Intellectual Property And HR: Complexities, Challenges And Solutions For A Hybrid Workplace
How HR can address the complexities in protecting the IP of a company
Highlights:
- Establish and communicate transparent intellectual property ownership guidelines tailored for the hybrid work environment.
- Navigate complex legal requirements by aligning with evolving state laws when managing intellectual property in the hybrid work era.
- Strengthen IP protection through comprehensive training initiatives and foster heightened awareness among employees in response to tech-based threats and evolving work dynamics.
The world of work underwent a major transformation in 2020 when Covid-19 hit. We saw how companies, who for the most part of their existence were operating in-person, switched to a completely remote mode in a short span of time.
This was also the period when it dawned upon large corporations that work can happen anywhere, and employees need not always be within the four walls of an office. In a world where WFM (work from home) was derided, it soon became the last resort for sustenance.
The following months were a period of learning for human resources (HR), IT and management. Since then we have seen various other phenomena making their way into the work environment. From Great Resignation to Quiet Quitting, and mass layoff to talent recession, and an imminent economic recession, today we continue to witness how social, economic and political factors affect the world of work.
Today, three years down the line, after several variants of the Covid-19 virus, vaccines, and even a Nobel Prize, the world has finally learned to live with it. While there are still a few companies that operate in remote mode, most of them have adopted a hybrid mode of work.
Although highly debatable, reports argue that working from home affects the productivity of the employees in a negative way. Gathering everyone in a central location is good on several fronts, however, people’s priorities have changed since the pandemic days, and it is up to the employers to cater to this changing nature of work.
Thus, hybrid work emerges as a win-win for all - it empowers employees to avail of a remote option (which, as per, experts is important for work-life balance and helps in building a positive employee experience - two of the most oft-discussed topics in the subsequent years of the Covid pandemic) while meeting employer's requirement of an in-person work mode.
However, this brings us to an issue that has been a major problem for companies - classification and protection of intellectual property (IP) that is created while an employee works away from a company.
When it comes to the ownership of IPs, the general rule of thumb is anything created using a company’s property and during work hours belongs to a company. However, today, when the lines between personal and professional are blurry, this rule has come under the scanner.
"Prior to widespread hybrid work culture, employees would normally create deliverables on company property, using company servers and resources. A hybrid work culture changes that. There used to be a bright line between what was created at work and what was created at home, but now there is sometimes a blurry line because work is at home. This can create some confusion as to what is company property and what is individual property," said William Stroever, Partner, Chair of the Intellectual Property Department, and Marissa Mastroianni, Partner, Employment Department, Cole Schotz.
Bryn Goodman, Partner in the Labor & Employment Department at Fox Rothschild LLP. reiterates the same, and adds, "Typically inventions created during the course of employment are owned by the company, but because there is an increased blurring of work and home life, employees may argue that certain work was not done during the course of employment.
Moreover, "One of the side effects of this arrangement is that the boundaries of professional and personal life can blur, making it difficult to draw clear conclusions about who owns the rights to an employee’s creations," added Ed Matei, Legal Counsel, Peninsula Canada.
Eric Tate, Partner and Co-Chair of the Global Employment and Labor Group at Morrison Foerster added, "The risk of loss from employees who may have malintent increases because of the lack of control and physical ability to monitor employee conduct just due to not being in the workplace increases. At the same time, there may be greater actual privacy-based and other legal limitations on the right of employers to monitor or access employee conduct outside of the workplace."
Having said that, such complexities shouldn’t, however, prevent companies from extending work-from-anywhere rights to employees, the majority of whom would not misuse such rights.
“If all we cared about was protecting confidentiality, there would be no problem: you would just lock your information in a safe and throw away the key. But if we want to actually use confidential information, then we need to take it out of the safe and allow people to access it. That carries risk with it — particularly when your employees are located across the country and around the world,” further added Randy Kahnke, Partner, Faegre Drinker.
A former Apple employee, who allegedly stole the company's trade secret of autonomous vehicle technology in 2018 and fled to China, was recently indicted. The U.S. economy loses up to $600 billion annually due to IP thefts, reports the Associated Press. With the increasing usage and advancement of technology, intellectual property theft has become easier and more prevalent. This makes it even more essential to protect.
In this article, we've compiled opinions from IP experts and attorneys, who shed light upon the challenges companies face while protecting IP in a hybrid work environment, strategies HR departments must adopt to protect it amidst increasing data breaches and internal employee frauds, the emerging complexities in this space and how prepared are HR departments with countermeasures, how new technology is affecting IP protection and what can companies do to prevent untoward incidents.
