In today's "information age," it is nearly universal practice for employers to require employees involved in research and development (R&D) or other technical work to sign so called "pre-invention assignment agreements" prior to employment. These assign to the employer ownership rights over any inventions created while employed. Below, we discuss the purposes and effects of these agreements.
Although such agreements are common and enforceable in all states, some states, including California, impose restrictions on them.
For more information on patent rights in the workplace, see Who Owns Patent Rights? Employer or Inventor?
As with most legal issues, the sooner you recognize a potential conflict, the better. Before beginning work on any invention on your own, read your employment agreement (and any other written agreements you have with your employer or former employers) to determine whether they contain any pre-invention assignment provisions. Don't forget to check your employee manual or other employee guidelines.
Based on what you find in these documents, you can determine your best course of action. For example, if your employment agreement explicitly assigns all inventions to your employer, you might be less likely to put personal time and funds into the invention process.
If your employment agreement does not include such an assignment, but other documents that you didn't sign but are expected to comply with do (like an employee manual) do, you might have a legal argument that such an agreement is not binding. In this case, you might wish to consult with an intellectual property attorney.
What exactly does a pre-invention assignment contain? There are no standard forms for these agreements, and they can vary widely in language. Consequently, it's important to review your employment agreement carefully, and consult an attorney if unsure of your rights.
Still, most pre-invention assignments include three parts:
Many agreements contain additional clauses as well. Let's examine how these three sections work together to transfer your intellectual property rights to your employer, and take a look at some possible additional clauses.
This requires the employee to assign any intellectual property rights over inventions made during the course of employment to the employer. It's the most important (and the only necessary) clause for establishing the employer’s total ownership of the potential patent.
Read this provision carefully. It might cover only employee inventions made during the work day and in the office, or it might cover virtually anything you "create," including outside of traditional work hours.
A sample assignment provision in an employment agreement might read like this:
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.
As a practical matter, the employer will probably not find out that it owns your invention unless you tell it of its existence. This clause puts an affirmative obligation on you, the employee, to do so. The precise language can also differ from agreement to agreement, but might state something like:
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.
A power of attorney clause guarantees that the employer can register and administer the ownership rights of any invention 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 (or consent).
While the exact language differs from one agreement to the next, it might look something like:
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 a period of time after their employment concludes.
Of all the provisions in pre-invention assignments, “holdover clauses” are the most legally suspect and problematic for employees. The reason employers use such clauses is obvious: They're afraid you will walk out the door without mentioning an invention you created while employed, then later develop and patent it yourself.
Fortunately for employees, courts are hesitant to enforce such post-employment assignment provisions. Such provisions can make it impossible for an employee to obtain a new job, given that a prospective new employer does not want to be subject to lawsuits by a former employer claiming that it owns an invention developed by its ex-employee. Even starting a new company can be tougher with the prospect of legal barriers.
To protect employees, most 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. As with noncompetition clauses, different courts and different states will enforce post-employment assignment agreements to varying degrees.
A holdover clause in an employment agreement might include language such as:
I will disclose to the Company any and all inventions, improvements or discoveries actually made, or copyright registration or patent applications filed, within six 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 six-month period immediately preceding the termination of my employment.
Do not assume you can escape a pre-invention assignment by quitting your job and immediately patenting the invention that lists yourself as owner. Many employers could see this as suspicious and file suit against you.
This was the situation in the case of Syntex Ophthalmics, Inc. v. Tsuetaki, 701 F.2d 677 (7th Cir. 1983).) 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. The court agreed that the chemist must have conceived of the compounds—which related directly to his job—before quitting. Therefore, the pre-invention assignment applied and the chemist had to assign ownership to the company.
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. The employee is then required to waive any right to claim that any other invention was created before starting 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 inventions that you have not patented. Otherwise, you could lose your ownership rights in them. (The waiver cannot apply to patents you already hold, since the existence of the patent would prove you created the invention before your employment began.)
A waiver clause in an employment agreement might include language such as:
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.
What happens if you do not have any sort of pre-invention assignment clause in your employment agreement? Over the past century, 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.
Under these default rules, depending on the employee's employment status and the circumstances of the employment (full-time versus part-time, for example), 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—effectively, the same practical result as if the employee had actually signed a pre-invention assignment.
In other cases, however, the employee might not have a duty to assign the invention, or might only have to give the employer a shop right, which is 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.
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, develop or invent a specific product, device or procedure, or to be generally inventive—that is, do research and development for the employer.
In these situations, employees are viewed as having 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 meets that criteria, 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, and who was also not hired to invent or develop new products or technology, usually owns the rights to any patentable inventions or trade secrets he or she creates.
However, the employer might be entitled to 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 (perhaps by building and testing it or filing a patent application). This might apply if, for example, the employee did a substantial amount of the work during business hours or used the employer’s equipment, or if the invention was closely related to the employee’s job duties, or if 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 is nontransferable by the employer.
Consider this 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 owned these patents. With 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. (This was the situation in 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.