What is the logic and legality behind "I own you" contracts?

Question

After reading "Dealbreakers for new programming jobs?" I was thinking about those "I own you"-contracts. To cite Chris Jester-Young:

The lack of ability to own code I write on my personal time, on my personal machine, that are not related to anything work-related.

I have never seen something like that.

I mean we are payed to write code and come up with designs and so on, but we are payed for e.g. 8h a day, not 24h. In most parts of the world the employer does not own you, no matter what's in the contract. What am I missing?

• What is the logic behind such contracts?
• Is such a thing actually legal?
• For the German "stackers": Is such a contract legal in Germany?

EDIT: Clarification: I know the employer owns what one creates on "his" time and that one is not supposed to use the aquired knowledge to compete with him (well, it depends...). I am talking about "code I write on my personal time, on my personal machine, that are not related to anything work-related".

EDIT2: I just found a similar question on this topic: http://stackoverflow.com/questions/9705/what-can-i-do-about-my-employers-intellectual-property-policy

Answer 1

At least in Estonia there I haven't encountered such things. I own my own single man software company. I worked in bank 10 years and there were some complains that you shouldn't do it, but nobody actually prohibited it . And it NEVER came up that bank would own my company's programs. Sometimes I used my the code I had developed in "my company", so bank was in the winning side.

I would never work for such company - they will get really crappy coders with this contract as good programmers tend to code also in free time.

Answer 2

It's about intellectual property. A clause like that clears up any possible argument that if someone creates things at or for work they can't make money off of it.
The problem is that job knowledge for us is a really subjective idea. If learn how to create a database schema a certain way and use it on a personal project is it stealing? What about a business process? What about a UI design? The line is extremely gray. This just makes it more difficult for someone work on something during company time and then sell it on the side.

I've seen it a lot, but I don't totally know if it is legal. Even if it isn't it can discourage people from trying to create something on the side as it will most definitely at least cost money to get it all sorted out.

What you also have to remember is that these clauses weren't created specifically for programmers. They were created for all business people, which means the clauses have to be vague. I agree it sucks, but internal processes are what make and break companies most of the time, and many of them have to protect them.

Answer 3

I don't think a real "I own you" contract is legal (at least not in Austria, so probably also not in Germany) - but a contract saying "you mustn't use anything relating to your company projects in your private work" most likely is legal, just as those "you're not allowed to work at a direct competitor when you change jobs" clauses are legal (though these often don't hold before a court).

Answer 4

They use that to discourage you from developing a similar/competing product.
I've seen and heard of many companies having this type of contract in place, but I've never actually heard of any company going after someone for developing something at home.
Though I would think that if you were working on a similar product compared to what the company has, they would go after you - and they'd be like "ALL YOUR CODE BELONGS TO US"

As long as your product doesn't compete with the theirs you're probably OK.

Answer 5

fwiw (and IANAL) every contract like that which I've heard of has been with a US company, and US law is - more than most countries - defined by case-law meaning the legality of these contracts is very much up for debate(1). The system encourages this kind of strong up-front assertion, so it's likely the company in question is simply acting as it must, rather than how it needs to.

I imagine it would be a fascinating case if it did come up though, especially if the personal work was on, say, a GPL project.

As somebody else mentioned in a related thread (can't find it to cite it), ownership means responsibility as well, which might be hard for a company to swallow if you write a virus.

1. assuming this actually hasn't been tested in court yet

Answer 6

A contract implies a negotiated agreement. Tell them you won't sign it with the offending provision and scratch out the passage. If HR says "it's standard, you have to sign it", tell them you will not sign it and they either get permission from their general counsel to make an exception or else "no deal".

I would not sign a contract if I didn't agree with the terms.

