Assignment of Inventions Agreements – Basics for Employers and Employees
Understand the basics of what an Assignment of Inventions is, as well as why it may be something you want to consider implementing.
If, as an employer, you think you might have reason to utilize inventions (including works of authorship or intellectual property) created or developed by your employees or independent contractors, then you may want to consider adding an “Assignment of Inventions” agreement to your current employment contract.
Inventions created by an employee during their retainment do not automatically render exclusive company or organizational ownership. In actuality, employers can make expensive mistakes through loss of property or use of property and/or improvements because they did not ensure they had secured ownership rights for their employees’ creations.
In many organizations, employers may and can require that their employees grant ownership of ‘inventions’ during their employment. Inventions can include intellectual properties, such as works of authorship in written material, as well as song composition. Read below for the basics of these types of agreements.
What is an Assignment of Inventions Agreement?
An “Assignment of Inventions Agreement” is a contract that is a typical feature of an independent contractor or employee agreement where the worker consents to assigning to the employer, their invention or intellectual property rights for their works created during their employment. It is intended to protect a company’s intellectual property rights in all employee created or developed works while they are employed by that company. Normally, the agreement requires that the employee discloses and “assigns” (legally transfers) any such inventions to the employer and that the employee assists in obtaining a patent for such inventions.
For independent contractors, agreements state that any works of authorship, finished product, invention or other intellectual property will be owned exclusively by the company or organization (free from any license or royalty fee) and that the contractor “hereby assigns” all rights so as to eliminate issues if the company or organization pursues patent or copyright.
Independent contractors will typically see these provisions in an independent contractor agreement, while employees will typically encounter these provisions in a Confidential Information and Invention Assignment Agreement (CIIA) that is separate from an employment contract or an offer letter.
Clauses can often be a part of the agreement, as well. One such clause may have the employee list any inventions created by the employee prior to working at the company. This clause allows the employee to maintain rights to these inventions, while not allowing them to claim rights to inventions not listed. Basically, all non-listed inventions are assumed to be the property of the employer.
Other standard clauses included in the language of these agreements might be:
An “integration” clause that assures the written contract represents the entirety of the agreement so that neither party can hold claim to a separate handshake or side deal agreement not stated in the written document.
A provision concerning disputes that requires the losing party to pay attorney fees.
A provision that “carves out” pre-approved employee creations, for which the employee will retain the rights.
A clause that guarantees power of attorney for the employer so that they are able to register and administer ownership rights for any invention without the employee, regardless of whether said employee is willing to assist, or not. An example of this would include the employer applying for a patent without help or consent from the employee.
What Should You Consider Before Instating an Assignment Agreement?
There are several things to consider when deciding to have an agreement.
Do you or your staff anticipate creating something valuable while employed with the company or organization? If so, and you are considering instating an agreement, you may want to talk to an employment lawyer in your state. They will be able to help you understand how the local courts have and will interpret intellectual property and employee ownership rules. They can also review the agreement and determine its enforceability. You or your staff may not want to handover the right to potential income or use of creations.
Can the agreement be required for signing? An agreement might be able to be required as a condition of employment. If someone is being hired as an “At-Will Employee” and the contract is legal, even though it cannot be a forced signature, refusal to hire is an option if no signature is given.
Can inventions be carved out (not included in the agreement)? If an employee does work in the same field in which they’re employed, they may be able to arrange a side deal. Here’s an example: an employee developing time management apps spends their own resources and free time developing apps that help people track their calories. In this instance, the employee might want to speak with their employer before signing and be specific about their work for the company/organization as well as their own personal work. They can ask the employer to carve certain types of work out of the invention assignment. A lawyer can help with the wording in this case.
FOR THE EMPLOYER:
For what types of inventions do you or does your company/organization believe it’s important to gain ownership?
What are the state employment laws?
What is the enforceability of an Assignment Inventions Agreement in your state?
What is the employment status of current and future employees?
Determine if there is already a written agreement including an assignment of inventions or ownership of discoveries provision for your employees/independent contractors. If there is a provision, does it clearly state that the employee “hereby assigns” all rights and ownership in the intellectual property, trademarks and/or copyrights?
