What Do You Mean My Company Doesn't Own That Employee-Conceived Invention During Work Time?
By Kathleen T. Petrich and April Upchurch Olsen
October 21, 2008
Ownership of Intellectual Property (IP) is often a critical thing for most employers as they create, catalog, mine, exploit, and enforce their IP assets in an ever-increasingly competitive and global marketplace. This is particularly true in areas where patents, often the largest sector of IP assets, were not previously allowable subject matter or not common, such as in the financial services industry. But often ownership concerns are overlooked until a problem is discovered.
While copyrighted works that are authored by employees are legally “authored” by the employer (thereby fixing the initial ownership issue), there is no such corresponding provision in the patent world for inventions. Employers do not automatically own inventions that are conceived and reduced to practice when done on company time and within the scope of the employee’s employment. And mere “work for hire” agreements simply have no effect on inventions (unless there are other assignment provisions in the agreement). This is because patents, at least in the United States, are filed in the name of the inventors or inventors. The inventor or inventors are the original patent owner(s) and unless there is a contractual agreement to transfer the rights to the employer, or the employee fits a narrow “hired to invent” exception, the employer can enjoy at best a “shop right” in the invention. A shop right is a mere defensive position that allows the employer to use the patented invention royalty free—but it does not convey any ownership rights in the invention and is merely a defense to a claim of infringement. Ouch!
So how does an employer get an invention that it believes it should have owned in the first place? Well, if there is no underlying contractual duty to assign that invention to the employer, the employer is going to have to get out its checkbook. And that can be costly.
What is the best way to handle such issues in the future?
The most proactive and least costly way is to have an employment agreement in place for all new hires. The employment agreement would have a section regarding IP rights, and particularly, inventions. The new employee acknowledges up front that in consideration of the new employment, there are certain contractual obligations that the employee must meet. One such obligation is the duty to assign all inventions that are done on company time and within the scope of the employment to the employer. Additional IP terms, like keeping trade secrets confidential, and making sure that the duty survives employment termination, are recommended. Of course, other more traditional employment policy clauses can be (and should be) incorporated into such an agreement. The primary benefit is that no additional consideration is required at the time of the hire and all IP rights within the scope of the employment are then owned by the employer.
Most states have statutory boundaries to keep employers from overreaching. In Washington, that provision is RCW 49.44.140 that basically makes unenforceable an employer agreement in which employees are required to turn over invention rights that they invented prior to the employment or did on their own time (e.g., the weekend “garage inventor” normally would be exempted from the employment agreement).
For existing employees, employers are going to need additional consideration of value to claim rights in future work-related inventions. For legal and practical reasons, the value for existing employees should not be “continued employment.” While this step of obtaining invention agreements from existing employees can be costly and distracting, it can save untold future headaches by addressing it now. Further, the additional consideration (the value) at this stage would likely be much lower than the cost required in obtaining an assignment from a balking employee at the patent filing stage.
Graham & Dunn can assist your business in evaluating the best course of action for employee inventions and provide counsel regarding the patent process. Please contact Kathleen T. Petrich (KPetrich@GrahamDunn.com), Registered Patent Attorney, and April Upchurch Olsen (AOlsen@GrahamDunn.com), who has experience in labor and employment transactional and litigation matters, to see how we can assist you.
