What are Proprietary Information and Inventions Agreements (PIIAs)?
Takeaway: PIIAs are very important documents that you should have every service provider sign before they start work. PIIAs ensure that the company owns all of the IP generated by its service providers. If you don’t have someone sign a PIIA, you may end up having to pay that person cash to assign the IP when you are getting acquired down the road.
For technology startups, intellectual property (IP) is often one of the most valuable assets they have. Proprietary information and inventions agreements (PIIAs) are legal documents that help startups ensure that (i) all IP that their employees and contractors produce is owned by the company and (ii) their employees and contractors do not disclose or misuse confidential information or trade secrets.
PIIAs outline terms and conditions of the employee's or contractor's employment or engagement with the company. The agreement typically includes clauses that address the ownership of intellectual property, confidentiality obligations, and restrictions on the use and disclosure of confidential information.
PIIAs are beneficial for startups for two important reasons:
They help ensure that the startup maintains ownership of its IP. By clearly outlining the ownership of intellectual property, startups can prevent disputes over who owns a particular invention or technology. This can be particularly important if an employee or contractor leaves the company and tries to take the startup's IP with them or if the startup decides to be acquired and the acquirer wants to buy the startup’s IP.
PIIAs can help startups protect their confidential information and trade secrets. By requiring employees and contractors to sign a PIIA, startups can establish clear guidelines for the use and disclosure of confidential information. This can help prevent employees from sharing sensitive information with competitors or using confidential information to compete against the startup.
Startups should have every employee and contractor sign a PIIA before they start work for the company. Failing to have an employee or consultant sign a PIIA before they start work often results in having to go back to that person later (e.g., in an acquisition) and pay them to sign one.
Overall, PIIAs are a valuable tool for startups that want to protect their intellectual property and create a strong foundation for long-term success. By using PIIAs, startups can safeguard their confidential information and prevent disputes over ownership of intellectual property.