Table of Contents
Intent of the Guide
About the Author
A Brief Primer on Intellectual Property
Engineering in the Context of Intellectual Property Law
Preinvention Assignment Agreements
Implications of Agreement Terms
The Legislative Response
Employment Strategies for the Creative Individual
Step One: Get an Offer in Writing
Step Two: Inspect the Total Offer
Step Three: When the Agreement is Unacceptable
Step Four: When You Choose to Accept the Offer
Step Five: During Employment
Step Six: Leaving Your Job
Appendix A: Anatomy of a Preinvention Assignment Agreement
Appendix B: State Laws on Preinvention Assignment Agreements
Appendix C: Types of Intellectual Property
This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting or other professional service. If advice or other expert assistance is required, the services of a competent professional person should be sought.
This work is dedicated to those, who by growing new companies with their ideas, keep everyone else employed.
Intent of the Guide
A majority of engineers and scientists are employed in design, research, or other capacities that require creativity and technical competence. The purpose of this guide is to familiarize such readers with the intellectual property issues and career implications surrounding their work. Although an intellectual property tutorial is included, this work is not a guide to inventing and authoring in and of themselves.
About the Author
Orin E. Laney was awarded the BSEE by the University of Maryland in 1974, and the MBA from Brigham Young University in 1980. In many years of experience as an employed engineer and as a business founder and employer, Mr. Laney has encountered intellectual property situations from both perspectives. A member and former chairman of the IEEE Intellectual Property Committee, he has written many articles for publication by the IEEE and elsewhere, and lectured extensively on intellectual property, the profession of engineering, and entrepreneurship.
A Brief Primer on Intellectual Property TOP
In the most general sense, "intellectual property" refers to intangible or incorporeal property, such as detailed knowledge of a manufacturing process, a really good story embodied in a novel, or a trade name. Although the abstract concept of intellectual property embraces many forms, the law restricts itself to commercially important categories. Indeed, most intellectual property lawyers will argue that the only kinds there are derive from legislation.
There are four legislatively defined areas, namely patents, copyrights, trademarks, and trade secrets. Each has its own universe of terminology and case law. The law includes mechanisms for these types of property to be protected, sold, and inherited, much as for real property. Because there is no physical property to possess, what may be purchased or inherited is title to and a legal right to exclude others from exploiting the intellectual property. For instance, patent infringement is analogous to trespass on real estate.
In the United States, Federal authority over intellectual property is established by article 1, section 8 of our constitution, which simply says, "The Congress shall have the power... To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries...". Consistent interpretation by the courts has made one point abundantly clear: the granting of a patent or copyright has no basis in any theory of moral rights. The Federal Congress can implement any legally consistent compromise it deems adequate to satisfy the constitutional objective. The actual approach is a cold tradeoff between the desire of society at large for books, songs, inventions, etc., and the unwillingness of authors, composers, and inventors to provide them for free.
Courts and legislators tend to be pragmatic about the sorts of things they can control. Thus, intellectual property law does not concern itself with ownership of mere thought as a general principle. A consistent feature of the four legislatively defined categories is that each requires some form of physical embodiment or demonstration in order to gain status as a legally protectable entity. For instance, a novel must first be written or at least dictated onto an audio recording to gain copyright status: it cannot be merely a good tale carried about in the author's head. A trade secret is not just any confidential knowledge of an employer, but must be knowledge protected by restriction to appropriate personnel and by other demonstrable measures. Trademarks must be in active commercial use to identify goods, and cannot merely be an idea in a file folder. Patents are only granted for inventions (machines, manufactured articles, software, processes, or compositions of matter) that are described in sufficiently concrete terms that anyone skilled in the industry could "practice" the invention, not for speculation about what an inventor could or might create.
Engineering in the Context of Intellectual Property Law TOP
The United States achieved technological preeminence on the strength of its entrepreneurial tradition. For entrepreneurs, however, the ability to pioneer new technology based industries depends heavily on the existence and fair application of intellectual property laws. These protect the profit incentive for inventors, artists, and authors to make the fruits of their efforts available to the public.
