Trade secrets can be the most vital aspects of an organization’s edge in the market, but it can be difficult to safeguard these from employees who leave to work for another company or start their own. Noncompete agreements can provide some measure of protection. However, the focus of the state’s Business and Commerce Code is to prevent the monopoly of trade and unfair competition, and Texas courts may rule in favor of the employees when these agreements end in litigation.
U.S. copyright law outlines the rules governing ownership of intellectual property and can be helpful in defending the validity of a noncompete agreement. Works prepared during the course of employment are owned by the employer rather than the creator as long as the creation of the works occurred within the scope of the job duties. This is known as a “work made for hire.” The employer-employee relationship is critical in determining the ownership, though, and courts often consider the following questions:
Does the employer produce this type of work?
Does the employer control how and where the work is done, and provide the means for creation?
Does the employer set the employee’s schedule for the work, assign other job duties, set the payment for the work and withhold tax from it?
These are not all-inclusive, but they are helpful in characterizing the nature of the employment. The lack of a standard for defining the employment relationship can put the employer at risk in an intellectual property dispute. In registering for copyrights, it is important for the employer to be named as the author of the work on the application.