IP Protection in a Hybrid Environment: Challenges
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Home office IP challengesNow that many employees are working from home and using their own personal devices to create deliverables, employees have more opportunity to assert that the work they develop is their personal property versus company intellectual property because they created the work off-site, during non-working hours, and without the use of company resources. This can make it harder for organizations to keep track of exactly what is being created. Finally, a hybrid work culture creates a situation where sensitive or proprietary information is being accessed outside of the controlled workplace. This can jeopardize company trade secrets and other confidential information.William Stroever, Partner, Chair of the Intellectual Property Department, Cole Schotz
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Local & state law complianceThe main difficulty is ensuring the protections that are implemented comply with the state or local law where the employee is working. Specifically, employers need to understand legal restrictions related to confidentiality, trade secrets, assignment of intellectual property, and monitoring of employees to enforce such policies.Bryn Goodman, Partner, Labor & Employment Department, Fox Rothschild LLP |
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Hybrid monitoring and rightsA hybrid workplace provides an unfortunate barrier to employers to protect their rights given a diminished ability to monitor employees from home as opposed to in the office. In other words, even if it is not ambiguous as to who owns the rights to a given creation, the employee will have an easier time hiding any profit or advantage gained from their creation from their employer.Ed Matei, Legal Counsel, Peninsula Canada |
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Off-duty conduct in CaliforniaIn California, for example, Labor Code Section 96(k) restricts the ability of employers to take adverse action against employees based on lawful off-duty conduct. When employees are working from home, that may increase the risk of employees claiming that any adverse action by an employer was based, at least in part, on conduct an employer may have observed in a home office or a personal device.Eric Tate, Partner and Co-Chair, Global Employment and Labor Group, Morrison Foerster |
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HR and IP Management: Legal Complexities
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Navigating remote work lawsLegal complexities arise from employment laws being tied to an employee’s location. Where employees are able to work remotely without disclosing their location, an employer may not be prepared to interact with the employee in compliance with the applicable employment laws. The case law on whether courts will subject employers to the law of the state where the employee is located has historically required employers to educate themselves on the law of the employee’s location. However, there is little case law addressing what law applies in a remote work environment where an employee has relocated without disclosing their new location to their employer. Bryn Goodman, Partner, Labor & Employment Department, Fox Rothschild LLP |
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Keeping pace with IP risksHR and legal professionals alike need to stay up-to-date with the latest schemes for data and intellectual property breaches to effectively mitigate the risk associated with these breaches. Further, HR and legal professionals should pay close attention to any applicable laws at the state level as this domain is becoming more regulated. For example, New York recently enacted a law that provides that any provision in an employment agreement requiring an employee to assign their rights in an invention to their employer shall not apply to inventions employees developed “entirely” on their own time without using the employer’s resources or trade secret information, with some exceptions. William Stroever, Partner, Chair of the Intellectual Property Department, Cole Schotz
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Trade secret protection challengesMany of the emerging legal complexities surrounding the protection of IP are reflected by the challenges of securing trade secrets and confidential information. There is a fundamental tension between extracting value from trade secrets, on the one hand, and protecting the confidentiality of such information, on the other hand. Fortunately, the law recognizes this tension and resolves it by allowing trade secret protection for information that has been protected by efforts that are “reasonable under the circumstances.” That’s a practical and flexible standard — and its application is evolving along with the complexities of our world and the threats to trade secrets. Randy Kahnke, Partner, Faegre Drinker |
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Challenges in IP ownership and enforcementDifficulties are typically on one of two axes: determining who owns the rights, and enforcement of those rights through various different means beginning with communication and extending to litigation as necessary. Employment and HR-focused legal professionals are typically well-positioned and trained to identify issues and take proactive steps such as preparing enforceable intellectual property clauses in employment contracts, which is typically the most important step. However, where the follow-up step of enforcement comes in and especially when litigatory steps are needed, these same bodies can coordinate with specialized intellectual property lawyers to create bespoke solutions to unique problems. Ed Matei, Legal Counsel, Peninsula Canada |
