I work in a small, specific, applied software development niche. The industry I operate in is relatively small and everyone knows everyone. Recently myself and a colleague have been floating the idea of leaving our current company to develop a new software product based on an idea that has been discussed at my current work.

A customer who I know very well and work with closely approached me about developing a software feature which would be an extension to our current platform (which would represent one feature amongst many for our current piece of software). I, in turn, brought this to my company saying that I thought it would be commercially interesting and this was met with general approval. However, due to other priorities we haven't been able to work on it. This happened about 9 months ago. In the last two months, due to company instability my colleague and I have been thinking more seriously about taking this idea and turning it into its own product and starting our own company based on this. To further complicate matters, I am the only person at our current company with the skillset to develop a particular part of this feature/product. However, none of the development relies on proprietary algorithms and all the knowledge required to develop the functionality exists in the public domain and is part of published standards. We would be taking this knowledge and applying it in new scenario. No code has been written for this in my current employment however I have done research and determined that it is possible. I have sent emails to other members of staff confirming this.

My employer is an American company and as such has a very strict contract (which I have been told before is unenforceable in sections). My contract says words to the effect that "any idea or know-how conceived in the employment of the company is their property and should be disclosed immediately to the employer". It also states that any work I do at any time, whether inside or outside work hours is their property. Does this prevent me from starting the company and building a product based on this idea once I have terminated my current employment? What do I need to be careful of? If I start a company and am sued by my current company, are there legal insurance packages that would cover me? I don't mind giving it a go, getting a cease and desist, and calling it quits - I do mind losing all my savings because I have to pay their legal costs.

On a separate note, the aforementioned customer and I have a close relationship and I would like to make them my first customer. My current employment contract also contains a restricted covenant which prohibits me from communicating with customers who I have dealt with in the last 12 months of my employment for 3 months after the termination of my employment. My guess is that this is relatively enforceable and I would need to be careful here?

I'm really excited about this idea and hope I can make it work! Any advice gratefully received.

  • 3
    Find a lawyer; you have too much to lose asking randos on the net. – BlueDogRanch Jul 26 '19 at 16:47

Generally speaking, if a contract states that any intellectual property authored by you during the course of your employment belongs to your employer, then it does, and is no longer your intellectual property.

The first thing you should do, if you're serious about this idea, is see a solicitor, always.

Anyway, there are some points to consider:

  1. Is this "idea" something that is copyrightable? An idea isn't copyrightable, but written words, or drawings, music, something with form is copyrightable. For example, it doesn't matter if a person came up with the idea of an iPhone before Apple actually released, it.

So if your idea is something like a "super cool new social media platform to rival facebook, with this feature, or that feature", this is not intellectual property, just an idea, and therefore not something covered by any intellectual property clauses in a contract.

Once you've actually drawn up initial sketches, or designs, or written demo code, then you've created intellectual property. If this is the case, depending on what is written in the contract, this property may belong to you or your employer.

  1. In most ip clauses in employment contracts, the clause only covers intellectual property created during the course of employment, this means IP you create as part of your job. If you are a hobbyist artist, and draw something, even if you drew it in your office, if that drawing does not fall within the scope of your work, then it's not going to be covered by the clause. Again, seeing the clause will be required, and a lawyer should be sought at this point too.

  2. It is true that some terms of contracts are unenforceable, this is usually when the term is blatantly unfair (what is unfair is different depending on the context, so it's best to see a lawyer about this), or if it is too vague for there to be any reasonable meaning attached, or if it is rendered unenforceable by other means (such as the Unfair Contract Terms Act 1977), or if there is a variation of the contract. If you believe that some parts of your contract do not apply to you despite it being in the contract, see a solicitor for confirmation.

  3. Non solicitation / non competition clauses are quite normal in employment contracts. If the clause is as you described: That you may not, after leaving employment, serve clients who you met during employment, then you are legally bound by that clause. Generally no ifs or buts, but again, examination of the clause itself is required, and seeking a solicitor would be the best choice too. I have not personally come across a contract which said you may not communicate with a client you met on your job, most of them prevents you from selling similar services as your employers' to them. So for example, if the clause only prevents you from selling certain services (which your company provides) to them, it will not prevent you from doing other things with your client, such as entering a business enterprise with them, etc.

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  • While ideas do not have the legislative protection of a panettone or copyright they can still be trade secrets with disclosure/use restricted by contract and or general employment law. – Dale M Jul 26 '19 at 21:15
  • Whilst something to consider, I don't think in this particular situation (subject to further information) trade secrets are relevant, as the 3rd party client apparently already knows of the "idea". But for those interested The Trade Secrets (Enforcement, etc.) Regulations 2018 is the relevant statute on the subject – Shazamo Morebucks Jul 26 '19 at 21:36

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