Intellectual Property Disputes Between Employers and Employees

The creation and development of intellectual property can be an exciting and profitable process.  Unfortunately, disputes often arise regarding the ownership of intellectual property when the intellectual property is created while the inventor is employed by someone else.  Intellectual property can be extremely valuable and, in this situation, both the employee and employer can have an expectation of ownership.

The general or default rule is that employers own the intellectual property created by their employees during the scope of their employment, while the employees own the intellectual property created outside of the scope of their employment, even if these creations were created during the time of employment.  As with most “general” or “default” rules, there are exceptions and numerous factors that must be considered in determining ownership.

The most important factor that must be considered regarding intellectual property ownership is the type of intellectual property at issue.

Copyrights:  Pursuant to the federal Copyright Act, ownership of a copyright initially vests with the author unless the work falls within the statutory definition of a “work made for hire.”  A “work made for hire” automatically is owned by the employer.  If a copyright does not qualify as a “work made for hire,” an employer must obtain a written assignment signed by the author to acquire legal ownership.

Trademark:  Trademark ownership is dependent upon who first uses the mark pursuant to federal law.  Conception without use does not establish an ownership right.  If a trademark is created during the course of employment, the employer must still establish that it was the first to use the mark to identify its goods or services, or that an employee’s use of the mark is on behalf of or for the benefit of the employer.  Common law trademarks may arise by usage in commerce, but ownership may be difficult to prove or defend.  A federally filed trademark provides clear evidence of the existence of a trademark and its ownership.

Trade Secrets:  While no statute specifically addresses the ownership of trade secrets between employers and employees, courts follow the general rule that trade secrets created during the scope of employment are owned by the employer.

Patents:  Patents are generally owned by the inventor, even if conceived during the course of employment.  Employers must get a written assignment from the inventor to establish ownership.  In the absence of a written assignment, an equitable claim for ownership by the employer may be established if the employee was specifically hired to create the invention at issue, which results in an implied obligation for the employee to assign the patent rights to the employer.

Written Assignments of Intellectual Property Rights

Due to the value and importance of intellectual property rights, employers should not rely on the general rule or assumptions of ownership to protect their interests.  Employers should have a written agreement with employees specifically assigning to the employer all intellectual property created during the course of his or her employment.  These agreements can specifically exclude creations made on the employee’s own time, without the use of company assets, and those not related to the employer’s line of business.  These agreements are commonly called “work for hire,” “ownership of discoveries” or “assignment of inventions” agreements.

It is recommended that these agreements be executed prior to the commencement of employment.  However, in situations where this is not possible or did not occur, it is recommended that the employer provide additional consideration for an employee’s execution of an assignment after the employment has begun.  This consideration may be in the form of a raise, a one-time bonus or some other benefit the employee was not receiving before execution of the assignment.

It is also recommended that these assignments include language regarding the available remedies if the employee misappropriates or infringes upon the employer’s intellectual property rights, including injunctive relief.  These agreements should also require the employee to disclose what, if any, intellectual property rights the employee possesses prior to execution of the assignment.  This helps avoid any confusion regarding ownership rights and the timing of inventions.

Independent Contractors

Typically, independent contractors own the intellectual property they create, unless there is a written agreement assigning such ownership.  As such, it is important for employers to have all independent contractors working for the company sign assignment of invention agreements and trade secret confidentiality agreements.

Employment Policies and Procedures

In addition to assignment of invention agreements signed prior to the start of employment, employers should also address intellectual property development in their standing employment policies and procedures.  These policies and procedures should address the documentation of all intellectual property development activities, and require employees to disclose all future inventions.  Additionally, these policies and procedures should address the confidentiality and protection of all existing intellectual property rights owned by the employer.  It is critical that employers guard against the unauthorized or accidental disclosure of their confidential or proprietary information during the term of the employee’s employment or after the employment period has ended.

Recommendations

LegalStandard.com strongly recommends that employers have an experienced employment attorney draft or review their employment agreements, assignment of inventions, and employee handbook to ensure that all past, present and future intellectual property rights owned by the employer are protected.  It is important that the language in these agreements is clear and enforceable so that the threat of litigation can hopefully be avoided.  LegalStandard.com’s attorneys can review these types of agreements for as low as $295.00.