Many employers incorrectly believe they automatically own the inventions of their employees. An employer does not automatically own the inventions made by its employees. In fact, the general rule is that the inventor, not the employer, owns the invention, even if it relates to the employer’s business. (Officers and directors, however, may have a duty to assign their inventions where other employees typically would not.)
There is an important exception to the general rule: The employer owns the inventions of employees who are hired to invent or are later assigned that task. However, the assignment must be specific. It is not enough that the employee be assigned to conduct “research.” The U.S. Supreme Court has held that “employment merely to design or to construct or to devise methods of manufacture is not the same as employment to invent.” Where the employee is hired to, or assigned to, develop a particular product or process, the employer will generally own any inventions that result. But, where the employee is not given any specific assignment, the employee will generally retain ownership of his or her inventions.
An employer may acquire limited rights to use an employee’s invention under the shop right doctrine. A shop right is a non-exclusive, non-transferable, royalty-free license to use an employee’s invention. A shop right merely confers the right to use the invention, not the right to sell it or to prohibit others from using it. A shop right will generally arise where the inventor—employee uses the employer’s time, facilities, or materials in making the invention. In such circumstances, it is only fair that the employer obtain a right to use any invention that results.
The use of the employer’s time, facilities, or materials is not the only way a shop right can arise. A shop right may also arise where the inventor-employee consents to, or acquiesces in, the employer’s use of the invention. Having permitted the employer to use the invention, the employee cannot then complain about such use. An understanding that the employee will be compensated for the use of the invention ─ even if indefinite as to the amount ─ will prevent a shop right from arising in this manner. However, an unarticulated expectation of compensation on the part of the employee is not enough to prevent the creation of a shop right. The employer and employee are free to alter these general rules by contract. (Although some states, particularly California, may require that additional disclosures be made in order to make the Agreement enforceable.) Such a contract is generally a good idea from the perspective of both the employer and the employee. It is often very difficult to determine whether a particular employee was hired to, or assigned to, invent. It can likewise be difficult to determine whether or not a shop right has been created. A well-drafted contract regarding the ownership of employee inventions can eliminate uncertainty on the part of the employer and the employee as to who owns the invention, and reduce the chances for future conflict. An employment agreement might contain the following provisions regarding the ownership of employee inventions:
Innovations – I promise to assign, and I hereby do assign, to the Company, all right, title, and interest, in and to any idea, creation, discovery, or invention (including but not limited to any and all patent rights and copyright rights), hereinafter “Innovations”), conceived, created, or developed by me solely or jointly with others during the period of my employment with the Company, if that Innovation:
(a) was made in the scope of my employment; or
(b) was made with the use of the time, material, resources, or information of the Company; or
(c) relates to the business of the Company.
I promise to execute such further assignments and other documents, and to take such actions as reasonably required by the Company to secure, protect, and enforce its rights in and to any Innovations it owns pursuant to this Agreement.
Prompt Disclosure of Innovations – I promise to promptly disclose in writing to the Company any Innovation that I make individually or jointly during my employment with the Company, and during the year following the termination (for any reason) of my employment with the Company.
Of course, contract should be in writing so that the benefit of certainty is not lost in a later dispute over the terms of the contract, or over whether the contract is enforceable. Furthermore state laws affect just what inventions an employer can require an employee to sign.