Legal Definitions - trailer clause

A trailer clause (also known as a holdover clause) is a specific provision often found in employment contracts, particularly in fields involving innovation or proprietary information. It is an agreement where an employee promises to transfer the rights to certain inventions or intellectual property not only if they develop it during their employment but also for a specified, limited period after their employment ends.

For this type of clause to be legally enforceable, the duration of the post-employment restriction must be considered reasonable by a court. This reasonableness often depends on factors like the nature of the industry, the employee's role, and the type of information or technology involved.

Here are some examples to illustrate how a trailer clause works:

• Example 1: Software Development

  Imagine Sarah, a senior software engineer, works for "InnovateTech," a company specializing in artificial intelligence algorithms. Her employment contract includes a trailer clause stating that any AI-related software or algorithms she develops within six months after leaving InnovateTech, which are directly related to the company's core business or projects she worked on, must be offered to InnovateTech first. If Sarah leaves InnovateTech and, three months later, develops a groundbreaking new AI algorithm that significantly improves upon a project she led at her previous company, the trailer clause would obligate her to assign the rights to InnovateTech, provided the clause's terms are deemed reasonable.

  This illustrates the trailer clause because it extends InnovateTech's claim to inventions beyond Sarah's active employment, covering a specific post-employment period for relevant intellectual property.

• Example 2: Pharmaceutical Research

  Dr. Alex Chen is a lead research scientist at "BioPharma Corp," a company focused on developing new cancer treatments. His contract contains a trailer clause requiring him to assign to BioPharma Corp the rights to any pharmaceutical compounds or drug development processes he invents within one year of leaving the company, provided they are related to the specific research areas he was involved in at BioPharma. If Dr. Chen resigns and, eight months later, discovers a novel compound that shows promise as a cancer drug, and this discovery stems directly from the research he conducted at BioPharma, the trailer clause would likely require him to assign the intellectual property rights to BioPharma Corp.

  This demonstrates the trailer clause by showing how a company can protect its investment in research and development by claiming inventions made by former employees for a defined period after their departure, especially when those inventions are closely tied to their previous work.

• Example 3: Industrial Design

  Maria is a product designer for "ErgoSolutions," a company known for its innovative ergonomic office furniture. Her employment agreement includes a trailer clause that stipulates any unique furniture designs or mechanical improvements she conceives within nine months of leaving ErgoSolutions, which are similar to or directly evolve from projects she worked on there, must be assigned to the company. If Maria leaves ErgoSolutions and, five months later, designs a revolutionary new chair mechanism that significantly improves upon a prototype she was developing at her former job, the trailer clause would require her to transfer the intellectual property rights for that design to ErgoSolutions.

  This example highlights the trailer clause's application in protecting a company's design innovations, ensuring that an employee cannot immediately take their specialized knowledge and directly related ideas to a competitor or start their own venture shortly after leaving.