Who really owns that patent?

Posted on March 10, 2012 by

Caution sign

Worried about employee assignment clauses? Maybe you should be. It’s time to take another look at the assignment language used in that template employee agreement you downloaded, since it could significantly affect your rights as an intellectual property holder years from now.

You need to own a patent before you can enforce it against others. In the US, inventors own the rights to their inventions until they explicitly assign the rights to someone else. If your employees don’t assign the rights over to your company, you don’t actually own that key patent. And if you intended to use it as a signal to investors or strategic partners, the first thing they’ll check is whether you own what you say you do. This is because the only way to enforce your patent is through a lawsuit where you request an injunction and/or damages from infringers – but, if not all of the inventors are listed as part of the suit, your case will be summarily dismissed. So, if you can’t gather all the inventors on a patent when you go to litigate, it is essentially unenforceable, and therefore useless. Between the nature of growing companies and the realities of a highly mobile workforce, it’s not uncommon for an employee or even a cofounder who invented key intellectual property to be long gone when a company decides to use that patent. This can be a real issue – especially when a company has invested a significant amount of time, effort, and money into its patents.

There are two ways to deal with this issue. One way is to have each inventor specifically assign the rights to the company after filing any patent applications, which may not be as easy as it sounds. The most common challenge arises when an employee was part of the inventive team but left before the company decided to file the patent application. In other cases, the employee may have (or suddenly develop!) a philosophical aversion to patents and/or start negotiating for additional compensation in exchange for their signature. You can avoid these issues by having employees assign their rights to the company in writing as part of your standard employment agreement. That way, any inventions arising during their employment will automatically be assigned to the company, alleviating any uncertainty.

However, the wording of that assignment needs to be precise – only a slight difference in the wording of an assignment clause in an employment agreement can render it void. The phrase “agrees to and does hereby grant and assign” is wording that will automatically assign an employee’s interest in later developed inventions to the employer. On the other hand, the phrase “agrees to execute any and all assignments or other transfer documents” is just an agreement that the employee will eventually sign the rights over but the phrase defers the actual transfer of rights to some point in the future. If this latter step is never taken, no assignment ever occurs. The distinction is slight, but the results can be disastrous – potentially resulting in an unenforceable patent.

This post co-written by Cynthia Gilbert and Hyperion Law’s Spring 2012 Intern, Kip Bodi. He is currently a third-year evening student at Suffolk University Law School with a concentration in Intellectual Property and Patent Law. He holds an M.S. in Bioinformatics from Boston University and a B.A. in Computer Science from Colgate University.

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  • Julia Mathis

    Great post. The automatic assignment of the employee’s interest in later developed inventions to the employer is also troubling for current employees thinking of starting a new venture.  Without even knowing, you may have already assigned your rights to your new idea to the employer if the idea is within the scope of the agreement. If it’s not, you should still try to get something in writing from your employer that your new venture is outside the scope.