Setting Up Employee Protections: NDAs, IP Assignment, and Non-Competes
Takeaway: For a synbio startup whose value is almost entirely intellectual property, having every team member sign a comprehensive confidentiality and IP assignment agreement isn't just good housekeeping—it's fundamental to survival.
Your team is your greatest asset. The brilliant scientists, engineers, and operators you bring on board will create the breakthroughs that define your company's future. But as you build this team, you are also creating potential points of failure. Every person you hire will be exposed to your company's most valuable secrets and will be paid to create new intellectual property.
To protect your company's core value, you must have every team member, from co-founder to intern, sign a robust set of agreements before they begin work. These terms are typically bundled into a single, critical document known as a Confidential Information and Invention Assignment Agreement (CIIAA). Let's break down the three key components.
1. The Non-Disclosure Agreement (NDA) or Confidentiality Clause
This is the foundational layer of protection. A confidentiality clause legally obligates an employee to keep your company's secrets secret.
Purpose: It prevents team members from sharing or using proprietary information for any purpose other than their work for your company. This duty continues even after their employment ends.
What it Covers: "Confidential Information" should be defined broadly to include not just the obvious scientific data and experimental results, but also business plans, investor lists, financial data, and even the details of failed experiments. In science, knowing what doesn't work is often just as valuable as knowing what does.
2. The Invention Assignment Agreement
This is arguably the most important clause for any deep tech or synbio startup. While the NDA protects what you already know, the invention assignment clause ensures you own what your team creates in the future.
Purpose: This clause states that any inventions, discoveries, ideas, or improvements an employee makes related to your company's business automatically and immediately belong to the company, not the individual employee who conceived of it.
Why it's Critical: Your company's patent portfolio is its primary asset. Investors will perform extensive due diligence to ensure that your company has a clean and undisputed title to all of its intellectual property. Without a signed invention assignment agreement from every contributor, you create a cloud over that title, potentially jeopardizing a financing round or acquisition. The agreement ensures that when an investor funds your company, they are funding the development of assets the company will actually own.
3. Non-Compete and Non-Solicit Clauses
These clauses are designed to protect your business when an employee leaves. However, they are legally nuanced and their enforceability varies dramatically by state.
Non-Compete Clause: This aims to prevent a departing employee from immediately going to work for a direct competitor for a specific period of time. Crucially, non-compete clauses are unenforceable in many key states, most notably California. Furthermore, the legal landscape is shifting rapidly, with the Federal Trade Commission (FTC) recently issuing a rule aiming to ban most non-competes nationwide, signaling a strong and growing trend against their enforceability. In states where they are permitted, they must be narrowly tailored in scope, duration, and geography to be upheld by a court.
Non-Solicitation Clause: This is often a more practical and enforceable alternative. A non-solicit prevents a former employee from actively poaching your employees (protecting your team) or your customers (protecting your business) for a set period. This protects the stability of your team and your commercial relationships.
These protections are the legal fences that safeguard your company's crown jewels. Requiring every new hire to sign a comprehensive CIIAA from day one is a non-negotiable aspect of good corporate hygiene. It demonstrates to investors that you are a professional organization serious about protecting the very assets they are funding.
Disclaimer: This post is for general informational purposes only and does not constitute legal, tax, or financial advice. Reading or relying on this content does not create an attorney–client relationship. Every startup’s situation is unique, and you should consult qualified legal or tax professionals before making decisions that may affect your business.