The relationship between intellectual property and the professions of science and engineering is inherent. Anything of commercial value soon is surrounded by laws to define and protect the elements thereof. Intellectual property law, as the name suggests, is oriented toward the fruits of the mind. Scientists discover new ideas, materials, and processes that engineers draw upon for their work. Engineering embraces those technical arts that yield practical benefits for the human race, such as safe bridges, new chemical processes, better television and radio systems, and faster and quieter aircraft. Engineers are professional innovators, and are prolific creators of intellectual property by the very nature of the profession.
Intellectual property law is carefully applied to the value created by engineering effort. Every schematic produced, each piece of software code, every drawing, diagram, and prototype has intellectual property rights attached upon creation. These rights are the legal essence of an engineer's output, for if an actual diskette or prototype is lost, another can always be had, but if the legal rights are lost, the diskette or prototype may be worthless even if securely in hand.
The economic value created by the process of engineering is as carefully guarded by employers as the output of the manufacturing process itself. Just as manufacturing employees cannot stuff their pockets with product to keep at the end of the day, engineers are proscribed in the use of their knowledge and creativity and cannot, for instance, legally give confidential information to competitors. Even in the complete absence of any formal agreement between an engineer and his employer, courts will generally hold:
These well established principles of common law are called "shop rights". The legal doctrine of shop rights reached its greatest expression during the industrial revolution of the 19th century. Today, few attorneys consider common law to be adequate for the needs of modern technology based corporations. For instance, there is no common law barrier against an employee creating job related inventions at home during nonworking hours without use of the employer's confidential information, time, materials, or funds, and selling them to the highest bidder. It is important for every prospective technical employee to understand that most employers escape the provisions of common law by means of an employment contract that includes a preinvention assignment agreement.
Preinvention Assignment Agreements TOP
A preinvention assignment agreement expressly specifies the ownership of inventions (or other intellectual property) made during employment with the corporation. The term "preinvention" refers to the fact that the contract is normally signed at the commencement of employment before any work is performed. Acceptance of such agreements is a nearly universal requirement of employment for engineers, research scientists, and others hired primarily to design, create, invent, or discover.
The generic term "preinvention assignment agreement" is increasingly inadequate to describe the scope of employment agreements. Many agreements now recognize that other forms of engineering endeavor are often as valuable as hardware design, and claim all forms of intellectual property, especially software. This should be kept in mind while reading this guide.
Often, we see the word "invention" and think "patent". However, the word "invention", as used in a preassignment agreement, is a legal term with wider reach. The subject matter covered by this term is much more than the special case of patentable inventions, for it includes essentially all creative output, including the unpatentable, mundane, and trivial. Even a total lack of patentable subject matter has no effect on the scope and validity of an employer's claim. This point needs to be absolutely clear.
Although the scope of a preinvention assignment agreement certainly includes patentable creations, the basic purpose is to ensure that all intellectual property generated in the course of the company's business is clearly understood to belong to the company, and to provide legal recourse when the terms of the agreement are breached.
Implications of Agreement Terms TOP
The right and duty of employers to obtain adequate protection is indisputable. Modern businesses could not survive without it. However, it is imperative for employee engineers to understand the scope and implications of the covenants they agree to. The importance is deeper than the ordinary duty of any citizen to understand documents they are asked to sign. An employment contract is not like an appliance warranty -- it defines the terms of earning ones livelihood. Furthermore, in most states, the only constraints on what an agreement can attempt to claim are the outer boundaries of what courts are willing to enforce. Given that most such agreements are drafted in privacy by corporate counsel, and few are the result of open negotiation with any prospective employee, it is not surprising that most draw the scope of the employer's claim as large as possible.
One-sided, overreaching agreements might never be an issue for a hypothetical engineer who never leaves an employer to work elsewhere and is never creative outside of working hours. As a group, however, engineers enjoy high job mobility. They are prolific starters of new businesses, often have hobbies related to their field, and often moonlight and consult on the side. Their technical orientation sometimes fosters a disdain for legal formalities, leading many to forget the contents, and even the location of the documents signed when starting employment.
Extensive experience has demonstrated that unquestioning acceptance of assignment agreements is a trap for the unwary. Innovative employees will do well to remember that typical preinvention assignment agreements may require (1) that all inventions or discoveries, patentable or not, and regardless of any relation or lack thereof to the employee's job responsibilities, be promptly disclosed in writing to the corporate counsel, (2) the company shall be the sole arbiter of whether said invention or discovery falls within the scope of the agreement, and (3) the employee must assist in securing any intellectual property rights without additional compensation, often even beyond the termination of employment. Some agreements include a "trailing clause" that continues to claim job related inventions for a period after the end of employment.
