What Is the Purpose of the Invention Clause in an Employment Contract?

With an invention clause, an employer can typically claim the rights to an employee's inventions.

Companies view intellectual property as an asset that prevents others from manufacturing or selling similar products without paying licensing rights. They can retain their employees' inventions with the use of an invention clause that the new employee signs. The clause typically appears in the employment contract and clearly articulates the company's claims on the employee's ideas that were invented during employment. Anything that was created prior to employment and after termination is also addressed in the invention clause. This ensures that that the employee does not walk away with inventions that could belong to the company and that future litigation from past or future employers are minimized.

Clear Boundaries from Day One

In the United States, inventors own their inventions unless stated differently in legal arrangements with another party, according to Casey Fitzpatrick, associate with Klarquist Sparkman, LLP. Upon signing the employment agreement, a new employee will be invited to list all the inventions that she developed prior to employment. The listed items serve two purposes. First, they indicate the intellectual property space for which the company would have nonexclusive and royalty-free access in the event the employee integrates these elements into their work. Second, they delineate clearly the boundaries of the intellectual property that does not belong to the company because it was developed in the past.

Keeping What Was Paid For

Inventions that have been discovered on the premises of the company and within the scope of projects sponsored by the company will belong to the employer if this is stipulated in the employment contract. Trademarks and trade secrets frequently fall under this umbrella. Even ideas that have not been reduced to practice or might not be patentable belong to the company. Gray areas refer to creativity at home after hours. Some companies will stipulate that all creative work on or off site during the years of employment become the property of the company.

De Facto Assignment to the Company

In the 2008 DDB Technologies Inc. vs. MLB Advanced Media, the U.S. Court of Appeals for the Federal Circuit ruled that the assignment of the inventions created during employment should follow the terms of the employment contract. Therefore, with proper care in the writing of the inventions clause, an invention done within the umbrella of the company can be automatically assigned to the employer without any additional documentation or formality.

Documenting New Thoughts

Traceability of the date of when the idea was first conceived becomes important in the United States because the patent law gives priority to the person who is first to invent, not the first to file. An invention clause usually calls for taking notes and maintaining records of all the creative ideas generated during employment.

Inventor's Compensation

In organizations that greatly benefit from inventive work, the inventions clause might explain what the inventor can expect in return for developing new ideas. Typically, it includes a cash payment or the promise of some form of returns on the commercialization of the idea.

Minimizing Post Employment Risks

A company maintains leverage over an employee during the years of employment, but after the person leaves the company, it becomes more difficult to ensure that the ideas will not find a home in a competitor's house. Employment contracts might stipulate that after termination, confidentiality about any invention belonging to the company will not be disclosed to the subsequent employer for a certain number of years. Furthermore, the contract can request that the person continues to participate and cooperate in patent procurement.

References

• Utah State Bar: Exemplary IP-Related Clauses in Employment Agreements
• Lawyers.com: Employee Inventions
• Goodwin Procter; "United States: Patents, Employment Contracts and Automatic Assignment: Federal Law Holds Sway"; Stephen G. Charkoudian et al.; May, 2008
• Klarquist Sparkman; "How Non-Patent Lawyers Can Help Protect ...;" C. Fitzpatrick; Mar 2005

Resources

• "A Manager's Guide to Employment Law: How to Protect Your Company and Yourself"; Dana Muir; 2005