Does a company automatically own a patent to an invention invented by an employee who uses company resources and on company time?
Or, if a company hires an independent consultant to create a design, does a company automatically own a copyright to that design?
Surprisingly, the answer is “no” to both questions.
With careful planning, companies can avoid potentially troubling ownership pitfalls and ensure they retain ownership of their intellectual property.

Inventorship and ownership

Generally, an invention is the property of the inventor who conceived, developed, and perfected it. The law protects and enforces the inventor’s property rights in an invention unless he or she has contracted them away.
The mere fact the inventor was an employee at the time of the invention does not mean the inventor is required to assign the patent rights to the employer.
There are two exceptions to this general rule.
First, if an employee was initially hired or later directed by the employer to solve a specific problem or to exercise his inventive skills, then the employee must assign the patent rights to his employer.
Second, the employer is entitled to the patent rights if the employee signed a contract agreeing to assign the patent rights to the employer.
Even absent a pre-invention assignment or any evidence the employee was hired to invent, an employer can acquire a “shop right” if the employee uses company resources to conceive, or reduce to practice, the invention.
The shop right doctrine equitably splits the patent rights between the inventor and his employer, rather than give one party all the rights. The shop right does not grant the employer an ownership interest in the patent. It does, however, give the employer a non-exclusive, royalty-free, non-transferable license to practice the invention. However, the shop right has limited value. It allows the employer to practice the invention, but not to license it or stop others from practicing it.
For these reasons, employers should include appropriate assignment language in their employment agreement to ensure they enjoy an ownership right, rather than merely a shop right, in any patentable inventions created by their employees.

Joint inventorship

It is not uncommon for the scientists or engineers of one company to collaborate with those of another to invent and develop new technology. Collaborative research and joint venture agreements pose their own potential ownership problems.
A patented invention may be the work of two or more joint inventors. However, each of the joint inventors need not “make the same type or amount of contribution” to the invention. Rather, each needs to perform only a part of the task which produces the invention.
If an inventor is a co-inventor for a single claim in a patent, he is a co-owner of the entire patent. On the other hand, one does not qualify as a joint inventor by merely assisting the actual inventor after conception of the claimed invention.
In Ethicon, Inc. v. U.S. Surgical Corp., Ethicon sued U.S. Surgical for patent infringement for a surgical invention called a trocar. The sole listed inventor was an Ethicon scientist named Yoon.
While the suit was pending, U.S. Surgical became aware of a former Ethicon employee named Choi, and contacted him regarding his involvement in Yoon’s trocar project. When Choi confirmed his role in the trocar project, U.S. Surgical obtained from Choi a “retroactive license” to practice “Choi’s trocar related inventions.” With the license in hand, U.S. Surgical moved to correct inventorship of the patent under 35 U.S.C. § 256, claiming Choi was a co-inventor of several claims.
The U.S. District Court found, and the Federal Circuit agreed, that although Choi was only a co-inventor of certain claims, Choi was nonetheless entitled to an undivided interest in the entire patent. As an owner, therefore, Choi could grant a license to U.S. Surgical. This retroactive license immunized U.S. Surgical from past and future patent infringement of Ethicon’s patent.
Employment agreements to assign rights to the employer, as discussed above, can obviate employee issues, such as with Ethicon, but how does a company deal with potential co-inventors that are outside the company?
In typical joint ventures, the parties often agree to assign the patent rights at the beginning of the venture. In other cases, the parties may not be aware they are entering into a collaborative effort. If a company hires another firm for testing of a new product and the testing firm develops an improvement, both the company and the firm may be joint inventors of the improvement.
It is therefore advisable to include an agreement to assign patent rights, even in cases where you are simply requesting testing of a product or material.

Copyright and works-for-hire

Under the Copyright Act, the general rule is that the person who creates a work is the author of that work. However, copyright law defines a category of works called “works made for hire.”
If a work is “made for hire,” the employer, and not the employee, is considered the author. Under the 1976 Copyright Act, a “work made for hire” is a work prepared by an employee within the scope of his or her employment, or is a work specially ordered or commissioned if the work falls within one of nine specific categories, and there is a written instrument signed by both parties.
To ensure ownership in any consulting arrangement with an independent contractor, a company should ensure that certain steps are followed.
First, the company should be sure to sign a written agreement with the contractor. Second, the agreement should also include a provision in the consulting agreement providing that such items will be deemed “works made for hire” under the Copyright Act. Third, the agreement should also include a provision that if the items do not qualify as works made for hire under applicable copyright law, the consultant agrees to assign those items. A sample clause would state: “Consultant agrees to assign to Company, and hereby assigns to Company, all right, title, and interest in and to the Works including but not limited to all copyright, trademark and associated goodwill, other intellectual property rights, and moral rights.”

Steven Coyle is a partner at Cantor Colburn LLP (www.cantorcolburn.com), a leading full-service IP law firm. Steve practices litigation in the firm’s Hartford, Conn. office. His practice focuses on all areas of intellectual property litigation, including patent, copyright, trademark, and trade secrets. He can be reached at [email protected].
Chad Dever is an associate at Cantor Colburn LLP. His practice includes patent preparation and prosecution and intellectual property litigation. He can be reached at [email protected].