There are tremendous variations between assignment agreements, depending upon the needs of the business and the skill of the drafting attorney, but in general there are two broad philosophies in use. The "Massachusetts Model" is so called because it is prevalent in the Northeastern States of the U.S., where it was developed during the industrial revolution as a response to the doctrine of shop rights. Agreements written on this model tend to imply that every sentient thought of the employee is company property. Clearly, the terms of an overreaching assignment agreement can impact heavily on an individual when a former employer challenges the rights to his work. The agreement can be a tool to quash new businesses or to prevent you from taking a job with a competitor.
The Legislative Response TOP
If big companies grow from little companies, little companies are often started by individuals who leave big companies. This cycle of innovation and renewal is fundamental to a healthy market economy. To foster this cycle, individuals require the same protections for non-work-related intellectual property that employers enjoy for work related creations. In 1977, Minnesota formalized this concept with a law that limits the enforceable terms of preinvention assignment agreements. The "Minnesota Model" adopts the philosophy that while the employer should enjoy protection, this should not be at the expense of the ability of today's employee to become tomorrow's new employer.
In 1980, the State of California followed by implementing protection for its famous entrepreneurial culture. As of this writing, Utah, Washington, North Carolina, Kansas, Delaware, and Illinois have also promoted new business formation by means of similar laws (see Appendix B). Significantly, the benefits of these laws have been achieved without discernable adverse effects upon employers.
Notwithstanding that these laws benefit the individual states, it creates a potential administrative nuisance for businesses with operations in multiple states. The United States is virtually the only industrialized nation that has not implemented a uniform preinvention assignment agreement policy at the national level.
Employment Strategies for the Creative Individual TOP
The state laws limiting preinvention assignment agreements are not in and of themselves sufficient protection for engineers working in those states, and of course are no help at all for those elsewhere. Although truly overreaching terms in employment agreements are of questionable enforceability in the courts, few individuals have the temperament and resources to overturn an unfair claim through litigation. The fundamental defense of any engineer against poorly drafted or ill-considered employment agreements is to not sign them. Beyond that, even when an engineer is already bound by an overreaching agreement, there are other defenses that can be brought into play.
Following are suggested strategies for dealing with intellectual property assignment agreements. Bear in mind that these strategies reflect the author's personal experience, case histories of which he is aware, and many discussions with intellectual property specialists, but that your circumstances are unique to you. Therefore, you must apply your own judgement and seek counsel as may be appropriate to your situation.
Although written primarily for engineers in private industry, others such as applicants for faculty positions, graduate students seeking research or teaching assistantships, and government employees can find application as well. Independent consultants should understand the points made and adapt them to each consulting situation. The following six steps assume that you are looking for a job. Actually, the preparation to take a new job should have started even before you accepted the job you are about to leave!
STEP ONE: Get an Offer in Writing TOP
As always, the first step is to find a job that appeals to you by the usual sequence of search, interview, and offer. Step one is not complete until a written offer of employment is in hand. Verbal offers are notoriously subject to changes of heart, initial sincerity notwithstanding. Failure to put an offer in written form might indicate lack of authority or lack of sincerity.
Without a provable offer, your status remains that of any other nonemployee. This is not to say that an agreement in principle can't be reached informally, with details to be worked out later, but remember the legal maxim, "verbal contracts aren't worth the paper they are printed on." Translation: if it isn't written, it isn't an offer. "Written" can include handwritten, as long as it is signed by a corporate officer of sufficient authority.
STEP TWO: Inspect the Total Offer TOP
Once a bona fide offer of employment is in hand (but not before), request copies of all documents that you will be required to sign when you begin employment. If the company automatically provides these with the written offer, this is a good sign, though in some instances only some, but not all of the documents will be provided. Do not accept an offer before receiving and reading these documents, or else make your acceptance conditional. Make the request for documents to the personnel department, not to your prospective supervisor, who does not handle these forms anyway.
There are numerous reasons for asking. The most cogent ones are:
In rare instances, a company may refuse to disclose the documents before you are an employee on the grounds that at least some of the contents are company proprietary information. In this case, you should insist on inspecting the documents but accommodate the company by either signing a nondisclosure agreement, or by reading the confidential documents on company premises.
