Employee Inventions

The default rule: employment determines ownership

US patent law does not automatically assign an employee's inventions to their employer — this is a common misconception. Unlike copyright (where works created by employees within the scope of employment are automatically 'works for hire' owned by the employer), patent rights vest initially in the named inventors. For an employer to own an employee's patent, there must be either (1) an express written assignment agreement (like a PIIA) or (2) the inventor falls within certain judge-made categories where assignment is implied: the employee was hired specifically to invent, or they used employer resources. Without a PIIA, employee inventors own their own patents.

PIIA agreements: the foundation of startup IP

A Proprietary Information and Inventions Assignment agreement (PIIA) is the standard contract used by companies — especially startups and technology companies — to ensure they own the IP created by their employees. A well-drafted PIIA: assigns all inventions conceived during employment that relate to the company's actual or anticipated business; requires the employee to maintain company confidential information; requires cooperation in patent prosecution (signing documents, testifying at the USPTO); includes a prior inventions schedule where employees list anything they owned before employment that they wish to exclude from the assignment; and complies with applicable state laws on employee invention protections. A PIIA must be signed before the employee starts work — PIIAs signed after commencement of employment may face consideration challenges.

California's § 2870: limits on employer claims

California Labor Code § 2870 is the most important employee protection in US IP employment law. It voids PIIA provisions that require employees to assign inventions that: (1) were developed entirely on the employee's own time; (2) did not use the employer's equipment, supplies, facilities, or trade secrets; (3) do not relate at the time of conception or reduction to practice to the employer's business or reasonably anticipated business; and (4) do not result from the employee's work for the employer. Any PIIA provision purporting to require assignment of inventions meeting all these criteria is void and unenforceable in California. Similar statutes exist in Delaware, Illinois, Minnesota, North Carolina, Washington, and Nevada, each with slightly different scope and requirements.

The shop right doctrine

When an employee invents something using company time and resources but without signing a PIIA, the employee retains ownership but the employer acquires a 'shop right' — a royalty-free, non-exclusive, non-transferable license to practice the invention. The shop right does not give the employer ownership or the ability to exclude the inventor from licensing the technology to others. This is a judicially-created equitable doctrine, not a statutory right. The practical effect: a company without proper PIIAs may find that a departed employee — who owns their invention — can freely license it to a competitor. The shop right is an inadequate substitute for a PIIA. Companies discovered this in costly litigation before PIIAs became standard practice.

Contractor vs. employee: the critical distinction

The rules for employee IP differ significantly from contractor IP. For employees, a PIIA provides broad assignment coverage. For independent contractors, there is no automatic assignment — contractor inventions belong to the contractor unless there is an explicit written IP assignment clause in the engagement agreement. Many companies make the mistake of assuming that a 'work for hire' provision covers contractors' patent rights; it does not — 'work for hire' covers copyright but not patent rights, which vest in the named inventor (the contractor). Every contract with a contractor who may develop inventions should contain an explicit clause: 'Contractor agrees to assign and hereby assigns to Company all right, title, and interest in any inventions....' developed under the contract. Without this, the contractor owns the patent.

Prior inventions disclosures in PIIAs

A well-drafted PIIA includes a schedule of prior inventions — a list of inventions, original works, or developments that the employee created before joining the company and that they wish to explicitly exclude from the assignment obligation. If the schedule is blank, it means the employee had no prior inventions. If the schedule lists specific items, those items are excluded from the PIIA assignment and remain the employee's property. Prior inventions disclosures serve two purposes: (1) they protect employees from having pre-employment work swept up in the PIIA; (2) they protect the company by creating a clear record of what the employee entered with and can use to establish an unfair head start claim if the employee brings prior IP into their work at the company.

University researchers and inventor rights

University employees — professors, researchers, postdoctoral fellows — operate under institutional IP policies rather than private-sector PIIAs. Most US universities assert ownership of inventions created using university resources, under employment, or relating to university-funded research through their Technology Transfer Offices (TTOs). Bayh-Dole Act (1980) established that universities can own inventions made with federal funding — but it requires universities to disclose, patent, and commercialize such inventions or return the rights to the government. Inventor royalty sharing policies at universities typically give inventors 20–50% of licensing revenues after costs. In the Ninth Circuit and under some state laws, faculty may retain rights to inventions outside their specific employment duties if the university policy so provides.

IP issues for departing employees and founders

When employees or founders leave a company, several IP issues arise. Continuing assignment obligations: a PIIA's invention assignment typically covers inventions conceived during employment, even if they are first disclosed or reduced to practice after departure — with a time-limited period after departure (often 6–12 months) during which post-departure inventions in the former employer's field are presumptively covered. Confidentiality obligations survive termination and are typically indefinite for trade secrets. Non-compete agreements: in California, these are void and unenforceable for employees (Bus. & Prof. Code § 16600); in most other states, reasonable non-competes are enforceable. Inevitable disclosure doctrine: some states allow employers to enjoin a departing employee from working for a competitor if their new role would inevitably require disclosure of trade secrets — California does not recognize this doctrine.

Frequently Asked Questions