Making intellectual property rights patently clear

Imagine a situation in which an employee creates an invention or produces a work for an employer. Who owns the patent rights or copyright for the invention or work?In the absence of an express, written employment contract clearly allocating ownership of intellectual property rights, answering that question may be difficult and costly for both employee and employer.Courts will generally honor a valid employment agreement defining ownership of intellectual property rights between an employer and an employee. However, in the absence of such an agreement, courts turn to state case law to determine ownership of inventions, and federal statutes to determine copyright ownership.Patent rights ordinarily remain with the employee in the absence of an express agreement stating otherwise. However, the nature of the employer-employee relationship and the circumstances surrounding the creation of the patented invention may give rise to some notable exceptions.Three general scenarios that may arise in a dispute over ownership of patent rights include: • An employee is hired to invent, to “accomplish a prescribed result,” or to “aid in the development of products” • An employee is not hired to invent, but acts within the scope of employment and/or uses the employer’s resources to invent • An employee is not hired to invent, and acts outside the scope of employment and/or uses his own resources to inventIn the first scenario, courts usually find that the employer owns the patent rights to the invention. The New Hampshire Supreme Court held in Vigitron Inc. v. Ferguson, (1980) that the “product of one who is hired to invent, accomplish a prescribed result, or aid in the development of products belongs to the employer in the absence of a written contract to assign.”In the second scenario, courts have often refused to find an automatic assignment of patent rights to the employer when the employment has only supplied the employee with the “mechanical skill, scientific knowledge and inventive faculties” to create an invention, or where the employer has simply employed “a skilled workman … to take charge of its works, and to devote his time and services to devising and making improvements in articles there manufactured.”Although in this scenario, the employee retains ownership of the invention, the employer may receive “shop rights” — the non-exclusive, non-transferable and royalty-free license to use the invention.However, different courts will consider different factors to determine if shop rights exist. Some courts will focus on whether the employee developed the invention on the employer’s time and at the employer’s expense. Other courts may focus on the employee’s consent to the employer’s use of the invention.In the third scenario, courts have generally found that an employee retains ownership of patent rights in his invention. No shop rights exist, and the employee may freely negotiate with the employer a license or assignment agreement for the invention.Copyright ownershipCopyright ownership is governed by the Copyright Act of 1976. In the absence of an express, written agreement, ownership of the copyright remains with the employee-author of the work unless the work is considered a “work made for hire.”Ownership of the copyright for a “work made for hire” belongs to the employer. Section 101 of the Copyright Act defines a “work made for hire” as: •A work prepared by an employee within the scope of his employment • A commissioned or specially ordered work that falls into specific defined categories and the parties expressly agree in a written instrument signed by both parties that the work is considered a “work made for hire”Without the express written agreement signed by both parties, the work cannot be considered a “work made for hire” under the second category.Without an express written agreement defining assignment of intellectual property rights, the ambiguity over the nature of the employer-employee relationship, the circumstances surrounding the creation of the invention or work, and the scope of employment may lead to difficult and unpredictable court proceedings, or worse – the loss of potentially lucrative intellectual property rights. An employment contract expressly assigning inventions and works to the employer or employee is the first step in making ownership of intellectual property rights patently clear.Paul C. Remus, chair of the Patent, Trademark & Licensing Group of Devine, Millimet & Branch, Manchester, can be reached at 603-669-1000 or premus@devinemillimet.com. LeinWeih Andrew Tseng, an intern at the law firm, is a student at UNH School of Law.