Policy handbooks, even if not read or signed by you, constitute part of the agreement. Some companies give an employee handbook to each employee, while others use large and unwieldy binders distributed mostly to management and available for employee inspection upon request. Typical contents cover the obvious, such as lack of permission for criminal activities on company premises. The versions mostly reserved for management typically include a lot of minutiae over such issues as sick leave and accounting practices.
Those companies that pay active attention to their policies often choose to provide prospective employees with copies of all appropriate documents at the time of an offer regardless of the interest or lack thereof expressed by a prospective employee.
STEP THREE: When the Agreement is Unacceptable TOP
If you decide to refuse the job as offered, you have an opportunity to explain your rejection of employment as a complaint about the offered terms. You obtained the forms from the personnel department, but explanation of your refusal should be directed to your prospective department, where your issues will be most understood and appreciated, and pressure for change can be made from within.
If you want the job, but cannot accept the agreement, nothing ventured means nothing gained. There are circumstances where negotiated modifications are the alternative to refusing the job. Most employers are willing to listen to legitimate concerns, and it may be that the company will respond with a willingness to change the agreement. If the agreement is the largest single objection, this is your opportunity to negotiate better terms prior to acceptance of the offer. However, personnel employees lack authority to change documents, and are sometimes paralyzed by lack of precedent and unwilling to approach an officer of sufficient authority.
One way to deal with this is to mark up the agreement yourself and submit it before accepting the offer, or as part of your acceptance. If the company now responds, make sure that you negotiate with an officer with authority to approve modifications. Responses from those lacking sufficient authority are merely advisory (though the advice may be good). Continued silence is problematic. It can be interpreted as tacit approval, and as such creates a presumptive right to use the altered agreement. Should inaction actually be due to confusion or continuing paralysis, that is an internal company matter beyond your control.
If the company files a signed, altered agreement in your folder without comment, they have accepted the altered terms. However, that does not mean that the employer cannot later require you to sign a newly prepared agreement as a condition of continued employment. Modifications to the original agreement that were not negotiated openly and fairly are unlikely to be accepted in the new agreement. Nor are the courts likely to enforce any altered terms that are unreasonable. It is cleaner, wiser, and certainly more professional to either accept or reject the company agreement as offered, or to negotiate openly and up front so that any alterations are formally approved by both sides.
Agreements (contracts) offered under circumstances that make it difficult or impossible to refuse acceptance are termed "contracts of adhesion". Such contracts are nonetheless generally enforceable to the extent that they are reasonable. Bear in mind that the ambiguous word "reasonable" is a loaded term in legal discussions. An employee who unilaterally modified an agreement may have a burden to explain the need to do so, when all other signers of the unmodified agreement apparently did not have a similar need.
By the same token, it is not a sufficient defense for a company that prefers to disclose their agreement the day you start work, to point out that preinvention assignment agreements are common, and that any new employee should expect them as a matter of course. The point is that agreements vary, and it is the potential presence of overbearing or unusual terms that creates the need for prior inspection, and a need for modifications to accommodate individual circumstances.
STEP FOUR: When You Choose to Accept the Offer TOP
As step four, if all is in order and the terms are acceptable, presumably you will accept the job. However, if you take the job, you have a professional obligation to understand the terms of and live up to the letter of your agreement.
This is the time to put your preinspection of the documents to work. When you show up on the first day, you can have the forms ready and completed more thoroughly than would otherwise be possible. Specifically, pay attention to any invitation to list prior inventions for purposes of exclusion from agreement coverage, because this is a prime opportunity to protect your personal intellectual property with a prepared list of excluded inventions. Read the agreement carefully for language that may attempt to limit your rights in subject matter that is not included on your list. If no list is solicited, you have the right to create one and have it included in your file.
Failure to mention an idea on your list does not by itself limit your rights if other proof of prior conception is available, such as a date of publication, provable disclosure to others such as your patent counsel, dated notes kept in ink, date on a patent application, etc. Bear in mind, however, that disclosure to a party not involved in the development of the invention can be a bar to virtually all foreign patents.
Remember that a submitted list is a most important opportunity for declaring subject matter that you consider your own. Unless there are valid reasons for keeping an excludable idea off the list (a duty of confidentiality owed to someone else, for instance), it should be mentioned irrespective of any amount of other proof.
