure Requirements
Many agreements require employees to disclose all prior inventions and IP that might relate to the company's business. Failure to disclose can result in forfeiture of rights to that IP.
Protection strategy: Maintain detailed records of pre-employment work, including development dates, and disclose potentially relevant IP during onboarding.
The "Listed Inventions" Attachment
Some agreements include attachments where employees list excluded pre-existing IP. Take this seriously—comprehensive disclosure protects your prior work from future claims.
Assignment Scope: What Are You Giving Away?
Beyond pre-employment work, understand what you're assigning regarding future work:
Work-for-Hire vs. Assignment
Work-for-hire: Under copyright law, work created by employees within the scope of employment is automatically owned by the employer. No separate assignment needed.
Assignment: Patentable inventions and trade secrets typically require explicit assignment.
Result: Employment agreements assign both copyrightable works (redundantly) and patentable inventions (necessarily) to employers.
Moral Rights Waiver
Some agreements require waiver of "moral rights"—the right to claim authorship and prevent derogatory treatment of your work. This is standard in the U.S. but more significant in jurisdictions with stronger moral rights protections.
Improvements and Derivatives
Aggressive agreements claim rights not just to your work product but to improvements, modifications, and derivative works—even those created after employment ends if based on work done during employment.
Non-Solicitation Clauses: Beyond the Non-Compete
While non-compete agreements face increasing legal restrictions, non-solicitation clauses remain broadly enforceable—and potentially more damaging to career mobility.
Types of Non-Solicitation
Customer non-solicitation: Prohibiting former employees from soliciting the company's customers or clients. Common in sales, consulting, and professional services.
Employee non-solicitation: Prohibiting former employees from recruiting current employees to join them at new ventures. Increasingly common across industries.
Vendor non-solicitation: Less common, but prohibits soliciting the company's suppliers or service providers.
Customer Non-Solicitation: The Career Killer
For employees in client-facing roles, customer non-solicitation can effectively prevent them from working in their field. If your professional network consists primarily of clients you've served, a broad non-solicitation can destroy your career mobility.
Scope concerns:
- Who is covered?: Current customers only, or anyone who was a customer during employment?
- How long?: Six months, one year, two years?
- What constitutes solicitation?: Direct outreach only, or responding to inbound inquiries?
- Geographic scope?: Local market, national, or global?
Employee Non-Solicitation: The Startup Blocker
For entrepreneurs planning future ventures, employee non-solicitation presents significant barriers. Building a team often requires recruiting people you've worked with—precisely what these clauses prohibit.
California has significantly limited employee non-solicitation, holding that such provisions are essentially non-competes in disguise and unenforceable under Business and Professions Code Section 16600. Other states vary in their enforcement.
Negotiating Non-Solicitation
Narrow the scope: Limit covered customers to those you personally worked with, not all company customers.
Shorten the duration: Six months rather than one or two years.
Add carve-outs: Allow responses to unsolicited inquiries; allow general advertising not targeted at specific customers.
Consider mutual provisions: If the company wants restrictions on you, consider whether reciprocal restrictions on them are appropriate.
Moonlighting and Side Project Policies
Employment agreements increasingly address outside work—both to protect the company's interests and, in some cases, to claim rights to side projects.
Company Consent Requirements
Many agreements require employees to obtain company approval for outside employment or business activities. These provisions serve legitimate purposes—preventing conflicts of interest and ensuring primary job performance—but can also be used to claim rights to valuable side projects.
Best practice: Disclose significant side projects during employment and document company acknowledgment that they don't conflict with employment obligations.
Conflict of Interest Definitions
Broad definitions of "conflict of interest" can capture:
- Working for competitors (understandable)
- Working for customers or suppliers (potentially problematic)
- Any activity that "diverts attention" from employment duties (extremely broad)
- Any business "related to" the company's activities (vague and expansive)
The Side Project Ownership Problem
Even without explicit claims, employers may argue that side projects created during employment belong to them if:
- Developed using company resources (time, equipment, facilities)
- Related to the company's business
- Based on knowledge or skills gained through employment
- Developed during work hours
To protect side projects:
- Separate entirely: Don't use company time, equipment, or facilities
- Document timeline: Establish clear records of when development occurred
- Disclose early: Transparency reduces suspicion and future claims
- Understand your agreement: Know what you've agreed to assign
Garden Leave and Notice Periods
Senior employees and those with access to sensitive information may encounter "garden leave" provisions—paid notice periods during which the employee remains employed but doesn't work, typically to enforce non-compete or non-solicitation periods.
