IP Clauses in Employment Contracts: What to Write Before You Hire

Real case: a Saudi company hired a developer to build their core product. The contract had no IP clause. After two years, he resigned and claimed ownership of the code. The case cost the company SAR 1.2 million to settle his waiver.

The Default Rule Under Saudi Law

Copyright in creative works belongs to the creator (employee), not the employer, unless the contract says otherwise.

This means: without explicit language, code your employee writes professionally may be theirs. A patent they invent may be in their name.

Exception: a "work for hire" contract automatically converting creation to the company — must be in writing.

The Core Clause

"Employee acknowledges that every invention, design, code, text, idea, patent, or any creative work they produce during their employment with the Company, or outside using Company tools, or within their job scope, is the exclusive property of the Company. Employee assigns all economic and IP rights arising thereon to the Company from the moment of creation."

Complementary Clause: Confidentiality Obligations

Bar disclosure of any commercial or technical Company information during and after employment (3–5 years).

Return all Company documents upon termination.

Bar use of Company information for personal benefit or for any third party.

Non-Compete Clause

Saudi law permits non-compete clauses with conditions: limited duration (2-year max), reasonable geographic scope, financial compensation to the employee.

Without compensation = the clause is void under Saudi law. A "higher salary" does not suffice — there must be specific compensation for accepting the restriction.

Fits senior executives, founders, employees with secret access. Does not fit all employees.

Non-Solicitation of Employees and Clients

The departing employee may not persuade Company employees to join them for 12–24 months.

May not contact Company clients to poach them for a defined period.

Important especially in consulting and service sectors.

Employee Pre-Joining Works

There must be explicit language: "Employee acknowledges that any IP they claim from works prior to this contract must be disclosed in writing and approved by the Company before use in its work."

Without this, the employee may later claim the "original code" your business uses is theirs from a prior personal project.

If You Forgot to Include These Clauses

Retroactive amendment requires "consideration" — a financial incentive to the employee to accept the clause.

Without consideration, the amendment may be void. The usual fix: a one-time bonus, promotion, or raise tied to accepting the addendum.

Far harder and more expensive than getting it right in a new contract.

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