Who Owns Patent Rights? Employer or Inventor?

Whether an employer owns a patent depends on the agreement between the parties as well as other factors.

Imagine that you work in a pharmaceutical lab for a large drug company. During the course of your work on their drug formulas, you figure out a new combination of chemicals, and method of combining those chemicals, that dramatically increases the effectiveness of the drug. Who owns the rights to that invention?

One could imagine “moral” arguments on both sides of that question: You did all of the intellectual work; if not for your imagination and ingenuity, the new drug would never have been created. But it was your employer that provided the lab, the chemicals, and the machinery necessary for you to create the drug—and indeed, you created the drug while your company paid your salary. So which side does patent law favor?

Employers Generally Control Employees’ Patents

The general rule is that you own the patent rights to an invention you create during the course of your employment unless, either: (i) you signed an employment agreement assigning invention rights; or (ii) you were specifically hired (even without a written agreement) for your inventing skills or to create the invention.

In practice, one of those two exceptions almost always applies, thus ensuring that employers typically hold the patents to their employees’ creations. Almost all sophisticated employers, particularly those hiring workers at chemical companies, technology firms, or design companies, will require employees to sign pre-invention assignmentsat the time of their employment. These are often included in the employment documents that an employee will fill out on his or her first day—documents that probably also include non-disclosure and confidentiality agreements.

Pre-invention assignments can vary in scope. For example, some might include all inventions created by employees during their terms of employment, while others include only inventions made on the employer’s property during work hours that relate to the employer’s business. (For example, a pre-invention assignment agreement might not cover a chemical company employee who writes a piece of code for a video game on his lunch hour using his own laptop.)

Moreover, if a company explicitly hires an employee to invent a product, or to work on a product, that employer controls the patent rights. This patent law concept is analogous (though somewhat more complex) to the copyright law concept of work-for-hire.

Shop Rights Provide Additional Avenues of Control to Employers

Importantly, even if your employer does not acquire ownership of the patent under one of these two methods—the pre-invention assignment or the work-for-hire concept—the employer may still acquire a limited right to use your patent (called a shop right) without paying you.

Shop rights arise when an employee uses an employer’s resources, such as its computers or laboratories, to create an invention. While this doctrine is flexible, it generally allows employers to continue to use the employee’s invention internally, but not to sell or assign that invention to third parties. The concept arises from the common law (created by courts, not legislatures) and is considered to be an equitable arrangement whereby employers still benefit, to some degree, from their employee’s inventions that they helped to subsidize.

Consult Your Attorney

Before signing an employment agreement, consider whether you are likely to invent a product or some other innovation during the course of your employment. If so, beware of pre-assignment clauses of your patent rights.

Indeed, you should work with an attorney who has patent experience in order to clarify your concerns and negotiate as narrow an assignment as possible. As you can see from the outline above, patent law tends to favor the rights of employers when employees create inventions on the job.

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