Employment Agreements & Patents

An invention assignment agreement (IAA) is the primary document that determines patent ownership in the employment context: STANDARD IAA PROVISIONS: INVENTION ASSIGNMENT CLAUSE: the core provision; the employee agrees to assign (transfer ownership of) to the employer all inventions that: are conceived or reduced to practice during employment; were made using company resources (time, equipment, facilities, information); relate to the company's actual or reasonably anticipated business; result from work performed for the company; DISCLOSURE OBLIGATION: employee must promptly and fully disclose to the company all inventions made during employment (even those the employee believes may not be covered by the assignment clause); allows the company to evaluate inventions early; protect company confidentiality for these disclosures; ASSISTANCE OBLIGATION: employee must cooperate with patent prosecution after the invention is assigned (sign documents; provide declarations; assist with the patent application); typically extends post-termination; PRE-EXISTING INVENTIONS: the employee lists pre-existing inventions at time of hire; these listed inventions are excluded from the assignment obligation; CRITICAL: failure to list a pre-existing invention → the company may claim it as an assigned invention; CONFIDENTIALITY: employee must maintain confidentiality of company inventions; cannot disclose or use company inventions outside of employment; extends post-termination for as long as the information remains confidential; ADDITIONAL CONSIDERATION: in some states, an IAA signed after employment begins (not at hiring) requires new consideration beyond continued employment to be enforceable; WHAT AN IAA DOES NOT TYPICALLY COVER: inventions excluded by state law (developed entirely on personal time without company resources and unrelated to company business); pre-existing inventions listed in the agreement; inventions conceived after termination of employment without using company information or resources.

Several states explicitly limit what employers can require employees to assign: CALIFORNIA — LABOR CODE § 2870 (most protective): an IAA provision is VOID and unenforceable if it requires assignment of inventions that: are developed entirely on the employee's own time; without using the employer's equipment, supplies, facilities, or trade secret information; AND do not relate to the employer's current or reasonably anticipated business; AND do not result from work performed for the employer; EXAMPLE: a software engineer at Google invents a mobile app unrelated to Google's business, working on weekends on personal equipment → the invention belongs to the engineer; CALIFORNIA EMPLOYER OBLIGATION (Labor Code § 2872): employers in California must provide employees with a written copy of § 2870 before obtaining a signature; SIMILAR STATUTES: DELAWARE (§ 805 of Title 19): same structure as California; ILLINOIS (765 ILCS 1060/2): same structure; inventions developed entirely on employee's time + without employer's resources + not related to employer's business; MINNESOTA (Minn. Stat. § 181.78): similar; NORTH CAROLINA (N.C.G.S. § 66-57.1): similar; WASHINGTON (RCW § 49.44.140): similar; IMPORTANT NOTE: these statutes set minimum protections; employers cannot contract around them; STATES WITHOUT SIMILAR STATUTES: most states do not have these explicit statutory protections; in these states, common law principles apply: unconscionable provisions may be unenforceable; courts may apply reasonableness analysis; but the baseline is that broad IAA provisions are generally enforceable; OVERSEAS CONSIDERATIONS: Germany, Japan, and China have mandatory inventor compensation requirements regardless of IAA provisions; these rights cannot be contracted away.

The hired-to-invent doctrine gives employers ownership of inventions even without a written assignment agreement in some circumstances: GENERAL RULE: patents initially belong to the inventor (the employee); employment alone does not transfer patent rights; EXCEPTION — HIRED TO INVENT: when an employee is specifically hired to solve a particular problem or to invent in a specific area, the employer may own the resulting invention even without a written assignment agreement; ELEMENTS: (1) the employee was specifically hired for the purpose of inventing or solving a specific technical problem; (2) the invention directly results from work the employee was hired to do; (3) the invention falls within the scope of the work the employee was engaged to perform; COMPARISON TO GENERAL EMPLOYMENT: a GENERAL employee who invents something → owns the invention (subject to shop right if company resources were used); a HIRED-TO-INVENT employee who invents as part of the specific task hired to do → employer may own the invention outright; PRACTICAL EXAMPLES: hired-to-invent: 'We need you to develop a new filtration system for our industrial process' → employee develops the filtration system → employer owns it; general employee: 'We hired you as a software engineer for our accounting software' → employee on weekends invents a new machine learning algorithm unrelated to accounting → employee owns it (possibly subject to shop right if company resources used); BEST PRACTICE: companies should NOT rely on the hired-to-invent doctrine — it is uncertain and fact-specific; always use a written IAA; the hired-to-invent doctrine is a fallback when no written assignment exists; RESEARCH AGREEMENTS: when universities conduct sponsored research for companies, the research agreement must specify who owns resulting inventions; in the absence of agreement: Bayh-Dole Act may vest inventions in the university (not the company), even if the company funded the research.

