ICCAD panel probes ‘ethics during transitions’

By Richard Goering

11/8/07

SAN JOSE, Calif. – It’s your last day at a job. What documents can you legally and ethically take with you? Not much, according to speakers at an International Conference on Computer-Aided Design (ICCAD) panel Nov. 6 entitled “Ethics during transitions.”

The panel, sponsored by the IEEE Council on Electronic Design Automation (CEDA), used a hypothetical case study in which a CAD developer left a large company and immediately launched a startup. Moderator Soha Hassoun, associate professor of computer science at Tufts University (Medford, Mass.), said ICCAD hosted the panel because “we wanted to create an awareness in our community about ethical and legal issues.”

It’s the second year that ICCAD has considered this issue. Last year Frances Houle, research staff member at IBM’s Almaden Research Center in San Jose, Calif., gave a lunchtime talk on professional ethics in research, publications, mentoring, and record keeping.

This year, panelists were first shown a list of various documents that an employee might be tempted to take away upon leaving a job. These include notes from a current development project, scripts written by the employee, product roadmap presentations, product documentation written by the employee, customer names and addresses, copies of training materials, HR (human resource) department forms, copies of patents or patent applications, and budget planning presentations.

“Everything on this list, except issued patents and possibly patent applications, may be confidential to your employer,” said Mona Sabet, vice president and associate general counsel at Cadence Design Systems. She asked panelist Jo Dale Carothers, attorney for IP litigation and information technology at Heller Ehrman LLP, whether taking HR forms might present a problem.

Taking a set of forms can indeed cause problems, Carothers said. “You cannot believe the number of times that something that seemed innocent at the time became a focus of litigation,” she said. “Other than family pictures or personal possessions, leave it behind.”

“Don’t be sentimental about a project you spent five years on,” Carothers said. “If you decide to leave, leave it behind and go.”

Panelists then considered a hypothetical case study in which a CAD developer joined a large company to implement parallel processing techniques. The company cut back on that project, and the developer spent three years working on customer-requested enhancements to existing products. After speaking with an employee of a customer, who works in Shanghai, about starting a new company leveraging talent in China, the developer gave two weeks notice to his employer and immediately started incorporating a new company.

The developer should not have incorporated the new company before leaving the old one, said Penny Herscher, president and CEO of FirstRain and former CEO of Simplex Solutions. “If you’re going to start a new company, stop work on it until you have some white space between you and your employer,” she said. “Don’t do anything until you’re gone and you’ve taken a vacation in Hawaii for a month.”

“There is a distinction between legal and ethical – these can be separate,” advised Keith Miller, professor of computer science at the University of Illinois. “Breaking up is hard to do. You don’t want to do something you feel creepy about afterwards.”

Carothers noted that many people assume non-compete contracts are invalid in California, but that’s not necessarily the case, she said. “You really should have a lawyer look at it,” she said. “Be very careful about what you sign.”

An audience member spoke of the “traitorous eight” who left Shockley Semiconductor in 1956 to launch Fairchild Semiconductor. “They took all the information, started another company, and made Silicon Valley what it is today,” he said. “They violated everything you talked about when they did that.”

“Just because they succeeded doesn’t make it right,” Herscher replied. She noted that EDA is a litigious industry with a handful of large companies with deep pockets and teams of lawyers. “It’s hard enough to get a company off the ground. Why make it worse by taking documents with you?”

Another audience member noted that what seems like an innocent email to a friend about a “fantastic new idea” could be considered the genesis of a new company by one’s existing employer. “If you put it in an email and start planning an idea while you’re being paid, you don’t own it,” Sabet said. Your ideas don’t belong to your employer, she said, but the work you do on company time does.

An audience member described a CAD company that hired a student who developed an algorithm while under contract with a university. If the student continues to work on the algorithm further, he asked, who owns the intellectual property? The CAD company should license the IP from the university, Herscher said. “If you sell a company or take it public, you have to show you own all the IP,” she noted.

Recruitment problems

Panelists then considered another chapter in the hypothetical case study about the CAD developer who started a new company. With venture capital backing, the developer offered jobs to three former co-workers and hired two. Both the developer and the co-workers received threatening letters from the former employer.

Herscher said that she’s received threatening letters regarding people she’s hired. “The basic issue is that you must not recruit,” she said. “You can talk about what you’re doing and why you’re excited, but your friend has to make a completely independent decision without getting an offer from you.” Further, she noted, “you may not raid” by hiring a large group of people from your former employer.

Sabet noted that it’s important to know the distinction between “residual knowledge” and trade secrets. You can take residual knowledge with you to your new job, but not trade secrets, she said. However, she noted, it can be difficult to determine what falls into one category or the other.

Residual knowledge, Sabet said, is knowledge that someone skilled in a particular area could be expected to have, and it exists in “unaided memory.” But if you’ve memorized information that gives your former employer a competitive advantage, that’s a trade secret, she said.

Even if you work on a new idea on weekends only, said Miller, there could be problems if you use your existing company’s email system to tell people about it. “The question is whose equipment you use to send the email on,” he said. “If you use the company’s email to make a personal observation to a friend, ethically and legally it could be considered a work product.”

“It’s practically impossible to work these days without mixing personal and business communications, but what you want to think about is that we [the employers] are legally allowed to monitor communications,” Sabet said. “You’d be shocked about the things attorneys read in front of juries,” added Carothers.

If your company pays for a DSL line to your house, asked an audience member, does the company then own any communications that use that line? “I have my own cell phone, my own Blackberry, and I pay for my own DSL,” responded Herscher. “I never want to get into a situation where I use company resources for private business, ever.”

If a programmer writes open-source software on the weekends, asked an audience member, will that cause problems with the programmer’s employer? Probably not, replied Miller, assuming that the programmer is not taking trade secrets from work, is not working on the open-source software while at work, and is writing software at work that addresses different problems from the open-source software.

“It depends on what kind of agreement you sign with the company,” said Carothers. With modern work hours, she noted, it’s hard to tell when work stops and the weekend starts.

“I’m getting a sense that people think the law hasn’t evolved to represent today’s technology perspective,” said Sabet. “Patent laws haven’t changed for 50 years. But it’s still the law.”

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