Work for Hire

Work for hire is a legal doctrine that determines ownership of IP created during employment or contracted work, but it operates very differently for patents vs. copyrights: FOR COPYRIGHTS: the Copyright Act (17 U.S.C. § 101) defines work made for hire as: (a) a work prepared by an employee within the scope of employment; OR (b) a work specially ordered or commissioned for use in one of nine specific categories (as part of a collective work; as a contribution to a motion picture or other audiovisual work; as a translation; as a supplementary work; as a compilation; as an instructional text; as a test; as answer material for a test; as an atlas) IF the parties agree in a written instrument signed by them; copyright in a work made for hire belongs to the employer or commissioning party as the 'author'; FOR PATENTS: there is NO automatic work-for-hire doctrine in US patent law; the patent initially vests in the human inventor(s); an employer does NOT automatically own an employee's patent; Stanford v. Roche (S.Ct. 2011) confirmed: 'Since 1790, the patent law has operated on the premise that rights in an invention belong to the inventor. The inventor is the presumptive owner'; HOW EMPLOYERS OBTAIN PATENT RIGHTS: (a) written assignment agreement: employee assigns future inventions to employer (pre-invention assignment agreement, PIAA or PRAIA); (b) implied assignment (shop right): employer gets a non-exclusive, royalty-free license to use the invention if employee used employer's resources, time, or facilities; THIS MEANS: an employer who fails to have employees sign a proper assignment agreement may NOT own the patents on their employees' inventions — a common and costly mistake.

Pre-invention assignment agreements (PIAAs) are the primary mechanism by which employers obtain rights to employee inventions: TYPICAL PIAA PROVISIONS: (a) ASSIGNMENT OF FUTURE INVENTIONS: employee agrees to assign all inventions made during employment that: relate to the employer's current or anticipated business; result from work performed for the employer; are made using employer's resources (time, equipment, facilities, information); (b) DISCLOSURE OBLIGATION: employee must promptly disclose all inventions to the employer; even if employee believes the invention is personal and outside the agreement; (c) ASSISTANCE OBLIGATION: employee must assist employer in obtaining patents; sign patent applications; execute assignments; cooperate with prosecution; (d) CONFIDENTIALITY: related NDA provisions protecting employer's trade secrets; STATE LAW LIMITATIONS — STATUTORY CARVE-OUTS: several states limit what an employer can claim through PIAAs; CALIFORNIA (Labor Code § 2870): employer cannot claim inventions for which: NO employer equipment, supplies, facilities, or trade secret information was used; AND developed entirely on employee's own time; AND do not relate to employer's business or anticipated R&D; AND do not result from any work performed by employee for employer; ALL FOUR CONDITIONS must be met for the invention to be the employee's; Minnesota, Washington (RCW 49.44.140), North Carolina, Delaware have similar statutes; BEST PRACTICES FOR EMPLOYERS: PIAA should acknowledge state law limitations; narrow scope to what is legally permissible; use clear definitions of 'related to business'; review and update as company's business evolves; BEST PRACTICES FOR EMPLOYEES: carefully review PIAA before signing; disclose pre-existing inventions to carve out existing IP; document side projects to show they meet carve-out criteria.