It depends on the firm. Some won't deviate from the boilerplate. However, many moons ago I worked for a company that routinely negotiated employment contracts with the senior staff they recruited. My favorite story was when they laid off a guy after one year. He said "fine, do you want to give me my year's salary as a lump sum now, or continue to pay me via direct deposit?" The bosses were confused until he showed them a copy of their signed employment contract which promised a two-year guaranteed salary. They hastily un-laid him off. He took two-hour lunches for the rest of his contract.

Answer 7

IANAL – No help on Germany - but in California while these agreements are often used they are not enforceable - BUT where most people run into trouble is by using company resources - this includes things that are easy to forget like using your company email to discuss outside projects or even surfing while at work to sites not directly work-related. In most places both in and outside the US there is a big difference between rights for employees versus rights for contractors. In Russia for example individual contractors (not corporations) have some personal rights to IP until the contract ends - a very scary prospect for someone hiring contract work. In the states it is much easier to proscribe a contractor's activities in related areas than an employee. Bottom line for the US - it varies by state but in general as long as you avoid copyright/patent issues and use NOTHING including bandwidth and relationships with existing customers you are probably good legally. However being good legally doesn't count unless you can afford the expense of a trial and that is the true power that employers have over employees. In California non-compete clauses after termination are VERY hard to enforce unless additional compensation is paid for the non-competitive behavior. I have been told that they are enforceable in some other states but even there they must have very short time frames. (< than 2 years). A final note many companies in the US have clauses that force arbitration to resolve disputes including the above - arbitration is inherently biased towards the employer so keep it in mind, moving a dispute from arbitration to the legal system adds to your expense. If you are going to fight over a clause I would suggest fighting arbitration clauses not the free time stuff.

Cheers, Terence

Answer 8

At my work I signed a slightly less stringent form of "I Own You". It allows you to "Carve Out" pre-existing and current works as exempt personal projects.

Something I did (and is relatively common practice) was to add code names of projects that are not yet started, or generic enough descriptions that could be applied later down the line.

Answer 9

I'm not sure if its ever been taken to court by any software company... at least not yet, and I doubt it will be, unless you end up working for a competitor making a product that competes with your old company's products and does well.

For example, look at MGA v Mattel in the Bratz v Barbie case. No-one would care normally, but the new dolls ate into the old company's profits. At that point it became a lawsuit, that went on and on for quite some time. A lot of that case came down to when the Bratz design was made, and the jury decided that it was designed when Bryant was working for Mattel, even though he had an 'exclusivity contract' like you're discussing here.

So, I don't think you have a problem unless:

• you write code that is a lot like the stuff you work on.
• uses frameworks etc that you use in your job (ie developed by the company)
• quit to work for a direct competitor
• make a ton of money off it

Answer 10

Bear in mind that (at least in the UK) any contract has to be "reasonable" to be enforceable. This has been the downfall of many a non-competition clause and (I suspect, though IANAL) will be the downfall of many an "I own you" clause in the future.

Answer 11

If you are a consultant and not an employee, then this could be construed as "restraint of trade", and therefore illegal.

If I'm paid by the hour to do contract programming, then everything I write "on their dime" belongs to them unless negotiated into the contract (and they always want to own what you write).

However, once outside their paid hours, I am free to obtain other contracts and work as much or as little as I please.

If you are serious about being a consultant, then you should seriously investigate (and obtain) your own limited company. Then, all contracts are between your company and the client. It protects you a bit (not as much as you'd think, but some) and keeps you "at arms length" as a person.

Now I know many client companies don't know how to deal with corporate clients - they try and write contracts that assume everyone is an employee (like demanding personal info about another companies "workers", etc.). But this can be resisted.

For me - if I don't like a statement in a contract that I have been given to sign (and it's first viewing of it), I will cross out the offending provision, initial the cross-out, then sign the contract. If it is accepted, then the deal's done. If not, they come back to you for "negotiation", but at least they know where you stand.

And yes, I've refused to sign contracts like this when then won't change them. To me, it tells me all I need to know about the client and how they do business and view their contractors.

Cheers,

-R