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Patents - Law on Employees' Inventions - United States

Ownership rights surrounding employee inventions are typically defined prospectively to avoid entanglements over rights to inventions made by an employee during the course of employment.  Under the common law rules in the United States, ownership rights are allocated in accordance with the employee’s independence in conceiving of and generating the invention.  More and more, however, this allocation of rights is accomplished by means of contract through employment agreements.

This article provides an overview of the analytical framework applicable to employee inventions in the United States.


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-When does the law on employees’ inventions apply?

The common law rules on employee inventions turn on the nature of the inventor’s employment and the employer’s contribution the invention.  The common law recognizes three categories of employees: (1) employees who are hired for the express purpose of inventing, (2) employees who invent on the employer’s time or using its resources, and (3) employees who invent on their own time using their own resources.  Rights in a resulting invention vary with each category. 


-Who becomes the owner of employee inventions?

In general, to the extent that an invention is made during the course of employment pursuant to a directive of the employer, the invention belongs to the employer.  Thus, in most states, inventions by employees that fit within Category (1) described above (i.e., those hired to invent) belong to the employer.  

At the other extreme, where an employee invents on his own time using his own tools, he usually retains ownership in his inventions.  Category (3) employee-inventors (i.e., independent inventors), therefore, typically retain ownership rights in their inventions.

A gray area exists, however, where an employee invents during working hours or using company resources.  In most states, a Category (2) employee-inventor is deemed to confer a “shop right,” i.e., a use right, on the employer in exchange for time and/or resources expended in generating the invention. 

The default rules enumerated above comprise a general statement of the law on employee inventions and may vary by state.

 


-Which duties do employers have in relation to employee inventions?

Absent an operable agreement, an employer is under no obligation to file a patent or otherwise affirmatively protect employee inventions.


-Is the employee inventor entitled to additional remuneration?

Unless provided for by agreement, the employee is not entitled to additional remuneration for an invention.


-Are contractual agreements possible?

Due to both the uncertainty of the common law tests and the default rules on patenting employee inventions, employers in the United States commonly use employee invention assignment agreements. These agreements serve three important functions: (1) specifying the employer and employee’s rights with respect to employee inventions; (2) providing notice of those rights to the employee; and (3) facilitating the transfer of rights.

In most states, pre-invention assignment provisions have become mainstay elements of employment agreements, supplanting the default rules for invention ownership.  Several states, however, have adopted statutes that govern employees’ ownership rights in their inventions.  

For example, seven states (including California, Washington, and Minnesota) have adopted statutes that effectively render pre-invention assignment provisions unenforceable where an invention is made on the employee’s own time, without use of the employer resources, and does not relate to the employer’s business.  In contrast, statutes in Nevada and Utah have reduced the threshold, making it easier for employers to claim employee inventions as their own.  In sum, the enforceability of an employee inventions assignment agreement may be limited by applicable state law.



-Procedural Issues

The common law principles for employee inventions are further informed by the considerations of the individual states as enacted via statute.  Disputes over ownership of employee inventions thus often involve complex issues of fact and jurisdiction and require studied analysis by attorneys familiar with the common law as well as the law of the particular jurisdiction.


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