Greetings jens,

First of all, such IP contracts are extremely common; too common, if you ask me. What you've got in your post (including the update) are two different contracts. So I'll treat them differently.

Contract #1 is illegal in some states. It's unenforceable in many more. Here's why: When two parties sign a contract, they are (from the point of view of the law) both agreeing to give up something in exchange for something. If I go buy a car, I give up money and the dealer gives up the car, but I gain the car and the dealer gains the money. In your situation, the company is claiming that part of what they pay you is payment for all your IP you develop while employed with them. Since they pay you a flat rate regardless of hours, you are in the eyes of the law in some states always working for them.

There's a problem here, though. You're not actually getting paid anything extra (in reality) for giving all your IP to the company. Some states have had cases on this and some judges are getting really smart about it. I live in Washington State where the law has tended to favor the contractor/consultant in the past few years. In Washington State, it's technically legal for companies to give you contracts like contract #1 (just because the legislature hasn't gotten around to making it illegal yet), but case law sides with the employee over the company in suits regarding such contracts. Most companies are either just not aware that they can't enforce such annoying contracts, or they know it and continue the practice in the hopes that they can sucker employees who don't talk to lawyers.

My advice to anyone presented with a contract like contract #1 is to politely request a revision while reminding the company about your particular state's laws and recent case history. Often, most companies will back down. If they don't, then you have to evaluate the chances of the company taking you to court. Even if you win, going through proceedings is expensive and time consuming.

Now on to contract #2: This seems much more reasonable to me. In this contract, both parties are realistically giving up something in exchange for something else. The employee will be given access to the company's technology, knowledge base, and trade secrets. The employee is promising not to use that technology or knowledge to develop a discovery or development related to that technology or knowledge and use it outside of the company. Seems fair.

In fact, it's a little too fair. It favors the employee quite a bit. What happens if you develop a discovery or development while employed, sit on it, then use it outside the company after you leave the company? The way the statement is worded, you'd be legally in the clear. Ethically, I think you'd have some problems, though.

Honestly, I think you should accept contract #2. The company is willing to back down from an obviously lame original contract. That gives the company some ++ votes in my book.

gryphon
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