When you hire either as an independent contractor or an employee to design or engineer your product, you can end up not having any invention rights. When you share your invention with your friends and family, you risk reducing the value of your invention rights. The core issue is ownership. Who owns the invention or patent when you work with others? Several common ownership issues arise with situations involving independent contractors, co-inventors and employer-employee relationships. These issues can be resolved if an agreement is signed when the relationship forms between the parties. However, for those companies starting to protect their inventions, they may not have thought through the issues and obtained the appropriate agreements.
Independent contractors
Under U.S. patent laws, ownership of patent rights in an invention vests with the person that conceives the invention unless there is an agreement otherwise or unless the person was an employee specifically employed-to-invent (v. generally employed). Put simply, if an independent contractor conceives of the inventive idea, then the independent contractor owns the patent rights to the invention even if the company paid for its research and development – provided there is no agreement otherwise. As such, agreements with independent contractors need to specifically spell out the ownership rights to the intellectual property between the hiring company and the independent contractor and they need to be in writing signed by the parties.
Generally, but not always, the company is in a stronger bargaining position than the independent contractor. As such, at the start of the project, the company should require that all inventions created by the independent contractor be assigned to the company since at that stage the company can shop for other contractors willing to agree to its terms. It is also useful to have the independent contractor also assign all copyright rights and agree to keep appropriate information confidential in that same agreement to simplify the process. Independent contractors may create drawings, reports and software which are all protected by copyright. The copyrights to these things should belong to the company. Also, to the extent that there are inventions, the independent contractor should be required to keep these secret, especially since the United States has transitioned to a first-inventor-to-file system and since most other countries require filing of a patent application prior to a public disclosure.
Co-inventors
Co inventorship issues typically revolve around family, friends and business acquaintances. If an invention was invented by two or more people, then under U.S. patent laws, each of the inventors can exploit the invention without remuneration to the other co-inventor. This can create some very tense situations especially when co-inventorship status was an untended result. Typically, these issues arises when the inventor conceives of an idea and obtains feedback from family, friends and acquaintances on improvements and modifications for the invention. During this process, they may provide additional useful suggestions to improve the basic idea. These suggestions are potential inventive aspects of the inventor’s idea that the inventor may or may not want to incorporate into the patent application. Unfortunately, unless there is an agreement between the original inventor and the second inventors (i.e., co-inventors), the original inventor might not be able to incorporate the suggestions of the second inventor. The co-inventorship status was unintended. Additionally, the second inventor could seek patent protection solely on their own improvements without the original inventor. If so, the second inventor need not provide any sort of remuneration to the original inventor since the second inventor is focusing the patent only on the second inventor’s improvements.
These situations may be easier to deal with if the contribution of the second inventor is truly ground breaking. In that instance, most inventors that I’ve spoken with do not have any issue either leaving that contribution out of the application or giving the second inventor an equity stake in the potential patent rights in exchange for an assignment of the invention rights of the second inventor. The trickier situation is where the second inventor provided minor improvements and alternative embodiments to the basic idea. In that situation, although the original inventor may have already conceived of these minor improvements and alternative embodiments, the second inventor may still contend that he or she has ownership rights to any patents that might be granted on the invention.
These personal relationships and potential contributions of others should be identified and managed before filing of a patent application.
Employer-employee
As I’ve stated above, generally, invention rights vest with the person that conceives of the idea unless there is an agreement otherwise or unless the person is an employee specifically employed to invent the subject matter of the invention. Various states have different laws that affect employee assignments and ownership, such as California Labor Code §§2870-72.
If an employee conceives of an invention, then the issue is whether there is an agreement that specifies who owns the invention. If there is no agreement, then the employee may own the invention unless the employee’s invention was within the scope of his or her employment. In that case, the employer may own the invention under the employed-to-invent doctrine. To win on the employed-to-invent doctrine depends on the employee’s job description and other factors which may be uncertain and lead to litigation. Instead of relying on the employed-to-invent doctrine, many companies require new hires who are being employed to invent enter into an invention assignment agreement to expressly transfer ownership of company-related inventions to the employer. Most job applicants are willing to assign their inventions if their employment depends on doing so. It is a more difficult to have an employee sign such an invention assignment agreement after employment begins because separate contractual “consideration” must be given for the employee’s promise to assign their invention rights away but it can be done. Even if the employer ultimately losses on the ownership issues, bear in mind that the employer may still have shop rights to the invention which allows the employer to use the invention without remuneration to the employee.
The specific rules vary from state to state and also vary with the specific factual situations, and thus the above comments are for general information only and do not constitute legal advice upon which you should rely.
I invite you to contact me with your patent questions at (949) 433-0900. Please feel free to forward this article to your friends. As an Orange County Patent Attorney, I serve Orange County, Irvine, Los Angeles, San Diego and surrounding cities.