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.
One interesting aspect to the new patent law is the section relating to prior use rights.
If you are a small company who hits on a great way of doing things but can’t afford to patent it, and someone, years later, gets a patent for that exact same technology and tries to sue you for infringing their patent, you can now defend yourself against infringement with the expanded prior use rights. You couldn’t do this before except in very limited circumstances involving business method patents and the new law has expanded this right. To take advantage of the defense, you yourself have to have been using the invention in commerce for at least a year before the patent holder filed her application – you can’t just assert that “everybody” was using it although you yourself weren’t. If you can do this though, you have a defense to infringement.
Prior use rights is a double-edged sword however. There are two related ways in which misuse of this right can impact companies:
1) “Stealth Prior Art” – A competitor can invent technology, keep it a trade secret, and then later prevent a patent holder from enforcing a patent by showing that the competitor used the technology in commerce before the patent holder filed for the patent. In this way, the competitor acts as “stealth prior art” – no one knew how their technology worked or that they were using it in this way, the market wasn’t benefiting from having knowledge about this technology, and when a party that actually did disclose the technology to the public tries to enforce their patent, they are now faced with this secret prior use that weakens the utility of their patent, at least as to the stealth competitor. There’s something unsavory about the potential for abuse in this type of scenario. For a more detailed discussion of the ways in which prior use rights can be misused, you should check out IP Watchdog’s series of articles on this topic.
2) Pressure to file earlier – one clear way to deal with the possibility of stealth competition is to file as soon as you possibly can, which puts more pressure on already-constrained patent budgets.
Prior use rights can be an extremely helpful way in which small companies can defend themselves against companies that have more funding and can afford more robust patent portfolios. Unfortunately, as is often the case, there are still ways in which a useful tool can backfire. This is a potentially troubling, and somewhat controversial, aspect of the new law that the industry will be watching with interest.
Here is a list of the most common questions clients ask me in our first meeting, with links to my posts with detailed responses:
1) Can I get a patent on software and/or business methods? Yes – but the real question is should you?
2) I’ve heard about provisional applications and non-provisional applications; what kind do I need? It depends – on how advanced development is, how soon you’ll be discussing the innovation in non-confidential settings, and how well funded your company is.
3) When do I need to file an application? Timing really does matter and the answer is often as soon as possible.
4) Is it expensive? Definitely. It also takes a number of years to get an issued patent. This means it’s extremely important to determine whether your company would benefit from investing in a patent application – before you file.
No one, not even an off-duty lawyer, enjoys wading through onerous, boring, never-ending fine print. Especially not when all that stands between them and sharing their favorite music, art, or other media with friends and fans is clicking on one little “ok” button!
But if you care about what other people can do with what you upload, you really need to understand those terms of service. This is especially important if you are a professional with a business interest in your data – a photographer posting photos to Twitter where his followers can give real-time feedback, or a musician sharing a new music video with her Facebook fans. An example of why reading the terms is so important came up on May 10 when Twitpic changed their terms of service, helping themselves to a lot more of your rights.
The new terms require that users let Twitpic give “affiliates” the rights to use, distribute, make derivative works, and reproduce an uploaded item, for free, forever, without asking the users. Now, a musician might be okay with letting Twitpic use her song in an ad for the service without paying her – could be great PR and a fair exchange for the benefit the musician gets from the service. But what’s this affiliate business? There’s no definition of affiliate so it could be anybody. Is it Twitpic’s employees, vendors, favorite news organizations? A company they do business with – perhaps a big search engine, social network, or computer company? A competitor of mine who also uses the service? Is it anyone I think ought to be paying me for the right to play that song? Doesn’t matter – by uploading the song, I’ve given Twitpic the right to decide for me who else gets free access to my song. Of course, I’m still the copyright holder, and I can still offer a license to the song to other people I approve of – but why should they pay me when they could just ask Twitpic for a free license?
These terms are not unusual – and courts have held that these kinds of click-ok-to-agree contracts are actually binding. If you create media and consider yourself a professional with any level of business interest in what you create, it’s really important to evaluate what media you share on-line and what the terms of service mean for you professionally. Decide what you’re ok with *before* continuing!
Technically, you don’t need a lawyer to write a provisional patent application. It’s true! But you’ll miss out on having a trained eye helping you avoid all the mistakes that await the novice drafter. And, unfortunately, an improperly written provisional can really be just as bad as no application at all. Let’s look at three of the big pitfalls to watch out for.