Due primarily to monetary constraints, many founders maintain a separate job (i.e., “day job”) during the initial stages of their startup. This is usually the case whether or not the startup is incorporated, and is a common way for the co-founders to self-fund or otherwise hedge their bet prior to a startup’s seed round of financing. However, many startup founders overlook the fact that a certain document they may have signed at their day job can hold great importance with respect to their startup’s viability. Prior to launching a startup, each co-founder should review their current employer invention assignment to see if the IP they are developing for their startup could possibly be claimed by their current employer.
Employer Invention Assignments do not come with all jobs
If in the technology field, a co-founder’s day job likely requires their employees to sign an invention assignment in conjunction with or as part of their employment agreement. In a nutshell, the employer invention assignment defines parameters that an employee assigns intellectual property to its employer. (And for what it’s worth, a startup should have such an invention assignment with each of their co-founders.) Thus, if your day job isn’t related to the development of technology or your employee is not a technology company, you may not have signed and invention assignment.
Check the Scope of Your Employer Invention Assignment
Some employer invention assignments are broad in scope while others are very narrow in scope. Regardless of what the contract says, you should note that certain jurisdictions like California place boundaries on how broad employers can make their employer invention assignment. For what it’s worth, the general trend is that employer invention assignments are somewhat fair and do not try to assign every thought you have ever had over the the company (although we’ve seen a few companies try).
The broader the scope of the invention assignment, the greater the potential problem for the founder and his or her startup, as the founder may be unknowingly assigning intellectual property to the day job rather than the startup. If the startup or the technology involved is in any way related to the day job or if the founder is using the equipment of the day job while working on the startup, the risk of such an assignment increases.
Thus, it is very important that startup founders who choose to maintain a day job first locate their employment contract and then look closely at applicable invention assignment. Determine under what parameters intellectual property is being assigned to the day job. Founders should at least be aware of the scope of any applicable invention assignment located in their current employer invention assignment agreement – even if their startup is a completely different product or service relative to their day job. And if you are not sure, it’s not out of bounds to call the company and speak to someone in human resources in order to determine what the scope of your employer invention assignment.