Confidentiality and Invention Assignment Agreement Overview
Sellers and purchasers regularly enter into confidentiality and/or invention assignment agreements, but what exactly are these agreements? A Confidentiality Agreement, or NDA, is a contract between at least two parties agreeing not to disclose information shared between the parties for a defined period. An Invention Assignment Agreement assigns the rights to whatever inventions an employee comes up with to the company. These are both important in employment contracts as employees often have access to information that is confidential to employers and the technology within a company is often the core of the business itself .
Most definitions of Invention Assignment Agreements state that "All employee’s inventions which (a) relate to the employers business or proposed business and (b) are conceived or made in any country during the period of time when employee is an employee of the employer (‘Employment Period’), are the property of the employer." Such agreements are common for employment contracts offered by tech deals, particularly those that use modern technologies.
Amazon’s Confidentiality Agreements
Among other things, the agreement prohibits the retention, use or disclosure of Amazon’s confidential information, which is defined broadly to include information relating to its business and employees that a reasonable person would understand to be confidential. This includes internal guidelines and reports, policies and procedures, customer lists, market strategies, and compensation structures. Section 4(c) of the agreement is phrased in a way that goes particularly far by focusing on whether the employee’s actions would constitute "misappropriation," a defined term in the agreement referring to someone obtaining another’s property by wrongful means when combined with an employment-related duty of nondisclosure or an obligation under law.
Another important provision is Section 5(a) of the agreement, which requires that the employee "promptly deliver" all Amazon property, including confidential information. This is a good opportunity to get a sense of what constitutes property in Amazon’s eyes, as listed in the agreement:
When combined with the discussion of what constitutes confidential information and the non-disclosure and non-use obligations in Sections 3 and 4, it is easy to see how broadly the agreement is written. It can impose both ongoing and future obligations on Amazon’s personnel. As a larger company that is a household name, Amazon has been clear about the protection of its proprietary information and intellectual property. For these reasons, the terms of the agreement with Amazon are likely to be particularly strict.
Amazon’s Invention Assignment Agreement
Amazon’s Invention Assignment Agreement establishes the rights and responsibilities of Amazon and its employees with respect to ideas that are invented, discovered, conceived, or reduced to practice during an employee’s employment. Invention assignment agreements like Amazon’s are very common for most technology companies and employers engaged in research and development.
Amazon’s Invention Assignment Agreement contains many provisions, including the following three key components:
Ownership and Assignment of Inventions: Amazon’s policy with respect to inventions is that "[substantial] employee resources and/or time on company business are invested in the creation of inventions in the ordinary course of business. Similarly, business and marketing plans, processes and ideas, customer and employee lists and company software and hardware are important assets of our business." The agreement further states that "[i]ndeed, Amazon’s very success has resulted from leveraging corporate and employee resources (financial, intellectual, and technical) to produce products and services. Inventions created on the job using these resources are company property and no employee may assign these inventions or the rights the law would recognize in them to anyone other than the company."
Company Policies Regarding Inventions During Employment: Employees are encouraged to report their inventions: "Amazon encourages all employees to submit any innovations that have not yet been disclosed to the company for review by a panel of innovators." The Invention Assignment Agreement also provides employees with knowledge of Amazon’s policy with regard to inventions that fall into each of the following categories: excluded inventions, assigned inventions, exempt inventions and inventions that have been previously assigned.
The Rights to Inventions Made by Amazon Employees Outside of Work: The Invention Assignment Agreement contains an annex that states that the following items are outside the scope of the existing Invention Assignment Agreement:
Legal Implications for Employees
Amazon’s Confidentiality and Invention Assignment Agreement ("CIA") imposes certain legal obligations on its employees who sign the Agreement. Section 2, Request for Invention Assignments obligates the employee to promptly disclose in writing to Amazon all inventions that the employee conceives or reduces to practice relating to the business of the Company. Once the employee has disclosed an invention, the Agreement provides in Section 6, Work Made for Hire that if the employee’s invention is patentable, the employee shall assist Amazon in obtaining such Client Invention IP rights and further shall execute formal assignment documents to fully and completely assign title to the invention to Amazon.
Section 8, No License Grant of the CIA provides that the Agreement does not grant to the employee any express or implied rights or licenses under any of Amazon’s rights, patents, copyrights, trademarks or other intellectual property rights. Thus, there is no implied license granted to an employee for any Intellectual Property that is owned, controlled or developed by Amazon.