Garden Leave Structure
Notice period: Employee provides extended notice (often 30-90 days)
Garden leave: During notice period, employee remains on payroll but is relieved of duties and denied access to systems
Non-compete timing: Non-compete period runs concurrently with or begins after garden leave
Economic Impact
Garden leave can be financially attractive—paid time off effectively—but also constraining if you're eager to start a new position. The combination of garden leave plus non-compete can extend restrictions for months.
Negotiation Points
Accelerated start dates: Can garden leave be waived by mutual agreement?
Benefits continuation: Does garden leave include full benefits or just salary?
Mitigation: Can employee work for new employer in non-competing capacity during garden leave?
Return of Company Property and Data
Employment agreements specify obligations regarding company property and information upon termination:
Return Obligations
Physical property: Laptops, phones, access badges, documents
Data and documents: All company information, regardless of where stored
Access credentials: Passwords, system access, cloud accounts
Copies: Obligations to destroy or return all copies of company information
The Personal Data Problem
Distinguishing company data from personal information can be challenging:
- Contacts: Professional contacts developed during employment—who owns them?
- Work product: Documents you created—can you keep portfolio copies?
- Communications: Personal emails sent through company systems
Most agreements require return of all company information without clear distinctions. Negotiate for reasonable exceptions—personal contacts, portfolio rights, and personal communications.
Forensic Investigation Rights
Some agreements grant companies broad rights to inspect personal devices for company information. These provisions raise significant privacy concerns.
Protection: Clarify that company inspection rights apply only to company-provided devices, not personal devices.
Confidentiality and Trade Secret Obligations
Confidentiality provisions in employment agreements typically survive termination indefinitely and can significantly constrain future employment.
Confidentiality Scope
Trade secrets: Proprietary information that derives value from secrecy (formulas, processes, customer lists)
Confidential information: Broader category including business plans, financial data, strategies, and operational details
Duration: Trade secret obligations last as long as information remains secret; confidentiality obligations may have time limits or extend indefinitely
Definition Problems
Overbroad definitions of confidential information can capture:
- General industry knowledge
- Skills and expertise developed through employment
- Publicly available information
- Information learned before or after employment
Negotiation: Request specific identification of confidential information categories rather than blanket definitions.
Inevitable Disclosure Doctrine
Some jurisdictions recognize the "inevitable disclosure doctrine"—the idea that employees with trade secret knowledge cannot work for competitors without inevitably using that knowledge. This doctrine effectively extends non-compete effects through trade secret law.
California rejects this doctrine; other states apply it variably. Understand your jurisdiction's approach when evaluating competitive employment risks.
Non-Compete Agreements: The Shrinking Enforceability
While not the focus of this article, non-compete clauses warrant brief mention as they relate to IP and non-solicitation provisions.
Current Legal Landscape
Non-compete enforceability is rapidly changing:
- FTC rule: The FTC issued a rule banning most non-competes (2024), though legal challenges continue
- State legislation: States increasingly restrict non-competes, particularly for lower-wage workers
- Industry variations: Non-competes remain more enforceable in executive contracts and M&A contexts
Even where enforceable, courts scrutinize:
- Geographic scope (must be limited)
- Duration (typically 6-12 months maximum)
- Legitimate business interest (must protect trade secrets, customer relationships, or confidential information)
Negotiation Strategies for Employment Agreements
When reviewing employment agreements:
Prioritize your concerns: What's most important—IP ownership, mobility, compensation, or something else? Focus negotiation on critical issues.
Understand leverage: Your negotiating power depends on your role, scarcity of your skills, company size, and timing (pre-offer vs. post-offer).
Get it in writing: Verbal assurances about IP ownership or non-solicitation scope mean nothing if not in the contract.
Consider professional help: For senior roles or complex IP situations, attorney review ($500-2,000) is a worthwhile investment.
Document side projects: Before starting employment, create clear records of existing IP you want to protect.
Plan your exit: Even when starting, consider how agreement terms will affect your eventual departure.
Conclusion
Employment agreements shape your relationship with your employer far beyond salary and job title. The IP assignment clauses determine who owns what you create. The non-solicitation provisions constrain who you can work with after you leave. The moonlighting policies affect your ability to pursue side projects.
Understanding these provisions before signing—and negotiating unreasonable terms—protects your creative output, preserves your career options, and prevents disputes when employment eventually ends. The agreement you sign on your first day can significantly impact your professional life for years to come. Read it carefully.
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