Label the list "Inventions Excluded as Conceived Prior to Employment". While you should list everything applicable, with a reach commensurate with the company's own use of the word "invention", what you want to pay special attention to are things that you might pursue on the side, and especially things that you might eventually use as a basis for generating income. Notwithstanding that this can be hard to predict, give yourself the benefit of the doubt while the giving is good. The most you owe is a list with each entry sufficient to tag a given idea without actually disclosing details. Do not include any inventions or creations that have already been assigned (for instance to a previous employer), because they are not your personal intellectual property. Mentioning their existence could be a breach of confidentiality.
The list can easily be longer than will fit on the form. In this case, prepare it separately, and put "see attached list" in the space on the company form. Be sure to keep a copy of your list for your files because you won't have the carbons that come with company forms. Make sure the list bears your name, in case it becomes separated. Don't sign and date anything at home. Wait until everything is signed on company premises.
STEP FIVE: During Employment TOP
Step five is optional. If, during employment, you feel the stirring of an idea that just won't wait, and you feel that you are entitled to the rights, you can either work on it at home in possible violation of your agreement or you can disclose it to your employer. Remember that, in all instances, the intent is to accord to yourself the same care for your personal intellectual property that you owe to the company for theirs. When step five must be invoked, it is a good time to review the terms of your agreement. You may even find circumstances of sufficient import that the advice of legal counsel may be wise. It is important to understand that such issues are not intellectual property matters per se. Employer / employee dealings are issues of labor law, and your specialist should be chosen accordingly.
Where a contemplated invention clearly will belong to the company, one approach to retaining rights is to request modification of your employment agreement. For instance, in a state without a law limiting agreements, your private agreement can still incorporate the terms of a suitable state law by reference. Some employees are in a better position to request modifications after they have worked in the company for a while and proven their value to the organization.
If the agreement itself cannot be modified, you can still request a waiver for a specific invention. Even submitted inventions that are clearly the property of the employer might be given back.
In many instances, an employee cannot discern whether a contemplated invention will be claimable subject matter. This presents a dilemma. Reasonable certainty is required for an intelligent decision as to whether to commit personal time and funds for development of an idea. This is because employer claimable ideas become company property regardless of the use of personal resources for development. Yet, there is no guarantee of reimbursement for personal resources used to develop a creation which is later claimed unless this is agreed to in advance by the company. Also, ideas that could have remained personal property will still belong to the company if company resources are used in development. Only nonclaimable ideas developed entirely with personal resources have a chance of remaining employee property. Therefore, an assessment of claimability prior to starting development is essential.
Given this, one can contact the corporate counsel and ask whether the general subject area of a proposed invention will fall within the interests of the corporation. You may need to explain that you have not created anything yet and are asking only for guidelines, not a commitment. If the subject area is declared to be claimable, the employee will have avoided the risk of expending perhaps considerable personal resources on development of the target idea. If the subject matter is declared to be nonclaimable, this is invaluable guidance for future inventions.
By training, many attorneys habitually evade firm commitments and written assurances. You might encounter the answer reported by some engineers, "First make the invention, then we'll decide". This non-answer in the face of a good faith effort to discern claimability is no help. One tactic reported by those who have faced this attitude is to create something similar in topic to the invention you wish to create, but one that is easy to make, and that you do not care about. The response by counsel after submission is a precedent for the intended invention.
Once an employee obtains a determination that the subject matter is claimable, any actual invention in that area should be disclosed as required by the employment agreement, and developed using company time and funds. If the idea is claimed but no activity results, this may be evidence that corporate counsel is simply casting too wide a net with regard to the active plans of the company. In this instance, the employee can still ask for a waiver or return of rights as previously discussed.
You have a common law duty of loyalty to your employer that includes disclosure of creations related to your employment duties. The employer has a reciprocal duty of good faith and fair dealing. If you have reasonable doubts about the intent of the employer, this does not release you from the ethical requirement of loyalty, including candor and honesty in meeting the terms of your agreement, but this does increase the level of vigilance required for protection of your personal intellectual property.
Refusal of corporate counsel to provide guidance on subject matter claimability does not automatically mean that the corporation will be unfair. If the company claims all inventions, whether business related or not, they have no incentive to provide such information anyway, but may still be reasonable about releasing rights back to you. However, refusal in a state with limitations on claimable inventions sends a signal that perhaps the definition of company interests depends upon the potential of the invention, a classic "catch 22" situation.
