When Does Your Employer Own Your Invention?

In general, the person who creates an invention owns it, and the mere fact that someone is employed at the time they create an invention doesn’t have an impact.

With that said, if the employer hired the employee to design a specific invention or solve a specific problem, the employee has a duty to assign the resulting patent. Where the employee is not hired specifically to design or invent, but nevertheless conceives of a device during working hours with the use of the employer’s materials and equipment, the employer is granted an irrevocable but non-exclusive right to use the invention under the “shop right rule.” A shop right is an employer’s royalty or fee, a non-exclusive and non-transferable license to use an employee’s patented invention.

Because these common law rules are a bit vague, most employers include a provision in an employment agreement allocating invention rights. In general, these provisions are enforceable, so long as they are reasonable in scope. However, there are several states that have enacted statutes limiting the application of these provisions. These states prevent an employer from assuming ownership of inventions that are created by employees completely outside the scope of employment.

Even in states without statutory limitations on an employer’s right to contractually require invention assignment, the extent to which a contract provision would likely be enforced to deprive an inventor of rights in an invention would depend on several factors, including the extent to which the product relates to the core business of the employer, the scope of work the employee was hired to do, whether any confidential information of the employer was relied upon to make the product, whether it will be sold in the same channels or to the same customers (in other words, how competitive it is to the employer), and whether significant resources of the employer were involved in the creation of the product.

Ultimately, the biggest determinant of whether or not an employer would ever pursue a claim to the patent depends on how successful the invention ultimately turns out to be or how much it could serve as a detriment to the company from a competition standpoint. If it is unlikely that the invention would be perceived as a threat, it is unlikely it would ever be an issue. Regardless, if it is an overwhelming success, an employee will have the resources to protect itself in any lawsuit.

If you are interested in more detail related to your situation it is best to speak with an attorney.

Megan K. Johnson is a business lawyer with over 7 years of experience. She helped champion securities crowdfunding at the local level and worked with the first company to successfully close an equity crowdfunding involving everyday investors. She is a partner at Founders Legal and can be reached at [email protected]

megan