Once in a while, when I send an engagement letter, the prospective client wants to add confidentiality provisions to protect its trade secrets. The following is the explanation that I provide as to why such provisions – let alone a separate nondisclosure agreement (NDA) – are not required in an attorney’s engagement letter.
California Business and Professions Code Section 6068 specifies the fundamental obligations of an attorney. Subsection (e)(1) states that each attorney must “maintain inviolate the confidence, and at every peril to himself or herself to preserve the secrets, of his or her client.” (Emphasis added.) Attorneys in other states have similar obligations.
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In “Independent Contractors: How to Assign Copyrights“, I provided sample language for an independent contractor’s assignment of copyrights to a client. This post explains why the present assignment aspect of that language is critical.
Here (with emphasis added) is the relevant portion of the pivotal sentence:
Contractor hereby irrevocably assigns, transfers and conveys to Client all of its right, title and interest in and to the Deliverables, including complete, unconditional and worldwide ownership of all intellectual property rights in any draft or final version of the Deliverables.
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September 22nd, 2010
Dana
Detail from an illustration of a machine by Leonardo da Vinci
Your invention is so novel and non-obvious that you have applied for a patent. You have formed a legal entity (see Should I form an LLC or a corporation?) to turn the patent, once it issues, into a revenue stream. How do you assign the patent application to your new entity so your startup company can begin conducting business?
First, you need to prepare an Assignment Agreement. The most important point is that the agreement must assign not just the application, itself, but any patents that are issued with respect to the invention. Here is an example of operative assignment language adapted from Drafting Patent License Agreements by Brian G. Brunsvold and Dennis P. O’Reilly:
I hereby sell and assign to ABC Company the entire right, title and interest in and to the [name of invention] invented by me as described in U.S. patent application number __________, and any and all applications for patent and patents in any and all countries, including all divisions, continuations,reissues and extensions thereof, and all rights of priority resulting from the filing of said U.S. application.
Second, you need to record assignment of the application using the U.S. Patent and Trademark Office’s Electronic Patent Assignment System (EPAS).
Related post: How Can I Switch from a Sole Proprietorship to a Corporation?
Photo credit: Leonardo3
Dana H. Shultz, Attorney at Law +1 510 547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
September 21st, 2010
Dana
Title page from the California Civil Code enacted in 1872 and published in 1880
I recently prepared a Stock Redemption Agreement pursuant to which one of the founders would leave a corporation (my client). The agreement included a General Release by which the parties would release one another from all liability. The corporation’s CEO had a difficult time understanding the need for, and the significance of, a provision that cited a particular Section of the California Civil Code.
California Civil Code Section 1542 says:
A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.
This statute is a potential threat to any general release: At some point down the road, a party may be able to compromise the release – thwarting the parties’ original expectations – by saying “I would not have signed the release, had I known that!”
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September 15th, 2010
Dana
This post is based on (and is an edited version of) a Quora question and my answer. Q. How do you switch from a sole proprietorship to a corporation? You do, of course, want to keep all your intellectual property and brand and street cred and so on. Can you treat that as equity?
A. Yes, you can treat the assets of your sole proprietorship as the consideration for which your shares are issued. You need to create an agreement by which you (as an individual) assign those assets (including the intellectual property rights therein) to the corporation. This is, of course, a friendly transaction, so the assignment agreement can be simple – no need for endless pages of legal boilerplate to protect against litigation that never will occur.
Related post: How to Assign a Patent Application to Your Startup Company
Dana H. Shultz, Attorney at Law +1 510 547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
From time to time, clients ask me to review their employment offer letters. Here is a summary of what I believe every offer letter should convey to the prospective employee from the business and legal perspectives.
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Earlier this week, I was called by a professional services provider (“Chelsea”) who was interested in my services. Chelsea had presented a confidentiality agreement – which she had found somewhere – to a prospective client for a large project. The prospect marked up the agreement pretty heavily, in ways Chelsea did not understand, and she wanted to make sure that her legal interests were protected.
I asked Chelsea to forward the marked-up agreement to me so I could see how much work I would have to do to help her. Within one minute, I could see the source of the problem. I called Chelsea. An edited transcript of our conversation follows:
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BusyBox Logo
Erik Anderson developed certain software that he contributed to BusyBox, a compact set of embedded Linux utilities licensed under the GNU General Public License, Version 2 (the “GPL”). In October 2008, Anderson registered a copyright on the code that he contributed.
On September 2, 2009, Anderson’s counsel notified Westinghouse that it was infringing Anderson’s copyright because it was distributing BusyBox – both integrated into Westinghouse televisions and separately with other software – on terms that are more restrictive than the GPL. Westinghouse continued infringing Anderson’s copyright.
Anderson and the Software Freedom Conservancy brought suit against Westinghouse and 13 other defendants on December 14, 2009. Westinghouse initially mounted a defense, but stopped participating in the suit when it filed for bankruptcy.
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One of the great legal myths in some circles is that anyone can cancel any contract within a certain number of days of entering into it. That’s just not true – though you may have cancellation rights under certain circumstances if you are a consumer (rather than a business).
In California, those rights have been summarized by the Department of Consumer Affairs’ “Consumer Transactions with Statutory Contract Cancellation Rights: Legal Guide K-6“.
Some of the more interesting points made in the Guide:
- There is no cancellation period for automobile sales and leases.
- There is an indefinite cancellation period for dance studio services and pre-need funeral contracts.
- There is a 30-day cancellation period for mail or telephone sales orders that have not been filled.
The second portion of the Guide discusses general contract cancellation rights based on circumstances such as fraud, duress, undue influence, or illegality.
Dana H. Shultz, Attorney at Law +1 510 547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
A couple of weeks ago, I answered a question on Avvo about who can sign a contract on behalf of a corporation. This issue comes up from time to time, so I will discuss it at some length in this post.
Authorization to sign contracts is addressed in the corporation’s bylaws and / or in resolutions of the board of directors.
If specific authorizations are set forth in the bylaws, changing those authorizations can be a bit of a hassle, because the bylaws must be amended. As a result, I prefer to have specific authorizations established by the board, with the board’s powers being established by the bylaws. Here is a typical such bylaws provision:
Executing Corporate Contracts. Except as otherwise provided in the articles or in these bylaws, the board of directors by resolution may authorize any officer, officers, agent, or agents to enter into any contract or to execute any instrument in the name of and on behalf of the corporation. This authority may be general or it may be confined to one or more specific matters. No officer, agent, employee, or other person purporting to act on behalf of the corporation shall have any power or authority to bind the corporation in any way, to pledge the corporation’s credit, or to render the corporation liable for any purpose or in any amount, unless that person was acting with authority duly granted by the board of directors as provided in these bylaws, or unless an unauthorized act was later ratified by the corporation.
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Dana Shultz is a business-savvy lawyer located in Northern California's San Francisco Bay Area (in the East Bay, near Oakland) who has in-depth knowledge of law, business, technology, and the needs of startup and early-stage companies.