Is the written agreement supported by sufficient consideration? Was it executed prior to employment? If not, what additional consideration will you provide in exchange for execution of the agreement? (Considerations include distinguishing and listing employee-owned and company-owned inventions created prior to the agreement).
Have prospective employees identify, in writing, any intellectual property that they own prior to the start of employment. Have current employees update and identify, in writing, any intellectual property they believe they own and make an analysis to ensure such property was invented independent of the employees’ duties, as well as company resources.
Remind employees and independent contractors of their contractual obligations through conducting exit interviews upon completion of employment.
FOR THE EMPLOYEE / INDEPENDENT CONTRACTOR
Be sure to examine and understand what you have or will agree to in your employment agreement (examination prior to employment is best). Seek legal advice if you are not certain of the rights you have retained.
Examine any other agreements you have signed. Determine if appropriate consideration was given in the execution of them. Any agreement signed after the beginning of employment are open for challenge if insufficient consideration was provided for new obligations.
Document, in writing, any inventions or ideas made on your own time, your own equipment and with your own money. Do not rely on memory or assume that these ideas automatically belong to you.
Assess the reasonableness and enforceability of any agreements.
For what were you hired? Employee or independent contractor? This distinction matters in determining ownership. Be sure to review your contract with an employment lawyer in your state if you are uncertain and need clarification.
Are There Limitations on these Agreements?
Many states put limits on the extent an agreement can go in making an employee give up their rights. For example, in California, an agreement is not valid for inventions or intellectual property that are created by the employee on their own personal time and with their personally owned resources. However, an exception to this occurs with inventions directly or indirectly resulting from work the employee was doing for the company or if the invention relates to the company business, using company trade secrets, and/or connected to projected research and development. California also mandates that the signing employee receives a written document of the agreement. Washington, Illinois and several other states have similar laws.
Make sure, before an assignment of inventions agreement is signed, that it meets the state’s requirements. Consult with a local employment lawyer beforehand, if you are unsure.
What if No Agreement Has Been Included in the Employees/Independent Contractor’s Contract?
The basic cornerstone to an analysis of ownership is whether or not the idea was created “in the course of employment”. It is insufficient for an employer to utilize a paycheck in order to lay claim to all of an employee’s ideas and creations. The invention or idea at issue must be created ‘during the course of the employment relationship’. Therefore, if the idea is developed outside of the employment relationship, the employee may own the idea. Close examination of the relationship will reveal this. If a case is taken to court, the court will make this examination.
The examination will primarily focus on the reason for the hire. If the person was hired to create intellectual property as a part of their job, then the employer is the owner of that property. Therefore, analysis of the written contract and the parameters of duties therein can determine ownership. Without a written agreement, courts examine the nature of the position as well as employer set goals and directives. Any invention or idea that stems from these goals, generally are owned by the employer. All circumstances must be considered.
Final thoughts on patents, “shop rights”, trade secrets and trademarks.
As with copyright, patent ownership presumptively goes to the employee inventor. However, Assignment of Inventions will typically require assignment of all ideas, even patentable ones, to the employer, but even without these agreements, exclusive employee ownership and use, may not result. Employer supported developments in processes and inventions may be held as “shop rights” by said employer. This allows an employer nonexclusive royalty-free rights to continue to utilize an invention. The employer that retains these rights may not transfer or assign them to another unless it is specifically allowed. An exception to this is if a transfer occurs as a result of a business sale.
State law governs ownership in the absence of a contract. These laws assist employee assertion of ownership over trade secrets or contest the notion of trade secret where a contract is nonexistent or a contract is insufficiently specific in regard to the trade secret in contention. Ideas and/or trade secrets are up for grabs if they are not protected by trade secret law, copyright or patent, despite one’s employment, former or current.
Lastly, slogans and trademarks are not usually at issue in disputes of ownership. Trademarks belong to the user, not the creator, and therefore the company utilizing the mark for promotion or goods owns it along with the goodwill associated with it.
For a sample standard Assignment Agreement Clause, and Standard Contract Wording email firstname.lastname@example.org
The contents of this article are intended for general information only. Consult a lawyer for any legal questions you may have regarding agreements or your situation.