Many business owners don’t put a lot of thoughts into their Intellectual Property (“IP”). However, it’s never too early to start managing your IP when you decide to hire new employees or independent contractors. You would get their help to create patents, design products, market your brand and build up your clients. At the same time, it’s critical for the business owner to retain proper ownership of these IPs to avoid unnecessary losses and disputes down the road. This article will help you plan your IP wisely as a business owner.
Although some products like PC games may have more than one IP protection, let’s discuss the most common categories of IPs: patents, copyrights, and trademarks.
Because the U.S. patent law generally favors inventors, the employer is advised to get a written assignment to acquire legal ownership of the patent from employees or contractors. A simple example would be:
“The Employee agrees to assign the Employer all present and future rights, title, and interests to all Patents created during their employment.”
If you forget to put this clause in your employment agreement, you could rely on the “hire-to-invent” aka “work made for hire” doctrine to claim equitable ownership. In this situation, the employer or contractor is specially hired to invent and has the implied obligation to assign the invention to you. But you should be aware that the claim will not help you transfer the legal ownership of the invention to yourself, it will only help you prevent infringement. Gellman v. Telular Corp., 449 F. App’x 941, at *2-3 (Fed. Cir. 2011). License is different from ownership, an employer could use an employee’s patented invention if the employee uses the employer’s materials, tools, or facilities to develop the invention. McElmurry v. Ark. Power & Light Co., 995 F.2 no d 1576, 1580-81 (Fed. Cir. 1993). Take a Drug company as an example, the company provides the lab, the research resources, and necessary equipment for all the experiments. And one employee came up with a genius idea to use the mRNA technology to create a new vaccine. Even if the employee was hired to do unrelated tasks and didn’t sign the IP assignment with the company, the company may have an implied right to use mRNA vaccine when the employee used the company’s facilities to invent the vaccine. This is also known as “Shop Right.” Having a license is far inferior to owning the patent outright, so having the assignment clause is critical for the business owner to claim proper ownership of the patent.
A written IP assignment is always the best to ensure your IP rights. As we mentioned above, if the work is within the scope of “work made for hire,” you don’t need to worry about your IP ownership too much. A court will look at the factors such as duration of the relationship, tax treatment, and the locations to decide whether the creator is your employee. Similar to Patent, either work created within the scope of employment or specially commissioned work will give the employer copyright ownership. Don’t forget about independent contractors, make sure you signed a “work for hire” instrument when the work falls within certain categories. 17 U.S.C. § 101.
In the US, trademark protection is based on use. For a business, if you are the first to use the trademark to identify your services or products, you have the ownership. Also, if your employees and contractors use your trademark on behalf of the company, you still have ownership of the trademark. Intellectual Property: Employees and Independent Contractors, Practical Law Practice Note w-002-9206
When employees or independent contractors create inventions and other work products, just remember the employer’s ownership rights depend on the specific type of work products. Hope this article helps!