Pre-Invention Assignment Agreements
Employers routinely require employees to sign agreements assigning inventions in advance ...
Today, it’s a nearly universal practice for employers to require employees involved in research and development (R&D) or other technical work to sign agreements assigning in advance to the employer their ownership interest in any inventions they create while employed. Such pre-invention assignment agreements are perfectly legal in all states. However, eight states, including California, impose restrictions on them. Click here to read Who Owns Patent Rights? Employer or Inventor?
Before you begin work on any invention on your own, read your employment agreement (and any other agreements you have with your employer or former employers) to determine if they contain any pre invention assignment provisions. These provisions might also be located in your employee manual or in other employee guidelines—which may or may not be considered legally binding terms of your employment agreement.
NOTE: If you’ve already developed an invention and are not sure whether it falls within your pre-invention assignment agreement, consult with an intellectual property attorney.
What’s in a Pre-Invention Assignment?
There are no standard forms for pre-invention assignments. They can vary widely. That’s why it’s so important to read yours carefully. If you don’t understand it, ask your employer for an explanation or take it to an intellectual property attorney.
A pre-invention assignment typically includes at least three parts: an assignment provision, a disclosure provision and a power of attorney. Many agreements contain additional clauses as well.
The assignment provision requires the employee to assign his or her inventions to the employer. This is the most important (and the only necessary) requirement for the employer’s total ownership of the patent. Be sure to read this provision very carefully, because they are not all the same. Some only cover employee inventions, others cover virtually anything the employee creates, including ideas.
Sample Assignment Clause
Assignment of Developments. I agree that all inventions that are (a) are developed using equipment, supplies, facilities or trade secrets of the Company; or (b) result from work performed by me for the company; or (c) relate to the Company’s current or anticipated research and development will be the Company’s sole and exclusive property and are hereby assigned by me to the Company.
The employer won’t know it owns an employee’s invention unless the employee informs the employer of its existence. This clause requires you to do that. These clauses can also differ from agreement to agreement. Many are limited like the following sample. Others purport to cover anything the employee creates while employed.
Sample Disclosure Clause
Disclosure. While I am employed by the Company, I will promptly inform the Company of the full details of all inventions, discoveries, improvements and innovations, whether or not patentable, copyrightable or otherwise protectible, that I conceive, complete or reduce to practice (whether jointly or with others) and which:
(a) relate to the Company's present or prospective business, or actual or demonstrably anticipated research and development; or
(b) result from any work I do using any equipment, facilities, materials, trade secrets or personnel of the Company; or
(c) result from or are suggested by any work that I may do for the Company.
Power of attorney provision
This clause guarantees that the employer can register and administer the ownership rights without the employee, even if he or she is willing and able to assist. For example, the employer can apply for a patent without the employee’s help. This provision is fairly standard in all agreements, and shouldn’t be a cause of controversy.
Sample Power of Attorney
Power of Attorney. If the Company is unable to secure my signature on any document necessary to obtain or maintain any patent, copyright, trademark or other proprietary rights, whether due to my mental or physical capacity or any other cause, I hereby irrevocably designate and appoint the Company and its duly authorized officers and agents as my agents and attorneys-in-fact to execute and file such documents and do all other lawfully permitted acts to further the prosecution, issuance and enforcement of patents, copyrights and other proprietary rights with the same force and effect as if executed by me.
In addition to the three clauses listed above, many pre-invention assignment agreements require employees to assign ownership of their inventions for some time after their employment ends. Of all the provisions in pre-invention assignments, “holdover clauses” are the most legally suspect. The reason employers use such clauses is obvious: They’re afraid you’ll walk out the door without telling them about an invention you created while employed and later develop and patent it yourself. However, courts don’t like such post-employment assignment provisions (also called “holdover clauses”) because they can make it impossible for an employee to get a new job. After all, a prospective new employer doesn’t want to be subject to lawsuits by a former employer claiming that it owns an invention developed by its ex-employee. To protect employees, courts will enforce holdover clauses only if they are reasonable. To be reasonable, a holdover clause must: (1) be for a limited time—probably no more than six months to one year after employment ends; and (2) apply only to inventions conceived as a result of work done for the former employer. Some courts are even more restrictive and will enforce such clauses only for inventions made using the ex-employer's trade secrets.
Sample Holdover Clause
Holdover Clause: I will disclose to the Company any and all inventions, improvements or discoveries actually made, or copyright registration or patent applications filed, within 6 months after my employment with the Company ends. I hereby assign to the Company my entire right, title and interest in such inventions, improvements and discoveries, whether made individually or jointly, which relate to the subject matter of my employment with the Company during the 6 month period immediately preceding the termination of my employment.
Patenting Immediately After Quitting Creates Suspicion
Don’t assume you can get out of a pre-invention assignment by quitting your job and immediately patenting the invention listing yourself as owner. For example, a chemist employed by an optics company signed a pre-invention agreement without a holdover clause. He quit his job and four days later prepared a patent disclosure describing his discovery of four chemical compounds useful to manufacture contact lenses. The company filed suit, claiming that the chemist must have developed the compounds while employed with the company. The court agreed that it was highly implausible that the chemist could have conceived the compounds—which related directly to his work for the company—so soon after quitting. Therefore, the pre-invention assignment applied and the chemist had to assign ownership to the company. (Syntex Ophthalmics, Inc. v. Tsuetaki, 701 F.2d 677 (7th Cir. 1983).)
