Who owns patent rights—employers or employees? - Inventions - Brief Article

USA Today (Society for the Advancement of Education), Dec, 2001

Employers may assume they have rights to market or produce an employee invention, but that is not always the case, indicates Jeffry W. Smith, a patent attorney at the Lathrop & Clark law firm, Madison, Wis. "Employee inventors present unique problems to their employers. Ideally, there is an express written agreement that assigns patent rights for inventions made on the job to the employer. But if no written agreement exists, the employee owns any patent rights in his or her invention."

The perils of having no written agreement far outweigh the effort required to obtain such an agreement. "Even if the employer wins a dispute over patent ownership, considerable resources and employee good will could be lost," he points out.

Most litigation involving employer patent rights does not involve a written assignment of rights. "The potential for a patentable invention is often ignored at the time of hiring, and the question concerning the ownership of patent rights does not arise until the invention of a marketable or valuable product or process occurs," Smith explains. At that point, it may be too late for the employer to claim rights to the invention. "If an employee signs an agreement assigning his or her rights in any invention to the company, the company owns it. But these agreements should be executed by all employees at the time they are hired and as a condition for employment."

In some cases, the courts have found that written agreements to assign patents, signed after the employee begins working, are not enforceable. "The key is whether the employee received adequate compensation for assigning those rights. Merely receiving a salary or hourly wage is not sufficient."

There are certain circumstances under which current employees can assign present or future patent rights to the employer. "Periodic bonuses, promotions, incentive programs, and even separation agreements have [been] found to be appropriate compensation for assigning patent rights. However, the courts have not upheld the assignment of patent rights in exchange for continued employment."

There are some instances when an employer may claim rights to an invention created on the job without a written agreement. "The employee may be involved in an employment relationship that, by its nature, requires the employee to invent. For example, an employee who is hired to do research and development."

Under some circumstances, employers may have the right to license the use of an invention. The "shop right doctrine," for example, grants employers a nonexclusive and nontransferable license to use employee inventions created during the course of employment. "However, the nonexclusive aspect of the license means that the employee inventor is able to license others to use the invention. There is no restriction on who may be licensed or the number of licenses under the patent. Even competitors can be licensed."

Under the shop right doctrine, the employee may not dictate how the invention is used. For instance, if it was made on a particular piece of machinery, the license does not limit the employer to use of only that machine. Rather, the employer is entitled to use the idea behind the invention for alt reasonable purposes.

"The best approach is to make the assignment of patent rights a condition of employment," Smith suggests. "More importantly, get that assignment in writing." What if a prospective employee refuses to sign an employment agreement that assigns patent rights? "Don't hire that prospect," he emphasizes. "Otherwise, the court is likely to find that the employer has no ownership in the patent rights."