The big problem here is that ownership of the rights to the invention may arise and vest with multiple people because of the way that the invention was created. However, to fully exploit the inventive technology, those that contributed to the invention should assign the invention rights to a single entity, such as a person or a corporation. Otherwise, the co-inventors can destroy the value of the invention and harm the other owner(s).
Ownership is one of the concepts that should be clarified and investigated prior to the filing of a patent application. The reason is that if a single inventor does not entirely own the invention rights he or she cannot effectively seek patent protection for the idea. When there are multiple inventors, inventive rights vest (i.e., belong) to the inventors who conceive of the invention. Invention rights split between multiple inventors (i.e., not controlled by any one entity) arise from relationships such as co-inventorship, investor–inventor relationships, independent contractors, and employer–employee relationships and may cause the inventors from exploiting the technology for fear of what the other co-owners might do to harm the others if there is a disagreement. To avoid these problems, these inventive rights should be transferred to a single entity by “assignment,” as explained below.
“Co-inventorship” is the situation where two or more people collectively come up with an idea to solve a problem. This group of people is known as the “inventive entity.” At the beginning, each inventor included in the inventive entity owns one hundred percent of the invention. Each of the co-inventors may think that he or she does not want to harm the other inventor(s), but over time feelings may change. Business pressures and personal problems may impose new duties and obligations on the co- inventors. Fights and disagreements may cause co-inventors to have very different views on how to commercialize the patent(s) or market products under the patent. Another downside to co-inventorship is that under United States law, each inventor can market and sell the patented invention without accounting for, or sharing, his or her profits with the other inventor(s). Additionally, any of the inventors can act against the interest of any other co-inventor by dedicating the invention to the public (i.e., allowing it to be designated part of the public domain) without permission from a co-inventor.
To mitigate potential disagreements, the co-inventors may enter into a “joint exploitation agreement.” In this agreement, the co-inventors mutually agree that they will not dedicate the invention to the public. They also agree that they will not market or sell the invention separately. Another more common means of protecting co-inventors is to form a corporate entity (e.g., L.L.C., S–Corporation, etc.) and assign the invention rights to the corporation. In this case, the co-inventors will split the shares of the corporation and, through the corporate structure, determine the rights and responsibilities of each of the co-inventors. This may deter inventors from harming the patented invention owned by the business due to their duty of loyalty to the corporation.
Ownership conflicts may also arise in inventor–investor relationships. An inventor may contribute the invention rights to the business while the investor contributes monetary funds. In other words, the inventor puts forth sweat equity and the rights to the invention, whereas the investor puts forth monetary equity. However, the inventor owns the inventive rights unless he or she assigns them to another person.
To protect both parties, the inventor should not assign any percentage (i.e., less than 100%) of the invention rights to an investor even if the investor is asking for this. Doing so would not be optimal for the inventor or the investor. If there is a disagreement between the investor and inventor, they can each harm the invention’s value by dedicating the inventive rights to the public or licensing the rights to a competitor without accounting for profits to the other co-inventor.
An assignment of 100% of the rights to the investor can hurt the inventor, as well. The investor can now sell or license the rights to the invention to a third party without compensation to the inventor or start a new company without the inventor. This is not a good situation for the inventor. In this case, the inventor now has no ownership rights or interest in the patent rights and the investor can harm the inventor.
To avoid these types of situations, the inventor should assign the invention rights to a corporation. At the corporate level, the shares, money, and/or employment opportunities can be divided as desired, and the rights and responsibilities of the all parties decided. Their duty of loyalty to the corporation prevents both parties from doing things that might devalue the invention.
Ownership issues could also arise in a relationship between an inventor and an independent contractor (e.g., consultant, engineer, designer). As established, the inventive rights vest with the person that conceives of the invention, unless an assignment occurs. An independent contractor who conceives of an invention, even a small part, owns his or her part of the invention. If that part of the invention is incorporated into the inventor’s patent application, and the application later matures into a patent, the independent contractor owns the entire patent along with any other inventor. To avoid this, the inventor should request that the independent contractor sign an “invention assignment agreement.” In this agreement, the independent contractor “agrees to assign and does hereby assign” the inventive rights to the company when the independent contractor conceives of an invention. This is a common requirement in independent contractor agreements and many independent contractors do not take issue with signing an invention assignment agreement. That is, of course, unless the assignment is so broad that the independent contractor would be precluded from seeking employment from other companies. The agreement should be reasonable in scope and seek only to assign inventive rights (solely applicable to the job they were hired for) to the hiring company.
If the independent contractor is unwilling to execute an assignment agreement, then a suitable solution may be an agreement that you would have a license to any technology the independent contractor incorporated into your product. The purpose of this fall-back position is to allow you to go to any other independent contractor and not be locked into a particular independent contractor.
Conflicts may also occur in employer–employee relationships. Many companies at their inception are small and funds are tight. These companies may not have formal employer–employee agreements wherein the employee agrees to assign all invention rights to the company. As companies grow, they may rely on goodwill and tight-knit relationships between employers and the employees. However, this goodwill is not enforceable in a court of law. Employers should therefore enter into an invention assignment agreement with employees. Without it, the employee may retain his or her invention and the invention rights would not belong to the employer. These assignment agreements are desirable for project developers, sales personnel who come up with ways to improve the company’s product, and/or employees involved in manufacturing who might have insight into the most efficient way of making products.