Thus, in a situation where an employee may create an invention and subsequently leave Amazon to either work at a competitor or start-up a competing business, the employee must keep in mind that Section 13, Non-transferability and Surviving Provisions provision of the CIA does not permit the employee to transfer or allow others to use the confidential information. Further, the CIA will obligate the employee for the client’s trade secrets and information.
Comparison of Amazon’s Provisions with Industry Norms
Amazon’s Confidentiality and Invention Assignment Agreement is not an outlier in the industry. Although the precise terminology and language used by some high-tech employers differ from Amazon’s Confidentiality and Invention Assignment Agreement, the guidelines for what can be made the subject of a confidentiality obligation or assignment of invention obligation are very similar.
For example, many companies that are not as large as Amazon have adopted contract terms with the same or similar provisions as those used by Amazon. For example, Adobe’s Employee Complete Comprehensive Benefits Book notes that employees must return all Company property prior to termination and assigns any related intellectual property rights to Adobe ". . . as and when the same come into existence."
At Microsoft, Employees enter into a similar contract – the Microsoft Proprietary Information and Inventions Assignment Agreement – which assigns any and all Inventions created or improved during the time period of employment and imposes confidentiality obligations on employees . There are differences in the definition of certain terms, but the overall requirements for the return of property and the assignment of rights to inventions was similar to Amazon’s approach.
Other high-tech employers take a different approach. Google, for example, has an Employee Confidentiality Agreement. This agreement does not include a return of property provision, but it does have an assignment of rights to inventions provision. The agreement states that the employee agrees to assign "inventions" that might "relate to the business or current or anticipated research or development of Google, or arise from any work performed by Employee for Google."
As seen, there is widespread adoption of provisions that assign rights to inventions and place confidentiality restrictions on use of confidential information and technology among high-tech employers. None of the agreements analyzed above specifically address the recording of information.
Impact on Innovation and Inventions
The Confidentiality and Invention Assignment Agreement has both immediate and long term effects on the innovation at Amazon. First, the agreements require that all new Amazon employees agree to immediately assign to Amazon all their inventions. This is a mandatory assignment, not a voluntary agreement to license the employee’s invention to Amazon. As a practical matter, the process of deciding whether Amazon wants to use an employee’s invention is made invisible to the public and the employee as the recognition in public of a company’s interest in a third party’s idea or invention provides a strong indication that the company is going to exclude others from using that idea. This allocation of rights was not unknown to the parties but the new regime appears to have tipped the scales towards the corporation’s interests, rather than the employee’s interests.
In addition, Amazon requires its employees to keep all of their inventive efforts secret. Most importantly the secrecy requirement continues to apply after the employee leaves Amazon’s employ. Thus, Amazon obtains an additional period of confidentiality after an employee leaves employment during which that ex-employee cannot freely commercialize his or her invention. However, as with all contractual rights, this additional period of secrecy can be, and often is, offset by the employee’s right to assign the patent right created by or licensed in the employment agreement, to freely assign patent rights, to a new employer. Finally, it is to be noted that the employee can assign the patent rights to a new employer who was not involved in the invention for Amazon. The allocation of rights in the secrecy provision gives Amazon the right to preclude the inventor from discussing his or her work with other employees. In contrast, the assignment provision gives Amazon the right to exercise control over who may be permitted to work on a similar invention, or even more broadly, to discuss similar inventions with other employees. Amazon would argue that this latter point is necessary to permit its management to control the direction of the research and development efforts of its technical personnel. However, the prohibition on discussing the inventive work tends to inhibit and discourage creativity.
As with all contractual relationships, the assertion of contractual rights, if exercised in an aggressive manner, can discourage independent innovation by the threat of litigation.
Conclusion
In closing, we believe it is useful to have a clear understanding of the framework that Amazon employs when asking employees – current or prospective – to enter into an Amazon Confidentiality and Inventions Assignment Agreement. Whether you are trying to gauge whether you want to accept an offer from Amazon or if you are reading your Amazon agreement for the first time after you are already an employee , hopefully this post has helped you understand the possible scope of the agreement.
To summarize our key takeaways:
Many of the arguments the Company makes in its standard Amazon Confidentiality and Invention Assignment Agreement are common in non-compete agreements. Such cases must take into account not only whether a former employee is bound by a contract not to compete with their former employer, but whether the court should enforce it under the specifics circumstances.
Accordingly, if there are elements of your Amazon agreement that seem downright unreasonable under your circumstances you would be wise to consider whether they should be challenged.