Agreements settle who owns patents, copyrights
Published 09/28/99

Patents and copyrights are valuable assets of companies, worthy of protection. It is important for employers, independent contractors, and employees to understand that absent a clear written agreement, there may be a legal issue as to who owns a patent or a copyright for work created by an employee or independent contractor while "on the employer’s clock."

Generally, absent an agreement, patents are owned by the individual who invents the patentable device or process, not the employer, and it is that individual who is entitled to apply for and own the patent. If an employee invents a patentable device or process while on employer time, generally the employer owns what is called "shop rights" to that patented invention. Those shop rights are less valuable than an outright assignment of the patent in that while the employer can use the patented invention, it cannot prevent the employee from using the invention or licensing it through others. Furthermore, a shop right is personal to the employer so the employer cannot obtain revenue by assigning or licensing the right to any third parties, but can only transfer the shop right pursuant to a sale of the entire business.

If the employee holds a fiduciary role such as being an officer, director or major shareholder of a corporation, or partner in partnership, he will have a duty of loyalty and good faith to the employer and may have an obligation to assign to the employer any patents resulting from inventions which are within the scope of the employer’s business. Further, if the employer specifically hired the individual to invent this type of invention, then a Court may force the employee to assign the patent. Likewise, if the employees in that particular department had historically been assigning their patents to the employer, an implied assignment may exist. However, relying on these possible exceptions to the general rule is not prudent, particularly when an employer can remove doubt by having a contract that requires the employee or an independent contractor to: a) disclose to the employer any intellectual property that she creates or discovers as related to employer’s business; b) assign all rights thereto completing all documents to protect the company’s rights; and c) cooperate in the enforcement of the employer’s rights against third parties.

Under the copyright laws, the employer is automatically the author of and therefore entitled to copyrights in "work made for hire." If the employee creates the copyrightable work, then it may be work made for hire if it was created within the scope of that employee’s employment. However, as to independent contractors, any copyrightable work will be work made for hire only if the employer and independent contractor have a signed written agreement clarifying that it is truly work for hire. Under both situations it is prudent to have a clear agreement with the employee or independent contractor.

An agreement protecting intellectual property should include a confidentiality provision prohibiting the employee or independent contractor from disclosing any confidential or proprietary information of the employer, whether or not it constitutes intellectual property, except through the employer’s prior approval. That confidentiality provision should provide that it survives the termination of the employment for a certain, specified, reasonable period. Under such an agreement, what is confidential and proprietary information of the employer should be defined, and it may be helpful to provide some examples. For instance, if the employer believes that its customer list is a valuable trade secret, then the employer may wish to identify it as one clear example of what constitutes confidential and proprietary information.

For independent contractors and employees, it is further important for them to carefully review such contracts with their employer and legal counsel in some instances, to determine to what extent the contract may be read so broadly as to prevent the employee or independent contractor from owning intellectual property rights developed off the employer’s clock and unrelated to her job with the company.

J. Daniel Marr is a director and shareholder at Hamblett & Kerrigan, PA whose legal practice includes counseling businesses and business persons on a variety of legal issues and advocating on their behalf. Attorney Marr is also an adjunct professor at Daniel Webster College where he teaches business law. You can reach Attorney Marr by e-mail at: dmarr@hamker.com

This information is general information and may not reflect the most current legal developments, verdicts or settlements. The information provided should not be relied upon as an indication of the actual state of the law or of future developments. The information contained on the Hamblett & Kerrigan website is for informational purposes only and does not constitute legal advice. If the information referenced may be of legal importance to you, you should consult with an attorney to provide you with legal guidance and opinion as the the effect of the current law upon your situation.