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Legal complexities in restrictive covenantsThe uncertainty regarding restrictive covenants in light of various actions by federal agencies is an emerging legal complexity, as restrictive covenants are one of the key tools employers have at their disposal to protect their trade secrets.In fact, a recent case (First Interstate Bancsystem, Inc. v. Hubert, 2022 U.S. Dist. LEXIS 127748, __ F. Supp. 3d __, 2022 WL 2763407 (July 15, 2022)) in which a court granted a group of defendants’ motion for summary dismissal of the plaintiff’s DTSA claim illustrates the importance of non-compete agreements as a trade secret theft mitigation measure. Finally, as to the remaining intimate knowledge of customers’ financial condition, circumstances, and business needs, First Interstate Bancsystem, Inc. (FIB) advances no evidence or argument about any disclosure or use of this intimate knowledge to solicit customers or for any other unfair competitive advantage for Defendants or Glacier. Certainly, customers know lender representatives have this intimate knowledge, and it is not unusual for customers in any sector to follow their friends and/or service providers, in part because of the providers’ knowledge of customer needs. It is unrealistic to expect customers to forget their service relationship with another, just as it is unrealistic to expect Defendants to forget the knowledge they gained with their former employer. Had FIB wished to preclude Defendants from leaving to compete by taking employment with another financial institution, FIB could have proposed an enforceable non-compete agreement. The Court will not recognize a nonexistent non-compete agreement under the guise of “remembered secrets.” Eric Tate, Partner and Co-Chair, Global Employment and Labor Group, Morrison Foerster |
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AI and Modern Tech-based Threats and Solutions to IP
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Enhancing IP protection awarenessThere are many technology-based solutions that are designed to address technology-based threats. In the HR world, we need to re-double our efforts to train employees about the significance of their role in protecting IP. Using real-world examples is an effective method of capturing an employee’s attention and helping them understand how their actions really do make a difference. Randy Kahnke, Partner, Faegre Drinker |
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Evolving IP safeguard strategiesTypical protections for intellectual property will no longer work without the adoption of work policies and agreements that contemplate the new technological landscape. Employers should revisit their non-disclosure agreements to clarify for employees what constitutes confidential information and trade secrets. These agreements should be tailored to specific state laws. Employers need to consistently enforce compliance with these written policies and remind employees of their obligations upon their departure. Bryn Goodman, Partner, Labor & Employment Department, Fox Rothschild LLP |
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Managing IP risks in techThe rapid advancement of new technologies has affected intellectual property security in a vast number of ways. The introduction of AI tools, for example, spread rapidly before users realized that information shared with AI tools (including trade secrets) may be deemed to be publicly disclosed and available to others. New e-commerce platforms have encouraged swarms of counterfeiters and copycats and created a whack-a-mole scenario of intellectual property enforcement. While these and other developments need to be dealt with individually, one of the primary common threads is that organizations need to educate themselves on the tools they are using. They also need to educate themselves on the tools their customers are using to find and purchase their goods and services. William Stroever, Partner, Chair of the Intellectual Property Department, Cole Schotz
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IP Protection: Can Employers Monitor Employees?
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Ownership verification and disclosureIn order to prove ownership, a company needs to be sure to provide proper disclosure regarding whether the company is monitoring the employee. For example, the state of New York passed legislation, effective May 7, 2022, requiring employers who engage in electronic monitoring of employee communication to provide prior written notice upon hiring to all employees of such monitoring. Employers must also post a notice of electronic monitoring in a conspicuous place that is readily available for viewing by the employees who are subject to electronic monitoring. Bryn Goodman, Partner, Labor & Employment Department, Fox Rothschild LLP |
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Provincial compliance for IP protectionHaving a reasonable level of digital surveillance that complies with provincial legislation is critical to safeguarding a company's intellectual property effectively. This provides the tools with which a company can enforce and monitor its intellectual property rights. Ed Matei, Legal Counsel, Peninsula Canada |
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Preparedness through expert trainingMaking a small investment in having experienced counsel conduct training with all of the key stakeholders so that if there is a trade secret or other information theft event, the company is ready to deal with it in real-time, as opposed to trying to figure out what to do, who decides what, in the midst of a crisis.Eric Tate, Partner and Co-Chair, Global Employment and Labor Group, Morrison Foerster |
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Critical Steps Employers Must Take to Protect IP in a Hybrid Workspace
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Training and confidentiality and intellectual property agreementsTraining is key. We recommend all employers conduct mandatory annual data breach prevention training for all employees. Effective training will allow employees to more easily identify data breach scams, as well as be better equipped to spot when one of their colleagues is potentially stealing or misusing company intellectual property. It’s also important for employers to enact information security policies that clearly delineate data and intellectual property protection procedures and who employees should speak to when they have any concerns about a data breach. Additionally, we recommend employers require their employees to sign confidentiality and intellectual property agreements, which will impose explicit contractual obligations upon employees regarding the protection of the company’s confidential information and ownership of intellectual property. William Stroever, Partner, Chair of the Intellectual Property Department, Cole Schotz
