News From Our Own Vermont Backyard: Proposed Legislation On Password Privacy And Ownership Of Inventions

by Downs Rachlin Martin PLLC

Last month the Vermont Legislature kicked off its 2013-2014 Legislative Session, and already a couple of bills have our attention here at the IP Stone.

Social Network Privacy

First up is S.7, titled “An act relating to social networking privacy protection.”  In two prior posts (see: Lawmakers Take Aim At Password Privacy and Password Privacy Laws: More States Are Now On-Board)I reported on legislative efforts in a number of states to address the issue of “password privacy” – specifically, whether and to what extent employers can request or require employees or job applicants to disclose access information (passwords, user names, etc.) for their personal electronic accounts or services (e.g., social media).  Thirty states have now enacted or proposed legislation on this issue.

Vermont’s proposed law is like those in other states in that it would prohibit an employer from (1) seeking to gain access to employees’ and applicants’ personal electronic accounts by requesting or requiring either the disclosure of log-in information or the taking of actions to grant the employer access, and (2) retaliating against employees and applicants who refuse to disclose.  But Vermont’s proposal doesn’t go much further than that – and namely, it doesn’t say anything about what employers can do vis à vis personal accounts or services.

Contrast this with pending legislation in Iowa, for example, which sets forth a number of “actions not prohibited.”  One such action is that an employer would not be prohibited from requesting or requiring disclosure of access information to “an account or service . . . used for the employer’s business purpose.”  Does this mean that, if an employee uses her personal Facebook or LinkedIn accounts to market her employer’s services, those accounts are fair game for employer access?  Interesting question.  As with many issues like this, we won’t know the true boundaries of password privacy laws until they are tested in the courts.  But at a minimum, it makes sense for a company to have some access to, and control over, a social networking account that is used for the company’s business purpose.

Shifting To Inventions . . . .

S.113, titled “An act relating to employee rights to certain inventions,” was recently introduced in the Vermont Senate.  It’s not uncommon for employment agreements in Vermont, and elsewhere, to contain provisions that require employees to license or assign their intellectual property or other rights to inventions to their employers.  After all, many employees are being paid to develop intellectual property for their employers.  But under S.113, these provisions would not apply to, and would be unenforceable regarding, “an invention that the employee developed entirely on the employee’s own time without using the employer’s equipment, supplies, facility, or trade secret information.”  Exceptions would be for (1) “inventions that relate to the employer’s business or actual or demonstrably anticipated research or development,” and (2) “inventions that result from any work performed by the employee for the employer.”

Although invention assignment clauses are common, this type of legislation isn’t.  Indeed, only eight states – California, Delaware, Illinois, Kansas, Minnesota, North Carolina, Utah, and Washington – have enacted laws like the one Vermont is proposing.  One could therefore argue that this legislation may be a solution in search of a problem.

By its language, Vermont’s proposed legislation seems intended simply to clarify who owns what, but it might raise more questions than it answers, and perhaps create unnecessary confusion.  For example, terms such as “entirely” or “own time” or “relate to,” and even “invention,” can be open to interpretation.  These issues have been the subject of several lawsuits in California under that state’s law, and in more than one case the courts seem to have trouble keeping the statute’s language straight, particularly concerning the exceptions.

The California case of Iconix, Inc. v. Tokuda, illustrates a number of the issues that can arise under such laws.  In this case, an employer (Iconix) sued two former employees for, among other things, breaching an agreement they signed obligating them to transfer inventions to Iconix.  Iconix argued that it was entitled to the invention at issue – a computer program and source code referred to as “rockmyspace” – because

(a) the employees had used “company equipment and resources to develop and operate rockmyspace,” as evidenced by the presence of code on their Iconix computers;

(b) the work done in creating rockmyspace was not done “entirely” on the employees’ own time because some of it was completed during the regular 9-to-5 workday (even during meetings!); and

(c) the invention was directly related to Iconix’s business and R&D.

The employees tried to get around these hurdles in several ways, all of which failed.  They argued that rockmyspace wasn’t an “invention” in the first place because it wasn’t “original.”  They argued that because Iconix allowed them to use their work computers for personal purposes, that somehow meant that the rockmyspace work was not done using company resources.  They argued that their workday lasted 14-16 hours and sometimes through the night, and therefore the issue of 9-to-5 was meaningless.  Nice try, but the court granted an injunction against the employees.

* * *

At this point, it’s too early to tell how far S.7 and S.113 will go in the Vermont Legislature, or what they will ultimately look like assuming they make it through.  We’ll keep watching . . . .

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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