Rights to Inventions: Employers v.
Employees
By Eric S. Freibrun, Esq.
The owner of a patent to an invention
generally has the exclusive right for 17 years from the date the patent issues to exclude
others from making, using or selling the invention throughout the United States. An
inventor usually owns all rights to an invention. But what happens when the inventor is an
employee and his or her employer lays claim to the invention? As with most complicated
questions, it depends.
No Written Agreement
In the case where no valid written
agreement exists between the employee and the employer assigning ownership of the
invention to the employer, the legal waters start to get murky and one has to look to
applicable state law for an answer.
At a minimum, three general common law
principles apply:
1. If an employee is not hired
specifically for the purpose of inventing anything, then whatever he or she may invent
during the course of employment will be owned by the employee. No implicit agreement to
assign any patent to the employer arises. This general rule applies even if the invention
is related to the employer’s business.
2. When an employee is hired to invent,
but the employer has no more in mind than a desired result and does not give the employee
instructions as to the means the employee must use to accomplish the particular result,
then any resulting invention, even if related to the employer’s business, will again
be owned by the employee.
3. If an employee is hired to create a
specific invention and the employer can demonstrate that the means to bringing the idea
into practical form were clearly spelled out for the employee, the employer will be deemed
the owner of the invention where the invention is within the scope of the inventor’s
employment and relates to the employer’s business.
Even in the first two scenarios where the
employee owns the invention and any resulting patent, the employer may have a "shop
right" to the invention. A shop right is an employer’s non-exclusive,
royalty-free, non-transferable license to make, use and sell items embodying an
employee’s patentable invention, but only within the normal scope of its business.
A shop right doesn’t automatically
arise, however. It typically exists only where an employee has used the employer’s
time, materials or equipment in creating the patented invention. A shop right can last
beyond the employee’s term of employment, but expires along with the patent at the
end of its 17 year term. Technically, a shop right is not an ownership right in the
patent, but is a defense against an employee’s allegation of patent infringement.
Written Agreement
To remedy the uncertainty that exists
when determining ownership of a patentable invention is left to a case-by-case analysis of
the facts and case law, many employers require employees to sign written patent assignment
agreements. These agreements typically assign all of the inventor’s patent rights to
the employer. They often contain clauses requiring the employee to disclose inventive
activity and assist the employer in securing patent rights.
Such agreements are usually intended to
accomplish the legitimate purpose of prohibiting an employee from using for his or her own
benefit, or for the benefit of a subsequent employer, any inventions resulting from the
resources provided by or work performed for a previous employer.
Employees have often been compelled to
execute overly broad patent assignment agreements as a condition of employment. Examples
include agreements which assign to the employer ownership of inventions unrelated to the
employer’s business or research or inventions made independently by the employee. To
protect employees against a perceived disparity in bargaining power with respect to such
agreements, Illinois enacted the Employee Patent Act, 765 ILCS 1060 (formerly Ill. Rev.
Stat. 1991, ch. 140, para. 301).
The Employee Patent Act restricts the
types of inventions an employer can require an employee to contractually assign. The
statute renders void and unenforceable any provision in an employment agreement to the
extent it purports to assign ownership to the employer of an invention, "for which no
equipment, supplies, facilities, or trade secret information of the employer was used and
which was developed entirely on the employee’s own time...."
There are exceptions, of course. Such an
otherwise unenforceable assignment provision will not be invalid if, "(a) the
invention relates (i) to the business of the employer, or (ii) to the employer’s
actual or demonstrably anticipated research or development, or (b) the invention results
from any work performed by the employee for the employer." The Act goes on to state
that the employee shall have the burden of proof in establishing that his or her invention
is subject to the protections afforded by the statute.
Interestingly, in balancing the rights of
employees and employers, the statute achieves a result contrary to the first common law
rule stated above. The Act can be interpreted to permit an assignment agreement that
requires an employee not hired as an inventor to assign to the employer an invention
created entirely on his or her own time using no company resources -- if the invention
relates to the employer’s business or actual or anticipated research or development.
A further feature of the Act is the
requirement that, with respect to employment agreements entered into after January 1,
1984, employers inform employees in writing of the types of inventions the Act prohibits
an employer from requiring an employee to assign. What happens if the assignment or
employment agreement does not contain this required notice? Is the assignment provision
still enforceable? The Act does not say, nor has this issue been litigated and reported in
any Illinois decision.
Attorney Eric Freibrun specializes in
Computer law and Intellectual Property protection, providing legal services to information
technology vendors and users. Tel.: 847-562-0099; Fax: 847-562-0033; E-mail: eric@freibrun.com.
Copyright © Eric S. Freibrun, Esq., Law Offices of Eric S. Freibrun, Ltd. All rights
reserved.
