The body of law surrounding invention ownership is hypertechnical and unforgiving. Departing from traditional property law principals, ownership of employee created inventions is an unintuitive web of intertwined federal and state law. However, properly prepared employment agreements, well planned policies, and due diligence will help you from becoming snared by the web.
Inventorship is governed by federal law and the default rule gives ownership of inventions to the creator, i.e., the inventor or co-inventors if multiple people collaborated together. Whereas patent and technology agreements, such as, employment agreements with intellectual property clauses, are for the most part, governed by state law and vary from state-to-state.
There is, however, a pretty significant nuance where federal law steps in when an assignment of rights in an invention is made prior to the existence of the invention. Such future interest clauses are routinely found in employment contracts. And, if not properly drafted, the employer could be left without ownership. The law is so hypertechnical that using the phrase “agree to assign,” rather than the phrase “do hereby assign” could cost the employer ownership of valuable technology created by its employees. Unfortunately, employers often find themselves caught by this trap when it’s too late to fix.
Having the ability to enforce patent rights in a lawsuit is one situation where improperly drafted agreements can cause havoc. Under federal law, to bring a patent infringement lawsuit the plaintiff must have legal title to the patent being enforced, and each owner must join the suit as a plaintiff. If these requirements are not satisfied, then there is no legal basis (standing) to bring the suit. Imagine being a company, whose success depends upon controlling certain technology that was developed by its employees, to learn that you don’t own the technology or patent because ownership was never properly transferred from the employee-inventors. And to make matters even worse, the employee-inventors have transferred ownership of the technology to your competitor!
Mergers and acquisitions is another situation where agreements not following the jagged contour of the law cause serious problems. Intellectual property is often an employer’s most valuable asset. And, unfortunately, as in the above-described situation, it’s not until a merger or acquisition deal falls apart that an employer learns it doesn’t have ownership of those valuable assets.
To make it more complicated, some states have enacted laws imposing requirements on employers that if not correctly followed could result in an otherwise well drafted employment agreement being nullified as it relates to invention ownership. As of February 25, 2016, California, Delaware, Illinois, Kansas, Minnesota, Nevada, North Carolina, Utah, and Washington have assignment of employee inventions laws.
And, if this wasn’t enough, we haven’t even touched upon the shop right doctrine, the equitable title doctrine, federally-funded inventions in federal contractors, or government employees. Indeed this area of law is complex and requires, if not ought right demands, proactive practices by employers. One of the best ways to be proactive is to have properly drafted agreements signed by all employees whether they are anticipated to develop technology for the company or not.