Does My Boss Own My Intellectual Property?
Southern California has long been the unofficial home of the entertainment industry and has more recently become the epicenter of a new technology boom dubbed ‘Silicon Beach.” From independent-contractor software engineers to salaried script writers, intellectual property ownership rights are often at issue and rarely clearly defined. Employers hire and invest in employees to develop new products, processes, technologies and ideas. To protect their investment, employers require “assignment of inventions”, “ownership of discoveries” or “work for hire” agreements to retain ownership of intellectual property created by its employees in the course of their employment. It should be noted, however, that intellectual property falling outside the scope of employment is owned by the employee under the California Labor Code, not the employer. Lack of any written agreement regarding intellectual property ownership rights can create challenges both for employees and employers alike.
California Labor Code Sections 2870-2872 provide that an employee’s inventions are not assigned to the employer if:
(a) they are developed entirely on the employee’s own time, and
(b) without using the employer’s equipment, supplies, facilities, or trade secrets
This does not apply, however, to inventions that either:
(1) relate to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or
(2) result from any work performed by the employee “as employee” of the employer.
Provisions in employment agreements that attempt to modify this scheme are unenforceable. Also, if an employment agreement with a California employee requires the employee to assign any invention, then the employer must also (at the time the agreement is made) provide a written notification to the employee that the agreement does not apply to an invention which qualifies under the provisions of Section 2870 (detailed above). As a result, this notice will generally appear in California employee invention assignment agreements.
Federal Copyright law also provides a basis to define when employers or employees have ownership of intellectual property rights. The “work made for hire” doctrine, according to 17 U.S.C. Section 201(b), holds that under certain employment conditions, the actual creator of a work is not the legal “author” of the work. When these conditions exist, the employer/buyer of the work is considered the legal author for copyright ownership purposes. In addition, the Copyright Act of 1976 applies to all works created on or after January 1, 1978. Under this Act, employers are presumed to be the owner of the copyright in the creations of its employees. Copyrights in the creations of independent contractors, however, are presumed to remain with the independent contractor.
Patent rights, on the other hand, are held by the inventors, unless those rights are assigned in a written Patent Assignment agreement. Even though a United States patent is a legal federal right, ownership of the patent is determined under relevant state law. Here in California, the general rule is that you own the patent rights to an invention you create during the course of your employment unless, either:
(i) you signed an employment agreement assigning invention rights; or
(ii) you were specifically hired (even without a written agreement) for your inventing skills or to create the invention.
Changes in patent ownership are recorded with the U.S. Patent & Trademark Office to place the public on notice of ownership interests in the patent.
Ownership in trademarks are retained by the person or legal entity that uses the trademark. A trademark is not a trademark until it is used as a trademark – that is, used on, or in connection with, goods and/or services that are traded in the free marketplace. So, in general, the first person, company, or organization to use a trademark in trade is the owner. Trademarks belong to those who use them, not those who create them.
Tips for Employees:
- Examine your employment agreement. Understand what you sign before you sign it and seek legal advice if you are unsure of what rights you have retained.
- Look at any other agreements and determine whether consideration was paid for the execution of those agreements. Consideration is an important element of a contract and it refers to a price which is equal in value for an act or a thing for which it is given. Agreements signed after you are employed will be open to challenge if additional, or insufficient, consideration was not provided for these new obligations such as a bonus.
- Keep records documenting the creation of your independent ideas on your own time, with your funds and your own equipment. Do not rely on memory and do not assume that ideas worked on at home or on your own time will belong to you.
- Review any non-compete agreements to assess their enforceability and reasonableness. It is considered a fundamental policy of the State of California that agreements in restraint of competition are to that extent void.
- Were you an employee or an independent contractor? The difference is very important in determining intellectual property ownership and should be reviewed by a legal professional to determine rights and obligations.
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