The notion that all intellectual property created in the course of employment is automatically the exclusive property of the employer is a misconception. The legal rules surrounding the ownership of employee created intellectual property is dependent on whether the employer and employee have executed an express agreement conferring the rights of the work product to the employer, which is commonly called an assignment-of-inventions agreement.
Where there is an enforceable assignment-of-inventions provision between employer and employee, this agreement will supplant any common law rights conferring ownership. Employers should be vigilant about incorporating this clause in their contracts before the employment term begins in order to avoid potential disputes and set expectations. But what constitutes an enforceable assignment-of-inventions agreement? The agreement must be explicit and clear in transferring all of the employee’s rights in his or her inventions, creations or developments to the employer. These agreements also must be equitable in delineating the rights to be assigned.
Certain states including California, acknowledge the disparate bargaining position of employers and employees and have codified restrictions on the scope of the agreement to transfer rights to an employer. These regulations provide that inventions produced outside the employee-inventor’s employment with the company are excluded from assignment. This includes any creation developed on employee’s personal time without the use of employer’s resources or information. The two qualifications to the rule exclude (i) an invention that, when created or filed to obtain a patent, related to the employer’s business or projected research or development, and (ii) a product resulting from work performed for the employer by the employee. These narrowly drafted exceptions suggest that the only inventions out of the scope of the agreement are genuinely independently created inventions.
In situations where no assignment-of-inventions clause is included in the employment contract, applicable patent or trade secret laws determine proprietorship of the information. Absent an express agreement, an employer runs the risk of not retaining rights to the employee’s inventions even when such inventions were developed during the time of employment or with the aid of company resources.
Shane Coons can assist your business with protecting its trade secrets and confidential information. To schedule a consultation or learn more about his professional services, call 949-333-0900 or visit www.ShaneCoonsLaw.com.