Why Business Owners Need Confidentiality and Proprietary Rights Agreements

At Smith Jadin Johnson, we represent a wide variety of businesses. In doing so, our firm often discovers that clients have key employees that are aware of the business’s confidential information and yet no protections are in place for preserving that information. This creates the risk that a key employee may leave the business and take the business’s confidential information to its competitor.

We also find that businesses have employees who through their employment have developed important work products (such as; processes, strategies, and other intellectual property) that without an agreement in place, can remain the property of the employee when he or she decides to leave the business.

Both of these potential problems are easily alleviated by having your key employees enter into a Confidentiality and Proprietary Rights Agreement (“CPR Agreement”) with your company.

The CPR Agreement will first identify what information is confidential. To be most effective, this agreement should be properly tailored to your specific business and industry. Second, the CPR Agreement will restrict the employees use of the confidential information when dealing with third-parties and prohibit the employee from divulging that information to unauthorized persons, particularly subsequent employers.

The CPR Agreement will also provide that all work products developed by the employee while employed by the company remains the property of the company. This ensures that the employee, while working for the company and using company resources to develop new ideas, cannot leave the company and take the new idea to a competitor. Like the confidential information provision, what is defined as work product should be tailored to fit the employees work and the business industry.

Finally, for the CPR Agreement to be valid, the employee will require some additional consideration, which could take the form of a bonus, other perquisites, or a promotion in title and responsibilities.

At Smith Jadin Johnson, PLLC, we are here to answer all your questions regarding these key employee agreements and would be happy to assist you in implementing them at your workplace.

-Charles Austinson, Attorney @ Smith Jadin Johnson, PLLC