Consulting and contractor arrangements require careful attention to IP ownership: THE DEFAULT RULE FOR INDEPENDENT CONTRACTORS: unlike employees, independent contractors OWN their inventions unless there is a written agreement to the contrary; 'works made for hire' doctrine (which automatically vests copyright in the hiring party for certain categories of works) does NOT apply to patent inventions; only specific categories of copyright works qualify as 'works made for hire' under § 101; patent inventions are not among them; CONSEQUENCE: a company that hires a contractor to develop a novel technology → the contractor owns the patent unless there is a written assignment; even after paying for the work, the company has no rights to the patent without a written assignment; REQUIRED PROVISIONS IN CONSULTANT/CONTRACTOR AGREEMENTS: INVENTION ASSIGNMENT: 'Contractor hereby assigns to Company all inventions, improvements, and discoveries conceived or made in connection with this agreement or using Company resources or information'; TIMING: the assignment must be in writing and must be SIGNED (preferably before the work begins); SCOPE: cover inventions conceived during the engagement; inventions resulting from work performed for the company; inventions using company confidential information; WORK-MADE-FOR-HIRE CLAUSE: include even though it does NOT apply to patents; works made for hire applies to certain types of copyrights (writings, software, artistic works) if they meet the statutory definition; CONFIDENTIALITY: contractor must keep company information confidential during and after engagement; RETURN OF MATERIALS: contractor must return all company materials, data, and work product upon engagement end; CONSULTING FOR COMPETITORS: consider non-competition provisions (limited in time and geography; unenforceable in California); PAST INVENTIONS CARVE-OUT: contractor should list pre-existing inventions; EQUITY COMPENSATION: some startups give consultants equity instead of cash; the assignment agreement should account for this.

Employee departures create significant IP ownership disputes in competitive industries: POST-DEPARTURE INVENTION OWNERSHIP: GENERAL RULE: inventions conceived AFTER termination of employment belong to the former employee; the IAA's assignment obligation typically ends with employment (subject to carve-outs for inventions based on trade secrets acquired during employment); EXCEPTIONS: if the invention is based on company trade secrets, the company may claim ownership; if the invention is a continuation of work closely related to work performed during employment (some courts); NOTICE-OF-DEPARTURE PERIOD: inventions conceived during a notice period where the employee is still employed are typically covered by the IAA; MOONLIGHTING PROBLEM: if an employee begins developing a competing business WHILE still employed: any inventions developed using company time, resources, or information belong to the company (under the IAA); the duty of loyalty may prevent the employee from competing before departure; NON-COMPETE AGREEMENTS: in states where non-competes are enforceable (not California; not Massachusetts), the employee may be barred from competing for a period after departure; California (and several other states): non-competes in employment agreements are generally void; Garden Leave clauses (requiring continued employment with reduced duties during a notice period) are sometimes used instead; NON-SOLICITATION AGREEMENTS: typically enforceable even in California; prohibit soliciting the former employer's customers or employees for a specified period; TRADE SECRET MISAPPROPRIATION: even without a non-compete, former employees cannot use the company's trade secrets in a new competing business; DTSA (Defend Trade Secrets Act): federal civil action for trade secret misappropriation; injunctions and damages; PRACTICAL RISK MANAGEMENT: at departure: conduct an exit interview; confirm the employee returns all company property and data; send a reminder of continuing obligations (confidentiality; assistance with patent prosecution; trade secret obligations); document the departure carefully.