What Is the EIACA and Why Do Businesses Need One?
Whether your business is a startup or deeply invested in research and development, hiring new employees can feel like a gamble. You want to encourage them to innovate, but you also need to ensure the innovations they develop remain with your company. Employee Invention Assignment and Confidentiality Agreements (EIACAs) can help your organization retain the rights to the inventions your employees create with company resources.
EIACAs have some critical legal limitations, however. You need to understand the foundation of these agreements to ensure you write a legally enforceable contract.
What is an EIACA contract?
Employee Invention Assignment and Confidentiality Agreement (EIACA) is a contract that typically assigns ownership of anything an employee invents on the job to the employer for the duration of the employment relationship. It also requires the employee to keep these inventions confidential, allowing the business to patent them before they enter the public domain.
For example, consider a car manufacturer that needs to hire new engineers. The manufacturer would likely require new engineers to sign EIACA contracts to protect their interests. That way, if an engineer develops a technique to produce safer windshields while employed with the manufacturer, it remains their property. The engineer can’t leave the company and take their invention to a competitor because of the contract. These contracts are an essential part of many industries’ hiring processes.
Other names for EIACAs are “proprietary information and invention assignment” (PIIA) agreements and “confidential information and invention assignment” (CIIA) agreements. Regardless of the specific name used, the contracts all accomplish the same purpose: keeping employee innovations confidential and owned by the company.
The purpose of EIACA contracts
EIACA contracts protect the investment a company makes in its employees. Businesses that hire people to create new technologies and designs provide many resources to those staff members. The EIACA contract ensures the company’s investment pays off instead of allowing employees to use the resources and patent the research themselves.
EIACA contracts are valuable for many businesses. Startups and young SaaS companies that heavily invest in research and development see particular benefits, but other companies can still find value. Any organization involving research or permitting employees to improve its processes can use EIACA contracts to retain control of inventions produced with its resources.
Parts of an EIACA contract
Along with the standard elements of any agreement, an EIACA contract should include the following key sections:
The bulk of the contract consists of the clause assigning intellectual property rights from the employee to the employer. This clause will precisely define the inventions and intellectual property for which the company will take ownership. It will also specify the rights that the employee is ceding to the company.
Confidentiality is an essential part of EIACAs. This clause will explain what information the employee needs to keep confidential, typically focusing on their inventions and innovations connected to the company. It will also explain the penalties for breaching those obligations. Some EIACAs may include full non-disclosure agreements as well.
In some states, EIACA contracts must have exceptions. These states require that EIACA contracts include specific exceptions for inventions that the employee produced on their own time, without using any employer facilities, supplies, or intellectual property. For example, if a worker invented a more efficient washing machine in their downtime while working at a car manufacturer, the contract exception would allow them to retain the rights to that invention.
Many EIACAs will also include a non-compete clause stating that workers cannot go into business in the same industry as their employer for a certain period after leaving the company. This clause helps prevent employees from leaving the company before making an invention known and immediately taking it to a competitor.
There are typically two durations involved in an EIACA agreement. First, the contract will explain when the employee’s inventions will automatically become the company’s property. This is commonly the duration of the signer’s employment, but it may extend after employment for industry-related inventions.
Second, the agreement will define how long the employee must keep the covered information confidential. Most often, this is determined to be indefinite. Some may only last a few years, however, similar to a non-disclosure agreement.
Limitations of an EIACA contract
EIACA contracts are effective, but they have two significant limitations:
Exceptions to the assignment of inventions
In states where exceptions are mandatory, EIACA contracts cannot automatically assign all inventions to the employer. However, the burden of proof typically remains with the employee to show they did not use any company knowledge or resources to develop their invention.
Time limits on non-compete clauses
In many states, non-compete clauses must have a time limit. Otherwise, they place undue hardship on employees after leaving the company since they prevent workers from using their expertise to find a new job.
How to create an EIACA
Typically, employers are the party that creates EIACAs. As such, your goal when writing an EIACA is to write a contract that will keep your company’s IP safe and ensure that you collect full returns on your investment in an employee. You need to balance state and federal requirements for your employees’ IP with your company’s interests to develop a contract that is both legally enforceable and firm.
Managing EIACA contracts
EIACA contracts rarely require significant negotiation. However, your employees may request certain concessions or alterations. They are more likely to do this if they have worked in your industry previously and have independent projects. Your Legal team needs to be prepared for these requests and have a way to negotiate the contracts without dragging out the hiring process. But this is far from the only potentially time-consuming aspect of EIACAs.
For instance, most companies manage dozens or hundreds of EIACA contracts and must generate new ones with every hire. In times of growth, your Legal team may be required to create and process multiple new EIACAs every day.
Furthermore, in many companies, the information required for EIACAs is typically stored in multiple different systems that aren’t designed to communicate with each other. The database that stores employee information is separate from the place where contracts are saved. This requires your Legal staff to enter all relevant employee details by hand for every contract, even if the EIACA itself is unaltered.
This siloing of information also leaves the EIACA process without any transparency. There’s no single place to check whether an employee has signed the EIACA or if their contract has been altered from the standard. You need to access the contract in question. If the agreement isn’t there or has been changed, there’s no way to track why.
Why use digital contract management for EIACA contracts
The answer to these problems is digital contract management. A contract lifecycle management (CLM) solution lets you store everything related to your contracts in one place. By acting as an all-in-one solution, CLMs provide a single source of truth. There are no contract details spread across separate databases.
Digital contracting enhances efficiency in other ways as well. Your staff can collaborate on contracts and edit them as necessary entirely online. The digital nature also makes your hiring process faster. New employees can sign contracts no matter where they are so they can get to work immediately.
Automating workflows for EIACA contracts
One way to simplify EIACA management is by implementing templatable workflows. A templatable workflow allows you to take a contract template and assign specific tasks in a designated order. Whenever a new contract is produced with that template, the workflow is reproduced as well. Your Legal team can follow that workflow instead of starting from scratch with every new agreement. This reduces wasted payroll hours and encourages uniform documentation at the same time.
Ironclad’s Workflow Designer lets you accomplish this entirely within the CLM. You can create a contract template, designate fillable elements, and design the workflow for completing the contract in minutes. Once you finish the template, the contracts you create with it will automatically upload to the Ironclad CLM, so there’s no gap between creation and tracking.
This makes the EIACA process much simpler. There’s no doubt about what to do next. You can monitor the status of every EIACA at a glance. If an employee hasn’t signed their agreement, you can easily spot where the contract process halts. The process is entirely transparent, so there’s no potential for missed steps or missing signatures.
Fast-track EIACAs with Workflow Designer
EIACAs are a valuable resource for protecting the innovations your company has invested time and money to achieve. With great EIACAs, you can ensure that your employees’ work with your resources remains with your business.
Managing EIACAs becomes easy when you’ve implemented Ironclad’s CLM with Workflow Designer. You can streamline the hiring process and track every EIACA for every employee by implementing templatable workflows and digital contract management. Discover how Ironclad can help your EIACA management and help you grow more effectively.
Table of contents
- What is an EIACA contract?
- The purpose of EIACA contracts
- Parts of an EIACA contract
- Limitations of an EIACA contract
- How to create an EIACA
- Managing EIACA contracts
- Why use digital contract management for EIACA contracts
- Automating workflows for EIACA contracts
- Fast-track EIACAs with Workflow Designer