Worried about intellectual property rights when hiring globally? Learn what you can do to protect your IP when hiring employees and contractors.
Thank you to our friends at Deel for sharing their knowledge on this important topic for startups.
Despite many advantages, global hiring exposes employers to several risks regarding company information. With company data stored in clouds and shared among global teams, ensuring data security and intellectual property (IP) protection is a challenge.
But it’s mission-critical to protect your IP, maintain your reputation, and avoid legal battles, even if you hire worldwide. Keep reading to learn more about IP and how to keep it safe with a global team.
What is Intellectual Property (IP)
Intellectual property (IP) refers to any creation of your mind, such as an invention, ideas, or product development. Although intangible, these concepts are considered tradable, so they count as legal property.
In a business setting, intellectual property includes any intangible asset owned and protected by an individual or an organization that third parties can’t use or implement without the owner’s consent.
Intellectual property protection matters for companies of all sizes since their products and services make them stand out from the competition and attract potential customers or investors.
Different types of IP include:
- Trade secrets
The challenges of IP in a global context
IP protection is more challenging in distributed teams than in companies that only hire locally. There are several reasons why.
Company data is more exposed
Remote companies without physical offices need to store and share their data in the cloud. Digital data storage and transfer make confidential company information vulnerable to hackers, phishers, and other unauthorized parties. The risk is even higher if employees use personal devices to access company data.
Local laws regarding IP may vary
In most countries, employers keep IP rights unless their contract with an employee states otherwise. That means that anything an employee creates while employed by a company belongs to that company. However, in some countries, independent contractors have IP rights, representing an issue for their clients. In the Netherlands, for example, employees may register a trademark in their name even if they create it during employment.
Companies risk failing an initial public offering (IPO) audit
Companies that fail to protect their IP may fail an IP audit organized for a particular purpose, such as a liquidity event like IPO. IPO audits mainly investigate controls over financial reporting, but auditors also ensure the company adequately protects intellectual property.
How to protect IP in global teams: 5 tips
You can protect your company IP by setting up proactive systems, such as the tips below.
Register patents, copyrights, and trademarks as soon as possible
In many countries, like the US, you have the right to copyright protection as soon as you create the work. But you should register your IP as soon as possible.
Depending on the type of IP you want to protect, you can register with the US Patent and Trademark Office or the US Copyright Office. The sooner you register, the easier it is to defend a copyright infringement.
Sign NDAs with employees, contractors, and partners
You shouldn’t rely on copyright automatically belonging to you. The best practice is to sign non-disclosure agreements (NDAs) with your employees, contractors, and partners to ensure your information remains confidential. NDAs add a layer of protection to work that’s not eligible for protection under copyright or patent laws. We encourage you to seek legal review on any NDAs to ensure enforceability.
Create remote work policies
If you recently transitioned to remote work, update your company policy with guidelines regarding remote work sooner rather than later. These guidelines should describe which distributed employees can access company data and equipment, when, and how.
Establish security audit protocols
Periodic internal audits of your data security processes will help you identify and improve your system’s potential threats and weaknesses. Hackers regularly develop new ways to hack into encrypted data and gain access to sensitive information. Continually test your firewalls, encryptions, and other protections, and update them as necessary.
Educate your employees on IP protection
Educate your employees on the importance of IP protection and cybersecurity protocols you require. If your team is aware of potential exposure risks, they’ll be careful when using unknown networks or installing unauthorized apps on their devices. At the same time, they’ll know the rules regarding ownership of their work as soon as they sign a contract and the NDA with you.
How Deel helps you protect your IP
Hiring global employees through Deel provides you with access to their employer of record features. One of these features is access to locally-owned entities and locally-compliant contracts that seamlessly transfer IP ownership to you whenever you hire a new person.
Direct vs. indirect IP assignment
Generally, when you hire people worldwide through an EOR, you have two options regarding IP assignment: direct and indirect.
Direct IP assignment means you enter into a direct agreement around IP with the employee. Indirect IP assignment means the employee assigns IP to the EOR in their employment agreement, and then the EOR assigns the IP to their client in their Master Services Agreement (MSA).
Deel’s general recommendation is to use Deel’s (indirect) IP assignment instead of Proprietary Information and Invention Assignment (PIIA) or Confidential Information and Invention Assignment (CIIA) agreements.
There are several benefits to indirect IP assignment:
- It lowers the risk around permanent establishment and joint employment as direct agreements between employees and clients are avoided as much as possible.
- It enables Deel to pursue the IP claims locally to protect the client’s IP ownership, if necessary.
Get your IP through EOR when hiring employees
If you hire full-time employees through Deel’s EOR model, Deel is their legal employer, so Deel can transfer the IP ownership to you. This happens in two steps, in which Deel acts as a middleman:
- Deel hires the employee on your behalf and the employee lawfully assigns any IP created during the contract to Deel as their formal employer.
- Deel receives the IP rights and assigns them automatically to you, the client, without the need to provide any additional documentation, with a few exceptions (like France).
This protocol allows Deel to ensure IP assignment enforceability worldwide, regardless of the local IP laws, which vary significantly by country. Deel’s tailored contracts account for regional differences through the two-step IP assignment, so no matter where you hire, you get the IP ownership that’s rightfully yours. When this protocol is followed, both Deel and the client company maintain operational compliance.
Another role that Deel assumes in IP ownership transfer is risk mitigation for the client. If the IP is assigned directly from the employee to the client, this act can be an indicator of a direct employment relationship, which puts the client at risk. To avoid the employee claiming to be a direct employee of the client, Deel uses the two-step approach to the IP transfer and keeps the client company fully protected while ensuring total compliance with local employment and IP laws.
Own your IP even when hiring contractors
Even if you hire contractors, Deel provides compliant contract templates that enable you to own any contractor-created IP. Deel tailors each contract to account for any regional legal differences, always with a strong IP clause protecting you no matter your contractor’s location.
Protect your IP when hiring globally with Deel
With Deel, you can have peace of mind knowing that your agreements are up-to-date with any changes in IP regulations in every country. Deel’s legal partners mitigate any risks against potential lawsuits whether you hire contractors or employees. If you’re preparing for an audit, you don’t have to worry about compliance as Deel can ensure your contracts align with local laws around the globe.
Disclaimer: This article is provided for informational purposes and should not be considered legal advice. Consult a legal professional for more information.