Independent contractor IP ownership is different from employee ownership and often misunderstood: DEFAULT RULE FOR PATENT INVENTIONS: for patents, the human inventor always starts with ownership; if an independent contractor invents something, the contractor owns the patent unless there is a written assignment; the hiring party does NOT get automatic ownership merely by paying for the contractor's work; DEFAULT RULE FOR COPYRIGHTS: work made for hire for contractors requires: (a) written agreement designating the work as 'work made for hire'; AND (b) the work must fall into one of the nine specific copyright categories in § 101; if these conditions are not met, the contractor owns the copyright; often, the work doesn't fall into a § 101 category (e.g., a software program written by a contractor is NOT on the list of nine categories); result: copyright in the software belongs to the contractor unless there is a separate written assignment; COMMON MISTAKES: assuming contractor work is automatically owned by the hiring company; using oral agreements or email confirmations instead of written assignments; failing to obtain assignments before the contractor becomes unavailable or disputes arise; CONTRACTOR PATENT ASSIGNMENT: the hiring party should obtain a written patent assignment BEFORE work begins; include in the services agreement: present tense assignment ('Contractor hereby assigns') rather than an agreement to assign in the future (which might require further action); IMMIGRATION STATUS NOTE: some contractors are on visa status that limits their ability to file as sole inventors; employer sponsorship may be needed; JOINT INVENTORSHIP RISK: if an employee of the hiring company makes suggestions that rise to the level of conceiving the claimed invention, there may be joint inventorship between the contractor and the employee — which means the employee's employer has a joint ownership interest.

A shop right is a limited, non-exclusive, non-transferable, royalty-free license implied by law when an employee uses an employer's resources to develop an invention: SHOP RIGHT REQUIREMENTS: the employee must have: (a) used the employer's time, facilities, equipment, or materials; OR (b) developed the invention while performing the employer's work; the employee is the inventor and owns the patent; but the employer gets a royalty-free license to practice the invention; SCOPE OF SHOP RIGHT: NON-EXCLUSIVE: the employer cannot exclude others; the employee/inventor retains the right to license others; NON-TRANSFERABLE: the employer cannot transfer the shop right to a third party (cannot sell it or include it in a corporate sale); ROYALTY-FREE: no payment required by the employer; IRREVOCABLE: the shop right is permanent — it cannot be revoked by the employee/inventor; no injunction against employer; WHAT SHOP RIGHT DOES NOT GIVE: ownership of the patent; the right to exclude others; the right to license the technology to third parties; the right to take the license in a company transaction (shop rights typically do NOT transfer with a company sale — they belong to the original employer entity, not successors); PRACTICAL IMPACT: shop right arises when employer does NOT have a PIAA; shop right prevents the employer from being sued for infringement but does not give full ownership; a startup that failed to get employee assignments may only have shop rights — making the patents useless as assets (cannot be pledged as collateral; do not transfer in an acquisition) unless the inventors later assign; ESTOPPEL AND EQUITABLE SHOP RIGHT: courts may also imply shop rights from the employee's conduct in assisting the employer in using the invention; cases of employer reasonable reliance.

The intersection of employment agreements and state law creates important employee rights: CALIFORNIA LABOR CODE § 2870 — MOST PROTECTIVE: four-part test for employee-owned inventions (must meet ALL): entirely on employee's own time; no employer equipment, supplies, facilities, or trade secret information used; does not relate to employer's current or reasonably anticipated business activities; does not result from any work performed by employee for employer; PRACTICAL APPLICATION: a software engineer at a tech company who codes a mobile app at home on personal equipment: does the app relate to the employer's business? (broad question); does it use any confidential employer information? (even mental knowledge of internal systems could trigger this); a strict reading makes California carve-outs narrow for tech employees whose employer is broadly in 'technology'; DISCLOSURE REQUIREMENT: California employers must provide employees with a copy of Labor Code § 2870; some employers include a notice in the PIAA; VOID PROVISIONS: provisions in PIAAs that purport to claim rights beyond what state law allows are void (but only the overbroad provision, not the entire agreement); WASHINGTON RCW 49.44.140: similar to California; additional requirement: employer must provide written notice of the law to employees; MINNESOTA: similar four-part test; DELAWARE: similar statutory limits; NON-COMPETE INTERACTION: in states that ban non-competes (California), employees leave freely but PIAAs remain enforceable; an employee who leaves and continues working on a project started at the prior employer must carefully evaluate ownership; STARTUP FOUNDERS: founders often sign PIAAs at prior employers; inventions conceived while still employed may be owned by the prior employer regardless of when filed; a gap between prior employment and the startup's incorporation may be important; best practice: have founders disclose all prior work and obtain clearance letters from prior employers.