By Dr Kalyan C. Kankanala
In recent times, there have been disagreements between many employees and their employers. Though very few of them receive publicity, instances of employers going after former employees are common. The disagreements that have arisen between journalist Arnab Goswami and The Times Group elucidate the problems that an employee may face from their erstwhile employer.
The past and the present
Known for his catchy phrase, ‘The nation wants to know’, Arnab Goswami was the star of the news channel Times Now not so long ago. However, towards the end of 2016, Goswami decided to quit the news channel. Soon after, in the first week of May 2017, Goswami launched his own television channel called ‘Republic TV’ from his venture, the ARG Outlier Media.
The Times Group decided to go after Goswami on multiple grounds including trademark, copyright and the alleged misuse and misappropriation of certain information that was collected during Goswami’s tenure with Times Now. To add to the list of Goswami’s woes, the National Broadcasters Association recently filed a complaint before the Telecom Regulatory Authority of India, alleging that the Republic TVs listing on cable networks under different genres amounts to the violation of interconnection regulations of the Authority.
Legal actions against employees may arise from contractual provisions, employment relationships, confidentiality obligations, and unauthorised intellectual property use. Grounds such as misappropriation, unjust enrichment, breach of trust, unlawful business interference, et al., may also be thrown in to add fuel to the ongoing battle.
Intellectual Property violation is one of the common avenues using which employers go after employees. Whether ignorantly or intentionally, employees turned entrepreneurs tend to use the intellectual property of their former employers, providing them with an opportunity to pursue legal action. Irrespective of the validity of a particular ground, any legal proceedings, or even its threat, can pose hurdles to the new entrepreneur at the startup stage.
Trademark enforcements at a glance
The first reported action against Goswami came in the form of a trademark enforcement. The Times Group objected to Goswamis use of the phrase, The Nation Wants to Know, claiming to own the trademark rights over the said expression, and avowed that Goswami’s use would amount to trademark infringement. With the intention of using the phrase for television programs and entertainment services, Goswami filed the trademark applications for the phrase in January 2017. Defying The Times Group’s objections, Goswami went ahead with the advertisements that were captioned, The Nation (Still) Wants to Know.
The practice of using trademarks of employers, or even trademarks similar to that of employers is not uncommon among employees turned entrepreneurs since they are generally in similar professions as their former employers. The obvious plan is to capitalise on the good will and identity of the employer by establishing consumer connection through a certain similarity. Such an act will most certainly give rise to trademark infringement and the passing off of liability. Further, the nexus of prior employment compounds the burden by adding malicious and dishonest adoption to the equation. Even if the employee coined the phrase and was responsible for making it famous, the trademark rights still lie with the employer either by a contract or by law except under certain circumstances.
It is therefore legally prudent for entrepreneurs to stay away from trademarks of their former employers while choosing a mark for their businesses. A trademark infringement decision against the entrepreneur at the startup stage may inflict financial losses, loss of credibility, and psychological distress. It must be borne in mind that addition of a word, removal of a letter, or any deceptive use of a trade mark can give rise to liability. Trademark risk cannot be mitigated by adopting a mark with merely a small change. From a long-term perspective, a distinctive trademark that differentiates an entrepreneurs business from their prior employer and their third parties can go a long way in protecting business interests of the startup and building financial value from trademarks.
Importance of patents and copyrights
For entrepreneurs driven by technology and knowledge, patent risks may be higher than risks from any other IP of former employers. An entrepreneur providing products or services similar to that of the employer, is under higher patent risk, than one who offers services or products different from those of the prior employer. While improving previously patented technology/inventions, appropriate care must be exercised to avoid patent infringement. Performing patentability or a Freedom To Operate (FTO) analysis at the right time and working with a patent attorney to mitigate risks can help in avoiding problems from former employers while creating a new business. Other than external sources, internal sources such as employment agreement obligations and other contractual obligations during exit, form critical inputs for patent risk assessment.
Infringement of copyrights gives rise to both civil and criminal liability. Entrepreneurs often end up copying website content, brochures and photographs from their employers, without a second thought. Even if these were created by the entrepreneur while working as an employee, this could give rise to copyright infringement and entrepreneurs would do better to abstain from doing so.
Over the years, several promising startups have had to shut down because of copied content. Hence, it is not only prudent but also extremely beneficial to the credibility of a business to create original content and materials for the startup. However, copying facts and public domain works, and the fair use of copyrighted works of former employers, is exempt from copyright infringementand a copyright attorney will be able to help an entrepreneur determine what can and cannot be used.
How confidential is information at work?
Obligations in employment contracts as well as the law, require employees turned entrepreneurs to maintain secrecy and confidentiality of trade secrets and confidential information of prior employers. Confidential information and trade secrets may include information ranging from business, technical and financial data, to client lists, processes, and future ideas. Like copyrights, confidential information and trade secret misappropriation may give rise to both civil and criminal liability. The misappropriation of confidential information not only gives rise to legal liability but can also kill the startup’s credibility by branding it as an untrustworthy, and an unethical organisation.
Entrepreneurs must stay away from using any confidential information and trade secrets of former employers. Though it is difficult to produce evidence to prove confidential information misappropriation, the entrepreneur may be held liable by a Court based on circumstantial evidence. Entrepreneurs are free to use technical knowledge gained during employment and may seek attorney advice to identify what they can and cannot use clearly.
Non-Compete Clauses
Most employment contracts have non-compete clauses which prohibit employees from starting a competing business while working with the company, and also for a period after quitting. The validity of such clauses has repeatedly been questioned before Courts, and the extent of validity of such clauses is still ambiguous. At a general level, reasonable non-compete clauses with limited restrictions, which do not unduly block employment opportunities are considered to be valid and enforceable. The higher the designation and remuneration of the employee, the greater is the enforceability of such clauses.
Entrepreneurs must analyse non-compete clauses in their employment agreements to identify and strategize their startup activities around restrictions in the said clauses. In addition to advising with respect to risks from the provisions, the attorney will also be able to advise if the clauses are valid/enforceable in the first place.
Further restrictions on employees
Non-Solicitation Clauses restrict employees from hiring their colleagues after leaving the company. Though these clauses do not normally pose serious risks, they may prove to be problematic when combined with other violations. If a non-solicitation clause exists in the employment agreement, entrepreneurs must understand its scope and extent before hiring employees from their former employer.
An entrepreneurial venture is fraught with several inherent risks and the last thing that an entrepreneur would want is legal action from their previous employer. Taking steps to mitigate the risks from former employers can go a long way in reducing the probability of failure. However, a disgruntled employer may initiate action irrespective of the measures and employees turned entrepreneurs must always be prepared to handle them strategically.
The article was originally published on Intellepedia, BananaIPs IP News Centre
Featured Image Credits: Business Standard