The owner of a patent to an invention generally has the exclusive right for 17 years from the date the patent issues to exclude others from making, using or selling the invention throughout the United States. An inventor usually owns all rights to an invention. But what happens when the inventor is an employee and his or her employer lays claim to the invention? As with most complicated questions, it depends.

No Written Agreement

In the case where no valid written agreement exists between the employee and the employer assigning ownership of the invention to the employer, the legal waters start to get murky and one has to look to applicable state law for an answer.

At a minimum, three general common law principles apply:

  1. If an employee is not hired specifically for the purpose of inventing anything, then whatever he or she may invent during the course of employment will be owned by the employee. No implicit agreement to assign any patent to the employer arises. This general rule applies even if the invention is related to the employer’s business.
  2. When an employee is hired to invent, but the employer has no more in mind than a desired result and does not give the employee instructions as to the means the employee must use to accomplish the particular result, then any resulting invention, even if related to the employer’s business, will again be owned by the employee.
  3. If an employee is hired to create a specific invention and the employer can demonstrate that the means to bringing the idea into practical form were clearly spelled out for the employee, the employer will be deemed the owner of the invention where the invention is within the scope of the inventor’s employment and relates to the employer’s business.

Even in the first two scenarios where the employee owns the invention and any resulting patent, the employer may have a “shop right” to the invention. A shop right is an employer’s non-exclusive, royalty-free, non-transferable license to make, use and sell items embodying an employee’s patentable invention, but only within the normal scope of its business.

A shop right doesn’t automatically arise, however. It typically exists only where an employee has used the employer’s time, materials or equipment in creating the patented invention. A shop right can last beyond the employee’s term of employment, but expires along with the patent at the end of its 17 year term. Technically, a shop right is not an ownership right in the patent, but is a defense against an employee’s allegation of patent infringement.

Written Agreement

To remedy the uncertainty that exists when determining ownership of a patentable invention is left to a case-by-case analysis of the facts and case law, many employers require employees to sign written patent assignment agreements. These agreements typically assign all of the inventor’s patent rights to the employer. They often contain clauses requiring the employee to disclose inventive activity and assist the employer in securing patent rights.

Such agreements are usually intended to accomplish the legitimate purpose of prohibiting an employee from using for his or her own benefit, or for the benefit of a subsequent employer, any inventions resulting from the resources provided by or work performed for a previous employer.

Employees have often been compelled to execute overly broad patent assignment agreements as a condition of employment. Examples include agreements which assign to the employer ownership of inventions unrelated to the employer’s business or research or inventions made independently by the employee. To protect employees against a perceived disparity in bargaining power with respect to such agreements, Illinois enacted the Employee Patent Act, 765 ILCS 1060 (formerly Ill. Rev. Stat. 1991, ch. 140, para. 301).

The Employee Patent Act restricts the types of inventions an employer can require an employee to contractually assign. The statute renders void and unenforceable any provision in an employment agreement to the extent it purports to assign ownership to the employer of an invention, “for which no equipment, supplies, facilities, or trade secret information of the employer was used and which was developed entirely on the employee’s own time….”

There are exceptions, of course. Such an otherwise unenforceable assignment provision will not be invalid if, “(a) the invention relates (i) to the business of the employer, or (ii) to the employer’s actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by the employee for the employer.” The Act goes on to state that the employee shall have the burden of proof in establishing that his or her invention is subject to the protections afforded by the statute.

Interestingly, in balancing the rights of employees and employers, the statute achieves a result contrary to the first common law rule stated above. The Act can be interpreted to permit an assignment agreement that requires an employee not hired as an inventor to assign to the employer an invention created entirely on his or her own time using no company resources — if the invention relates to the employer’s business or actual or anticipated research or development.

A further feature of the Act is the requirement that, with respect to employment agreements entered into after January 1, 1984, employers inform employees in writing of the types of inventions the Act prohibits an employer from requiring an employee to assign. What happens if the assignment or employment agreement does not contain this required notice? Is the assignment provision still enforceable? The Act does not say, nor has this issue been litigated and reported in any Illinois decision.

Attorney Eric Freibrun specializes in Computer law and Intellectual Property protection, providing legal services to information technology vendors and users. Tel.: 847-562-0099; Fax: 847-562-0033; E-mail: [email protected].