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What Happens When An Employee Produces An Invention?

Inventions that are made by employees present questions of ownership. When an employee uses employer resources, such as equipment, funds, time or facilities, the employer may have some rights in the invention. This depends, however, on the circumstances and whether there is an agreement between the employer and employee.

Should an employer insist on a contract with an inventor-employee?

The simplest way to avoid confusion and conflict over who owns the rights to an invention is through a contract. The contract should spell out the circumstances under which the employer shall have the right to use, manufacture or sell the employee's invention. It should also specify the type of compensation the employee will receive for the invention and whether the employee will retain any rights in the patent. Although the inventor-employee (not the employer) will need to apply for the patent on the invention, the contract can specify that the employee will assign the patent rights, once they are granted, to the employer.

Does the contract have to be in writing?

While it is preferable for the contract to be in writing, certain situations may indicate an implied contract between employer and employee. If, for instance, the employee has been hired or directed to create an invention that solves a specific problem, the employer will likely own the resulting invention. This is because it is understood between the parties that the employee's invention is for the employer's benefit.

What is the difference between assigning and licensing a patent?

When a patent is assigned to an employer, title passes from the employee to the employer. The assignment may cover the whole patent, an undivided share of the patent or just the right to use the patent in one area of the US. Assignment also gives the employer the sole right to sue for enforcement of its rights in the patent. Assignments should be recorded in the US Patent and Trademark Office (USPTO).

A license gives the employer the right to use, manufacture and/or sell the invention. With a license, the employer typically will not have the right to sue a party who infringes the patent. When a patent is licensed to an employer, title remains with the employee.

What if there is no contract concerning the employee's inventions?

If there is no contract concerning inventive rights and the employee develops an invention independently of the employer, the employer is unlikely to have any right to the invention. If the employee was not hired to solve a particular problem by coming up with an invention for the employer, but the employee uses employer resources during the inventive process, the situation is more complex.

The shop-right doctrine gives the employer an interest in the employee's invention. The employer will not own the patent for the invention, but it will have the nonexclusive right to use, manufacture or sell the invention, without paying royalties, for an unlimited time. The employer may not sell or transfer this right to anyone else.

How can employees and employers protect their rights?

Using a contract to define each party's rights is a good way to avoid conflict. An attorney can provide valuable assistance. In a gray area, when there is no contract, but the employee used employer resources in coming up with the invention, the shop-right doctrine offers answers.

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DISCLAIMER: This site and any information contained herein are intended for informational purposes only and should not be construed as legal advice. Seek competent counsel for advice on any legal matter.

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