A harsh, but necessary corollary that cannot be overstated is: proceed with caution if you attempt to sell an idea to your employer. This does not depend upon whether you conceived the idea, applied for, or even received a patent or copyright on it before taking the job. If it applies to the business of the company which has you on their payroll, there may be a strong presumption that somehow, it is theirs.
Including the idea on your list of exclusions when you began employment is an important defense, but the bottom line is that the normal course of employment trades paychecks for ideas. Attempts to go outside of this relationship both breaches this conceptual arrangement, and does it with parties holding an abnormal amount of power over you. The advice and early involvement of an independent intellectual property attorney is often a wise expenditure where such an arrangement is pursued. Remember that the corporate counsel is likely the only employee trained in the niceties of property ownership, and he represents the business, not you.
Needless to say, trying to sell any idea to a competitor of your employer is even more problematic.
In the instance that an employee maintains secondary employment, i.e. works multiple jobs, the same principles apply. A second paycheck and a second preinvention assignment agreement is a sale of ideas elsewhere. Secondary employment must not be with a competitor unless all parties agree. The best choice of side job will have no direct relationship to the business of your primary employer.
Personal projects commonly require workday hours, because that is when suppliers and other merchants are open for business. To avoid shop right claims or worse, avoid using work facilities for personal projects you want to keep the rights to. Personal time off is one solution, as is an off-premises lunch hour, but often a poor one considering that personal time during business hours is a scarce resource and often not available when needed on the spur of the moment.
Do not discuss outside projects with your manager - time spent with you is use of a company resource. There are cases where events as trivial as running a few pages through an office copier has resulted in upholding an employer's claim. The basic approach is to be both knowledgeable and discreet. The purpose of this is to maintain parity with the company regarding intellectual property protection. It is a matter of applying the same principles of confidentiality to your personal intellectual property that the employer specifies for theirs. It should always be done with due attention to the terms of your employment agreement.
STEP SIX: Leaving Your Job TOP
Finally, step six applies to the task of leaving for new employment. Rather than leaving everything in your office to be cleared out (and possibly scrutinized) on your final day, it is better to quietly remove anything related to personal projects a week or more beforehand. Leave a clean desk and complete files on quitting day. Make sure that company material stays put, including customer lists, cost data, and other proprietary information. It may be best to hand off sensitive company materials to colleagues a day or more in advance, so that there is little or nothing confidential left in your desk.
There are certain things that a former employer cannot claim. One is normal growth in your profession. Every engineer is expected to continuously learn during the course of employment. The fact that you learned a generic skill while working for one employer is no bar to using it for others. However, proprietary applications of your knowledge for a former employer must remain confidential.
An employer can't force you to keep working for them, nor can a former employer legally prevent you from earning a living. While it is normal that a soon-to-be past employer will not like you leaving to work for a competitor, it is difficult to argue that you must abandon the very skills that make you valuable. Even so, circumstances do arise where the courts temporarily deny a competitor access to the talents of a particular worker. One solution that has been used is to pay a former employee not to work for a period of time!
If you leave for consulting, you may find that your former employer is a willing client. Be sure that there is not a conflict of interest with other client assignments. Do not solicit other employees before leaving, and be circumspect about hiring former colleagues or using them as consultants for job related projects. It is important for both intellectual property and tax reasons to avoid any further identification as a company employee. For instance, checks issued to you should no longer have your old employee number or tax withholding.
If you intend to become a competitor to your former employer, you might do well to move away. Your former employer will be less likely to pick on a new competitor several cities or a state away as opposed to a former employee who is still calling former colleagues for advice and meeting them for lunch.
Although these six steps outline strategies for specific periods in the relationship between creative employee engineers and their employers, the overriding philosophy to keep in mind is one of mutual respect between the various parties, attention to rights and obligations in both directions, and the benefits for both employees and employers of an atmosphere where creativity can thrive both on and off the job.
Appendix A: Anatomy of a Preinvention Assignment Agreement TOP
The proper place to begin learning the language of assignment agreements is with your own. Find and read the copy given to you when you took your current job. If you can't find it, get a copy from the personnel department. Sometimes it is a separate document, but often it is a clause or set of clauses in a general employment agreement. The generic term "preinvention assignment agreement" is likely not found in it, but if it refers to inventions, copyrights, or intellectual property, and was signed when you commenced work, then a preinvention assignment agreement is what it is.
