As General Counsel, I have begun spending more time researching employment statutes and came across an interesting intersection between labor law and intellectual property law. I recently revised our employment agreement and the procedure for assigning inventions created within the scope of employment and learned that several states have take the step of regulating employee invention assignments. Most of the states have devised employee friendly rules that place most inventions that are created outside of the scope of employment off limits for assignment without additional compensation. One exception, Nevada, has written an employer friendly rule that automatically assigns inventions to an employer unless there is an express agreement to the contrary.
Employee Friendly:
California, Delaware, Illinois, Kansas, Minnesota, New Jersey, North Carolina, Utah and Washington prohibit an employee assignment from being enforced if the invention was created entirely on the employee’s own time and without use of employer equipment, supplies, facilities or trade secret materials. Some of these states make an exception if the invention is related to the employer’s business or actual R&D; or if the invention results from work performed by the employee for its employer.
California, Illinois, Kansas, Minnesota, and Washington require the employer to notify the employee of their statutory rights any time an assignment is made.
California, Kansas, New Jersey, North Carolina, and Washington also specify circumstances under which an employee must disclose the inventions that they are working on during their employment even if those inventions are within the statutory exemption from assignment. Some of these states require the obligation to form part of the employee’s agreement to be enforceable.
Employer Friendly:
Nevada has gone a different direction creating an automatic assignment of ownership to the employer for any patentable invention or trade secret developed by an employee during the course and scope of the employment that relates directly to work performed during the course and scope of employment. This automatic assignment can be negated by an express agreement between the employee and employer.
Notably, Nevada’s statute cuts against U.S. patent law that grants ownership first to the inventor, and requires a written document to transfer ownership to an employer.
General Rule:
As noted, U.S. patent law requires a written agreement transferring ownership from the inventor to an employer even if that person created the invention within the scope of their employment. Consequently, the general procedure of providing an obligation to assign inventions within the employment agreement, and having an employee sign an assignment for each invention is still the best practice. I would argue that even in Nevada, this is the best practice and rely on the Nevada rule only as a back-up.
The employee friendly laws appear to rein in employment agreements which may generically obligate an employee to assign all inventions to their employer during their employment without differentiating between inventions created on their own time and without use of employer resources or trade secrets. Presumably in states that do not have these limitations, employers can extend the obligation to include any inventions created during employment regardless of their nature.
Practical Takeaways:
If you are in the employee friendly states, you should be reviewing your employment agreement to ensure its scope is aligned with these statutes and include any notice and invention disclosure language required by those states where you have employees. Also, if you have employees in the states that require notice of the employee’s rights in each assignment, you should be reviewing your assignment documents to ensure that they comply with these states’ rules.
In general, it is best to have clear language regarding the obligation to assign ownership of inventions, works of authorship, trade secrets and other intellectual property rights within your employment agreement. You also want to have an employee sign an acknowledgement that they have reviewed the employment agreement in case the obligation ever comes into question. Finally, since many of the statutes allow assignment of an invention that is outside of the scope of employment when there is separate compensation, it is good practice to recite separate consideration in the assignment document.
