Employment Law Practical Guide: Protecting Your Business Through Employment Contracts and IP Clauses

Written by Luke Musto, Associate

In today’s technology-driven and resource-focused industries, intellectual property (IP) is a cornerstone of competitive advantage and will often be the most valuable asset belonging to a company. For businesses in tech, mining, and the Mining Equipment, Technology, and Services (METS) sectors, IP can include everything from proprietary software and patented mining processes to specialised machinery and innovative solutions tailored to industry challenges. Protecting these valuable assets is paramount, especially when they are closely tied to the work of employees. To safeguard your business’s IP, it’s crucial to have well-drafted employment contracts with clear IP clauses that specifically address the unique challenges of these sectors. This ensures that the innovations driving your business remain securely within your control. In today’s post, we will give an overview of the importance of IP clauses in employment contracts and a practical guide on how to protect your business.

Why are IP clauses in employment contracts so important?

Intellectual property created by employees can become a contentious issue if not addressed properly. Without clear contractual terms, there can be disputes over who owns the IP, especially when it involves innovations developed during employment but outside the scope of regular duties. To avoid such conflicts, it’s essential to include well-drafted IP clauses in employment contracts.

Key Components of IP Clauses

1. Assignment of IP Rights: The cornerstone of any IP clause is the assignment of IP rights to the employer. This means that any IP created by an employee in the course of their employment automatically becomes the property of the employer. The clause should specify that all creations are owned by the company, whether that be patentable inventions, copyrighted works, or trade secrets.
2. Scope of Employment: To strengthen the assignment clause, define what constitutes the “course of employment.” This should include any activities related to the employee’s duties, even if conducted outside regular working hours or off-site. Broadening the scope ensures that any IP created using company resources or knowledge is covered.
3. Moral Rights: In some jurisdictions, employees may retain moral rights over their creations, such as the right to be credited as the author or to object to derogatory treatment of their work. Employers can include clauses where employees waive these rights, but this must be handled delicately, balancing legal enforceability and employee goodwill.
4. Confidentiality Obligations: Protecting IP goes hand-in-hand with maintaining confidentiality. Clauses should clearly state that employees must keep any confidential information, including IP-related knowledge, secure both during and after their employment. Non-disclosure agreements (NDAs) are often used alongside these clauses for added protection.
5. Non-Compete and Non-Solicitation Clauses: While non-compete clauses must be reasonable in duration and geographic scope to be enforceable, they can be vital in preventing employees from using your IP to benefit a competitor. Similarly, non-solicitation clauses can stop employees from poaching clients or other employees, which indirectly protects IP by maintaining the team and client relationships that helped create it.
6. Post-Employment IP Obligations: Employment contracts should clarify that any IP developed by the employee while at the company remains the employer’s property even after the employee leaves. This is especially important in industries where innovation and product development are ongoing.
7. Dispute resolution: A well-crafted dispute resolution clause provides a pre-agreed mechanism for resolving conflicts that might arise during or after the employment relationship.

Protecting IP Through Employment Policies

In addition to contract clauses, employers should implement comprehensive IP protection policies. Regular training on IP rights and obligations, clear guidelines on the use of company resources, and a culture of respect for confidentiality are all critical components of a robust IP protection strategy.

Handling IP Disputes

Even with meticulously drafted contracts, IP disputes can still arise, often due to ambiguities or differing interpretations. To mitigate the risks and costs, it’s essential to include a dispute resolution clause in employment contracts. This ensures that conflicts are resolved efficiently and cost-effectively, often through mediation or arbitration. This offers a faster, private, and less adversarial solution than litigation. By choosing arbitration, employers benefit from having disputes decided by experts in intellectual property law, while maintaining confidentiality and preserving professional relationships. Moreover, arbitration awards are generally easier to enforce internationally, providing a strategic advantage in a global business environment. Including such a clause helps protect both the employer’s and employee’s interests, minimising disruptions and focusing resources on innovation rather than legal battles.

Conclusion

Intellectual property is a key asset that needs to be protected at all costs. By including robust IP clauses in employment contracts, employers can ensure that the IP generated by their employees stays within the company. Ensuring that your employment contracts are robust and comprehensive is crucial to protecting your intellectual property and avoiding costly disputes. However, the complexities of IP law and employment regulations mean that even small oversights can lead to significant issues down the road. That’s why it’s vital to have legal experts review and draft your employment contracts. Experienced legal professionals can help tailor IP clauses to your specific business needs, ensuring that all potential risks are addressed and that the contracts are enforceable. By investing in expert legal guidance upfront, you can safeguard your business’s assets, reduce the likelihood of disputes, and ensure that your contracts stand up to scrutiny. This will allow you to focus on what matters most—growing your business.

Harris Gomez Group METS Lawyers ® opened its doors in 1997 as an Australian legal and commercial firm. In 2001, we expanded our practice to the international market with the establishment of our office in Santiago, Chile. This international expansion meant that as an English speaking law firm we could provide an essential bridge for Australian companies with interests and activities in Latin America, and to provide legal advice in Chile, Peru and the rest of Latin America. In opening this office, HGG became the first Australian law firm with an office in Latin America.

As Legal and Commercial Advisors, we partner with innovative businesses in resources, technology and sustainability by providing strategy, legal and corporate services. Our goal is to see innovative businesses establish and thrive in Latin America and Australia. We are proud members of Austmine and the Australia Latin American Business Council.