An Employers’ Guide to Preserving Intellectual Property Rights

Posted on August 9, 2007

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Many employers assume -often wrongly- that the intellectual property employees create for their companies is automatically owned by the employer.  In fact, determining the owner of the intellectual property is a fact-driven analysis that will often depend upon the employer’s level of involvement in the creation of the intellectual property. Because of this, it is important for employers to take measures to ensure that it is clear who owns the intellectual property created for the company.

With regard to an employee that creates a work as part of his or her job, it is the employer who is the owner of the work under the work made for hire doctrine.  Employers should be aware of the exceptions to this doctrine, however, because there are employee creations and inventions that are not the property of the employer.  For example, inventions that are not created in the scope of employment are employee property.  In order to fall out of the scope of employment, the invention must be created during the employee’s personal time and without use of the employer’s resources.  In addition, prior inventions of the employee are also excluded from the employer’s portfolio, and are discussed more below.  If the employer wishes to obtain rights to a work not made for hire, the parties can agree to sign an assignment agreement whereby the employee agrees to assign certain works to the employer.

The best practice from the employer’s perspective is to require employees to sign a written agreement upon hiring them.  The employers may also have current employees sign, but courts have held they are not required to do so unless further consideration is given in the form of a raise or promotion.  This agreement should include a provision whereby the employee states that all intellectual property shall be the property of the company, minus certain exceptions such as prior inventions.  Prior inventions of the employee should be listed within this agreement- perhaps in an exhibit- (i) to avoid future disputes about what constitutes a prior invention of the employee, and (ii) to put the company on notice of prior inventions created for a prior employer so that the company is better able to avoid potential infringement situations.

Another method of avoiding disputes and preserving the employer’s intellectual property is to simply educate the employees about intellectual property in general and, more specifically, what is required of the employees with regard to the company’s intellectual property portfolio.  This may be done during employee training and by adopting internal policies to serve as a guideline for the employees. The employer should notify the employees that if they are uncertain about something, then they should ask the employer first before disclosing information that might potentially be confidential.  Let the employees know that ignorance is not an excuse. 

The value of intellectual property assets continue to rise, and with this increase, it is essential that employers clearly indicate who owns particular intellectual property assets and what employee obligations are with respect to those assets.  Utilizing some or all of the practices described above will go a long way toward decreasing disputes with employees claiming rights to the company intellectual property as their own, as well as hopefully reducing the instances of misappropriation and infringement by employees.

Elizabeth Ritter, Goodrich Law Firm, LLC

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