Overview: The Art of Quitting Your Job

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					STARTUP 2009 LEGAL SERIES Topic #1 The Art of Quitting Your Job to Start a Company

The Art of Quitting Your Job
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Leaving your employer to start a business Restrictions applicable while still employed Common contractual restrictions applicable following termination of employment Trade secrets Assignment of inventions Relevant form documents

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Leaving your employer to start a business
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Be honest with your current employer about why you are leaving. Understand the terms of your employment agreement(s).
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Are you subject to a “non-moonlighting” clause? What is the scope of your assignment of inventions agreement? Are you subject to a non-compete agreement? Are you subject to a non-solicit?

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Also understand your non-contractual, fiduciary duties. Do not take tangible or intangible property of current employer. Do not solicit co-workers before you leave (and maybe even after you leave).
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Restrictions applicable while still employed
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Fiduciary duties
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Skilled employees owe a fiduciary “duty of loyalty” to their employer. Duty prevents employee from acting in a manner that is adverse to employer. Duties are imposed by law. Employee may make plans to compete, but cannot actually compete while still employed. Cannot solicit employees while still employed. Non-moonlighting clause preventing employee from pursuing any other business opportunities while employed. Non-solicitation while still employed. Non-compete while still employed.
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Common contractual provisions
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Common contractual restrictions applicable following termination of employment
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Non-solicit
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Prohibition against soliciting employees of former employer for a certain period after termination of employment. Prohibition against soliciting customers of former employer for certain period after termination of employment. Must be reasonably limited in scope, geography and duration. This is very fact specific. Must be designed to protect a legitimate interest (e.g., protection of IP or goodwill of business). Must be ancillary to some other agreement/relationship between employer and employee. Must not be contrary to public policy.

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Non-compete
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State laws differ greatly in the area of non-competes, so you must consider the jurisdiction.
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Trade secrets
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Trade Secret
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A trade secret is business information that is not generally known that provides the holder an advantage over competitors. Two factors when determining whether a trade secret exists: (1) the value of the information, and (2) the amount of effort made to maintain the secrecy of the information.

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Use and disclosure
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Most states have laws prohibiting unauthorized use and disclosure of trade secrets, regardless of whether there is a contract. Nonetheless, companies should have employees sign nondisclosure agreements prohibiting unauthorized use and disclosure of trade secrets.
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Assignment of inventions
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Intellectual property ownership at law
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Copyright law provides that the copyright to any work produced during the scope of employment belongs to employee. Patent law provides that patent to an invention of a person “hired to invent” belongs to the employer. Courts have interpreted this legal protection fairly narrowly.

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Assignment of invention agreements
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Best practice for companies to have employees sign contracts expressly assigning intellectual property to employer. The contract can prevent future disputes regarding the scope of intellectual property assignable to the employer, whether the work was produced during the scope of employment and whether the employee was hired to invent.
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Relevant Form Documents
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Proprietary Information and Invention Assignment Agreement (with non-compete) Proprietary Information and Invention Assignment Agreement (without non-compete)

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posted:8/28/2009
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