If you are consistently bringing intelligent and creative people in to work at your company, chances are good that at some point you are going to be in a situation in which one of them comes up with a new invention, product or process that could be of enormous help to the business. In this case, does this new innovation become the property of your or the employee? The employee demonstrated his or her own sense of creativity and initiative, but used the tools and resources of your company in order to make it a reality. Would he or she have still conceived of the idea without your business? If and when the time comes to apply for a patent, who will own it?
Patent Ownership in the Employment Relationship
Generally speaking, the United States Supreme Court has stated that unless there has been a prior agreement made to the contrary, when an invention is created by an employee during his or her working time, the employer is allowed a nonexclusive license to make use of that invention. This is more commonly known as the “shopright doctrine.” Even though you as the employer are granted a nonexclusive license to implement the invention into your business, the employee ultimately still owns the invention. He or she can therefore commercially exploit the invention through sales or licensing. The rule of shopright doctrine typically applies even if the invention is crafted on the employee’s personal time as long as your business’s resources were used.
It is important to note that it is a completely different situation when you approach one of your employees to develop something new that will later be patented, in which case the patent is awarded to you. This is because even though the employee created the invention, he or she was being paid to do so under your directive. Essentially, the employee was simply doing his or her job.
The Law’s Relation to Intellectual Property and Patents
Only the federal Patent Office has the ability to confer patents. However, once it has been issued, the patent rights are subject to the laws of the states. Many business owners with employees who are likely to conceive of new ideas with the business’s resources often enter into agreements stating that patents will go to the business. Even without an explicitly stated agreement, you as the employer may compel your employee to transfer the patent if the employee was paid to work on the invention in the first place.
While there are many laws that have to do with the issuance and ownership of patents, there are also laws that deal with property that is intangible, otherwise known as intellectual property. For instance, if you have an employee who conceives of a new method that improves the effectiveness of one of your business’s practices and it is then trademarked and licensed out, you are not obligated to pay royalties to the employee because he or she was only carrying out his or her assignment.
Knowing Where the Line Is
With all of this in mind, it is important to remember that in each of the cases in which the legal rights to an employee invention were awarded to the employer, the item or process in question was created either under the direction of the employer or with the employer’s business tools. Just because someone who happens to work at your toy company comes up with a great design for a lawnmower with his or her own time and resources does not give you any right to that design.
Inventions, at their best, push not just businesses, but the whole of humanity in new and exciting directions. Make sure your business is an environment that contributes to this idea is a smooth and legal fashion.
Legal Disclaimer
The content on our website is only meant to provide general information and is not legal advice. We make our best efforts to make sure the information is accurate, but we cannot guarantee it. Do not rely on the content as legal advice. For assistance with legal problems or for a legal inquiry please contact you attorney.