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Adopt virtual meeting security policies, two-factor authentication and trainingEmployers should adopt virtual meeting security policies, which require access codes or locked meeting rooms and a dashboard feature to allow everyone to see all attendees. The policies should discourage recording of meetings (and encrypt recordings) and issue warnings before sharing screens to avoid inadvertently sharing sensitive information. HR Departments should implement training for employees regarding these policies. Employers should also implement strong password policies with two-factor authentication and prohibit the use of risky applications. Employers should have the ability to terminate computer assets and accounts as soon as the employee departs or earlier if needed. Bryn Goodman, Partner, Labor & Employment Department, Fox Rothschild LLP |
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Employee buy-in and use of real-world examples to identify risks and fraudsThis is one area where employee buy-in can make a real difference. Effective strategies to protect IPs against these threats include training that makes the threats — and the attendant harm — accessible and palpable. Using real-world examples to identify the risks of data breaches and employee fraud can quickly move these threats from theory to reality. If employees understand that their actions can cause problems — or, better yet — solve them, they are more likely to understand the reasons for policies and then embrace them. Randy Kahnke, Partner, Faegre Drinker |
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Strong and enforceable agreementsLaw is conservative by its nature and resistant to rapid changes, as can be observed by the fact that many legal offices continue to have operational fax machines. While legislation is perpetually behind, employers can and do have tools at their disposal to try and enforce their intellectual property rights. As mentioned, having strong and enforceable agreements in place with their employees will effectively lay the groundwork for protecting employers against losing rights over intellectual property that should be theirs. The second part is taking the necessary steps to enforce those rights and not inadvertently relinquishing those rights through inaction. Ed Matei, Legal Counsel, Peninsula Canada |
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Data protection agreements in HRTo begin with, HR departments can double down on the basics. Make sure they have technology use, bring your own device (BYOD) (if applicable), investigation and search policies that reduce the reasonable expectation of privacy, Proprietary Information and Inventions Agreements (PIIAs), and other agreements that clearly describe employee confidentiality obligations, what is sensitive information and why, that are signed by employees, with copies retained by HR.Eric Tate, Partner and Co-Chair, Global Employment and Labor Group, Morrison Foerster |
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Intellectual Property Rights: HR Strategy to Protect Employees and Company
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Unambiguous agreement and acting on IP rightsThe most important step that an employer can take is having a clear and unambiguous agreement regarding intellectual property rights in the employment contract. The best enforcement mechanisms will be hampered by an inability to show that an employee’s creations do indeed belong to the employer. The next step is acting on its intellectual property rights as soon as possible. If, for example, it comes to an employer’s attention that an employee is personally benefiting from a creation that should belong to the company, failing to enforce those rights may amount to condoning the employee’s actions and thereby giving up the ability to pursue them later.Ed Matei, Legal Counsel, Peninsula Canada |
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Employee assignment agreements must comply with state/local lawEnsuring that an employer’s invention assignment agreement complies with the relevant state and local law is the first step towards safeguarding such information. HR departments should consider reviewing policies in place that could help prevent data breaches and internal employee fraud. Employers can also implement policies providing for incident response. Moreover, under the Defend Trade Secrets Act (DTSA), employers must take reasonable security measures to protect their trade secrets. As such, this is arguably required to enforce protections under the DTSA.Bryn Goodman, Partner, Labor & Employment Department, Fox Rothschild LLP |
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A strong IP protection schemeHR and legal professionals also need to make sure that intellectual property is being appropriately protected. Leaks and misappropriations may happen eventually, but a strong protection scheme can help minimize any damage when that does happen. William Stroever, Partner, Chair of the Intellectual Property Department, Cole Schotz
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Training for consistent complianceOne would be surprised how often when litigation arises, basic measures, such as PIIAs, investigation and search policies, etc., have not been consistently followed in private and public companies. Conduct periodic training on all of the above so employees are not just signing but actually understand what is expected of them, which makes it more likely that they will comply, or for bad actors, at least think twice before not doing so.Eric Tate, Partner and Co-Chair, Global Employment and Labor Group, Morrison Foerster |
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