Confidential Information and Inventions Assignment Agreements (CIIAAs), also known as Proprietary Information and Inventions Agreements (PIIAs), serve to transfer the rights of intellectual property and other proprietary information developed by employees during their employment to the employer. Startups typically require employees, consultants, or contractors to sign CIIAAs when they start working with the company, especially in industries where intellectual property is a critical asset, like technology or biotech. The CIIAA serves several essential purposes:
- Protection of Proprietary Information: The agreement requires that the individual keep confidential all proprietary information they learn during their time with the startup. "Proprietary Information" generally encompasses trade secrets, business plans, customer lists, technical data, product plans, strategies, and other non-public information that the company considers valuable and confidential.
- Assignment of Inventions: The agreement usually states that any inventions, designs, works, products, or information developed during the individual's time with the startup (and for a specified period after leaving) that relate to the company's business are the property of the company. This assignment ensures that the company owns the rights to the work product of its employees and consultants.
- Return of Company Materials: Upon ending their relationship with the startup, individuals typically are required to return any materials, documents, or tools that belong to the company.
- Obligation to Disclose: Many CIIAAs also obligate the signer to disclose promptly any inventions or creations they make during their time at the company to determine ownership rights.
- No Conflict with Prior Obligations: The individual often has to affirm that their work for the company does not and will not breach any agreements with any previous employers or other parties.
A CIIAA is essential for startups to protect their intellectual property and ensure that the value created by employees or contractors during their tenure remains with the company. Startups that fail to use these consistently can find themselves in deep trouble during due diligence with investors or potential acquirers, as these parties will expect to be investing in or acquiring a company that owns its core IP. Lack of sufficient documentation to prove this can be fatal to a startup's chances to raise money or be acquired.