Finally, in addition to the assignment provision discussed above, many agreements contain a provision requiring the employee to list all inventions he or she conceived or patented before starting work with the company. Then, the employee is required to waive any right to claim that any other invention was created before his or her employment. This eliminates one important defense an employee may have against a pre-invention assignment: that the invention was conceived before he or she began working for the company and is therefore not covered by the assignment agreement. If your agreement contains such a clause, be sure to list all your inventions you haven’t patented. You could lose your ownership rights in those you fail to list. (The waiver can’t apply to patents you already hold, since the existence of the patent would prove you created the invention before your employment began.)
Sample Waiver Provision
Waiver: I have listed on the back of this agreement all inventions and discoveries that, before the start of my employment, I made or conceived and owned or had an interest in. Any inventions or discoveries not so listed shall be deemed made or conceived during my employment. This provision does not apply to inventions I patented before the start of my employment.
Learn more about Patent Ownership Issues.
Default Rules When There is No Pre-Invention Assignment
Over the last 100 years or so, the courts have developed rules governing patent ownership by employees. These rules apply only if you did not sign a pre-invention assignment giving ownership of your inventions to your employer, or if the assignment you did sign is found by a court to be invalid. In effect, they apply only by default. They usually don’t come into play because most companies prefer to have their employees sign pre-invention assignments, rather than rely on these rather ambiguous rules.
Under these default rules, depending on his or her employment status and the circumstances, an employee may be deemed to have created an implied contract to assign the invention to the employer. This means that the employee has a legal duty to assign ownership to the employer; the same practical result as if the employee had actually signed a pre-invention assignment. In other cases, however, the employee may not have a duty to assign the invention, or may only have to give the employer a shop right, a type of nonexclusive license.
To determine how these rules apply to you, you must know your employment status. Employees are classified under these rules as either employed to invent or noninventive.
Employed to Invent
Employers obtain ownership of the patent and trade secret rights in any inventions created by employees employed to invent. Employees are employed to invent if, at the time the invention was conceived, their primary job responsibility was:
to solve a problem or develop or invent a specific product, device or procedure, or to be generally inventive—that is, do general research and development (R & D) for the employer in a particular area.
In these situations, employees are deemed to have agreed to assign (transfer) to the employer whatever rights they may have had in any invention or trade secret they create at the employer’s request and expense. This assignment is made in return for their salary or other compensation.
However, a person employed to invent may be able to keep ownership of an independent invention. The clearest example of an independent invention is one that is:
conceived outside the scope of employment unrelated to the employer’s business, and developed without any employer assistance.
If your invention was outside the scope of employment and unrelated to your employer’s business, but you did use employer resources (for example, developed it on company time or using company equipment), you might still be able to retain ownership. But your employer would likely have a shop right as described in the following section.
An employee who has not signed a pre-invention assignment or is not hired to invent or develop new products or technology usually owns the rights to any patentable inventions or trade secrets created by the employee. However, the employer may be entitled make, use and sell the invention without the employee’s permission and without paying the employee for the use if: the employee used the employer’s resources in conceiving the invention or reducing it to practice (building and testing it or filing a patent application)—for example, the employee did a substantial amount of the work during business hours or used the employer’s equipment, or the invention was closely related to the employee’s job duties, or the employee allowed the employer to promote the invention with a reasonable expectation of royalty-free use by the employer.
This type of license is called a “shop right.” It is nonexclusive (it does not prevent an employee-inventor from transferring patent rights to others) and nontransferable by the employer.
EXAMPLE: Hewett worked as foreman in the Samsonite Corporation’s model shop where he helped build prototypes of new products. Hewett wasn’t hired to invent anything, so he was not asked to sign a pre-invention assignment. While working in the shop, on his own initiative Hewett invented or helped invent three products that Samsonite later patented, including a soft sided luggage case. After being laid off by Samsonite, Hewett filed suit claiming he was the owner of these patents. Since there was no enforceable assignment agreement, the default ownership rules applied. The court held that, because Hewett was not hired or paid to invent, he was entitled to ownership of the patents. However, Samsonite was entitled to a shop right because Hewett did his inventing on company time using company resources. This meant that Samsonite could go on manufacturing and selling products containing Hewett’s invention without paying him. However, Hewett could now attempt to license his inventions to others. (Hewett v. Samsonite Corporation, 32 Colo. App. 150 (Colo. 1973).)
You need only be concerned about shop rights if the invention was created on the employer’s time or using the employer’s resources (materials, supplies or trade secrets). If it wasn’t, the shop right rule is irrelevant.
Portions of this article are derived from What Every Inventor Needs to Know About Business & Taxes by Attorney Stephen Fishman.
For assistance with the preparation and filing of a provisional patent application, see Nolo’s Online Provisional Patent Application.