The Danger of Consulting Agreements

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I received this message (edited slightly for anonymity) from someone in another department. It's a good reminder of the importance of having someone review ANY consulting or intership agreement BEFORE you sign it, rather than later when you discover you're in poop up to your armpits.

-----Original Message----- 

From: Sent: Thursday, April 04, 2002 6:41 PM 
To: Ed Lazowska Subject: in need of some advice

Ed Lazowska,

I need a bit of advice, and don't know who to turn to. Perhaps you can help or suggest who I might speak with. I'm a [xxx] who was involved last year with a foreign startup software company (owned and run by Americans in Tokyo, Japan). I consulted on some learning software they are developing. This year, I'm not collecting any salary from this company, because the company has fallen on hard times and they have little venture capital. My question concerns the confidentiality agreement I signed last year. Under 'assignment of inventions' (see b, below), the first sentence seems to broadly state that EVERYTHING I do while under contract with them is theirs. The second sentence is slightly narrower with the inclusion of the phrase "within the scope of and during the period of my Relationship with the Company". However, "within the scope of" might be interpreted as anything to do with learning software. I want to continue working on learning software and start my own small company (hoping to apply for a small business grant). I am not developing the same kind of software as they are presently developing, but I'm afraid that I might be vulnerable to future claims on products and innovations that I develop from now on. Here is the paragraph that seems overly broad and rigid for someone in my position (i.e., as an academic consultant rather than a full-time employee).

(b) Assignment of Inventions. I agree that I will promptly make full written disclosure to the Company, will hold in trust for the sole right and benefit of the Company, and hereby assign to the Company, or its designee, all my right, title and interest throughout the world in and to any and all inventions, original works of authorship, developments, concepts, know-how, improvements, or trade secrets, whether or not patentable or registrable under copyright, trademark or similar laws, which I may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, during the period of time in which I am employed by or a consultant of the Company (collectively referred to as “Inventions”), except as provided in Section 4(e) below. I further acknowledge that all inventions, original works of authorship, developments, concepts, know-how, improvements or trade secrets which are made by me (solely or jointly with others) within the scope of and during the period of my Relationship with the Company are “works made for hire” (to the greatest extent permitted by applicable law) and are compensated by my salary (if I am an employee) or by such amounts paid to me under any applicable consulting agreement or consulting arrangements (if I am a consultant).

I haven't been doing any actual work for the company since the first of the year, but I remain 'under contract' receiving stock options (which are presently of very dubious value). I am considering breaking my relationship with the company, solely because the above paragraph (and the additional restriction that I don't work for a competitor for 2 years after termination) makes me nervous. I have no experience in law and so I don't know if I'm being overly 'paranoid'. Do you have any advice or suggestions that might help me out?

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