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up vote 3 down vote favorite

Disclaimer: I'm not seeking legal advice here, I will naturally seek actual legal advice before I make any decisions. I'd just like to know the lay of the land, if anyone can help.

I'm in the following position:

I'm in the UK. A year ago, I was working as a freelancer developer. I built a project for a client in NC, in the US, they paid, they mentioned wanting to give me an equity stake in 'company A' to continue updating the project in future, but nothing was formalized.

A few months later, I get a full time job at 'company B', a major software company in London. I sign a contract which has a clause stating that all inventions, intellectual property I create while in the employ of the 'company B', is owned by them. Yeah, one of those annoying clauses. It's the first full time job I've had since graduating, and honestly I didn't understand the breadth of the clause when I signed it. My own stupid fault.

Which brings us to now. My previous freelance client wants me to sign an equity agreement with 'company A', and spend time on weekends helping to grow the application as a side-project. I'm all for this: it's an interesting thing to do as a side project, I have a good relationship with the owner, and there's the potential that given a few years it could really take off.

The hitch: I'm worried about this intellectual property clause in my current employment contract. Can anybody tell me if this will bite me? (for the UK, but any anecdotes from other jurisdictions are welcome):

  • What if I'm a minority partner, and I sign away the intellectual property rights for all work done to 'company A'?

  • What if I come on board as a consultant, to begin with, with no equity stake while I'm still at 'company B', and again I sign away all intellectual property rights?

In either of these situations, can I 'sign away' whatever intellectual property rights I might have had to 'company A', in order to protect them from being claimed by 'company B'?

In my view, this surely ought to be possible, since it's not uncommon for people to do consulting work on the side of their software engineering jobs, and in such cases I've never heard of disputes over intellectual property.

Advice, guidance, anecdotes, thoughts would be appreciated!

Side note: there isn't anything in my employment contract which states that I can't do work on the side, only that I can't work for competing companies. Neither of these companies are competing, so that won't be an issue.

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3 Answers

up vote 4 down vote

If you have an equity stake in Company A before you joined Company B, there's unlikely to be a problem there as long as they're not competitors. You say they're not, so that's good. Whatever you earned, owned, created before Company B stays with its owners (you, Company A, whatever) unless the owner chooses otherwise.

If the Company B clause says "we own everything you do" (paraphrased), then technically they should own the results of whatever you do for Company A (or anyone else) after you signed the agreement.

There are a few options you can take here:

  1. Don't address the issue and hope B doesn't notice. Realistically, unless you make major money with Company A, move into a similar space, or it starts taking away from your regular job, even if Company B notices, they won't care.
  2. Address it with B and try to get an exemption. In that regard though, telling your boss "hey, I'm working on this" isn't probably enough technically. The ideal would be to get the corporate counsel or someone of the CxO level to sign something that says "as long as it's not competing or related to Elenesski's work on the job, he can do whatever he wants."

I would not recommend Option 1 but most of the time it would probably work. It's just not "safe."

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Option 2 is the correct choice here. You need to make your employer aware of your situation, guarantee that your side work will have zero impact on your day job (may help even, if you learn new stuff), and make sure you get in writing (ideally paper, not email) that your employer is aware of what you are up to and agrees to it. In a perfect world, the clause is unenforceable in court so you can ignore it. In reality, they can still fire you over it and you don't need that stress. Keep everything open and friendly, explain you have the existing relationship and document all conversations. – Steve Jones Jan 17 at 8:30
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@SteveJones I agree. I work for a company that has the same clause. They modified it for me to say that as long as it's not something I do based on knowledge of a product or idea at the company I work for (including our clients, etc.), I do it on my time, and off company property, and not with company property (i.e. company purchased VS license) than I retain the rights to do as I please. If the company likes it they even require in it that they purchase a license for it! It's all about being up front and honest. – Randy E Jan 17 at 21:19
up vote 2 down vote

In Canada, anyway, the work you perform for two clients are mutually exclusive unless there is a conflict of interest where both companies in competition with each other (in your case, this isn't an issue) ... or, you're dumb enough to work on one project while billing to another; an ethical issue.

The best call actually is to contact your immediate supervisor or HR in your UK company and give them the details. By being forward about the situation, and wondering if there is a conflict of interest or possible ethics issue, your UK company can advise you. I expect they will say there is no issue, but get it in writing.

I have multiple clients and multiple potential sources for conflicts, and I have always advised any employer of any and all potential conflicts of interest even if I don't believe they are at issue. The reason being is that I'm not privy to all the business dealings of a client, and may not realize there is even a conflict. Your company should be the ones who are made aware as soon as you join to avoid this kind of thing. I've never had an issue in 25 years in the industry.

The fact that you take their IP seriously to bring this to their attention makes you look good too. Show's you're ethical in nature. It's better to be forward and open about this to avoid conflicts ... you don't want them finding out by accident. That's bad.

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up vote 1 down vote

Factors that may determine if company B has claim to your intellectual property include whether:

  • you worked on the invention during working hours;
  • the invention arises out of your duties at the company;
  • you used the company's equipment or tools;
  • the invention is in the field of your employment; and
  • you used any confidential information from the company.

Take another look at that employment agreement. I'll bet it does not say they own everything you do. There should be some limiting language about inventions, works of art, etc. that you create in connection with your employment.

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