The most fundamental clause in any preinvention assignment agreement is the assignment itself. This can be narrow, perhaps naming the areas of subject matter that are claimable, or it can be virtually unlimited in scope. An example of the latter type is:
"The employee agrees:An example which is both more benign and more comprehensive is:
(a) that all inventions and improvements made, developed, perfected, devised, or conceived by the Employee either solely or in collaboration with others during the Employee's employment by [corporate name], whether or not during regular working hours, relating to the business, developments, products, or activities of [corporate name], or its subsidiaries, shall be and are the sole and absolute property of [corporate name]; and to disclose promptly in writing to [division name]'s Legal Department or to such other person as [corporate name] may designate, such inventions and improvements;".
"In consideration of my employment by [corporate name] and of the salary or wages paid to me, I agree:This wording at least acknowledges that an employee can engage in independent creativity not related to job responsibilities or confidential information (though similar work at the other end of the building, or even at far flung subsidiaries of which the employee may be totally unaware can create a presumption that the employee might know about it). It also references the quid pro quo -- something given for something received -- at the heart of every employment agreement.
(a) to disclose and assign to the Company as its exclusive property, all inventions and technical or business innovations developed or conceived by me solely or jointly with others during the period of my employment, (1) that are along the lines of the business, work, or investigations of the Company or its affiliates to which my employment relates or as to which I may receive information due to my employment, or (2) that result from or are suggested by any work which I may do for the Company or (3) that are otherwise made through the use of Company time, facilities, or materials."
The clause which typically follows the assignment requires the employee to assist the company in securing the rights to the disclosed matter:
"(b) At the request and expense of [corporate name], to make, execute, and deliver any and all application papers, assignments, or instruments, and to perform or cause to be performed such other lawful acts as [corporate name] may deem desirable or necessary in making or prosecuting applications, domestic or foreign, for patents and reissues and extensions thereof, and to assist and cooperate (without expense to him) with [corporate name] or its representatives in any controversy or legal proceedings relating to said inventions and improvements or the patents which may be procured thereon;".As a second example:
"(b) to execute all necessary papers and otherwise provide proper assistance (at the Company's expense), during and subsequent to my employment, to enable the Company to obtain for itself or its nominees, patents, copyrights, or other legal protection for such inventions in any and all countries;".The second example is explicit that the duty to assist extends beyond employment. This is also the case for the first example, because no limitation on time was specified. The open ended wording of the first example may be obvious to an attorney but can be a trap for the layman.
Although both examples of this clause promise that the company will bear the incidental expenses, neither example offers additional compensation for labor required beyond employment. During employment, time spent assisting the corporation is just another job responsibility. Beyond employment with the corporation, uncompensated labor can become a considerable burden. Simple copyright matters may be trivial, but there are cases where complicated patent matters have forced former employees to work free for ten hours or more per week for months. Fairness dictates that compensation for former employees should be provided at an hourly or daily rate not less than the equivalent of what the former employee received from the employer during employment.
Another common clause is an agreement to keep records:
"...to make and maintain for the Company adequate and current written records of all such inventions and innovations...".This may be interpreted by the employer as requiring a notebook to be kept detailing all work.
The agreement typically includes a confidentiality clause:
"To regard and preserve as confidential all information pertaining to [company name]'s business or that may be obtained by the Employee from specifications, drawings, blue prints, reproductions, and other sources, and not to publish or disclose either during the term of employment or subsequent thereto, without the written approval of [company name] such or any other confidential information obtained by the Employee while in the employment of [company name]."A more comprehensive, yet fairer wording is found in this example:
"upon termination of my employment to deliver to the Company promptly all written and other materials which are of a secret or confidential nature relating to the business of the Company or its affiliates;Having disposed of these matters, some agreements add incentive clauses. For instance:
not to use, publish, or otherwise disclose (except as my Company duties may require), either during or subsequent to my employment, any secret or confidential information or data of the Company or any information or data of others which the Company is obligated to maintain in confidence; and
not to disclose or utilize in my work with the Company any secret or confidential information of others (including any prior employers), or any inventions or innovations of my own which are not included within the scope of this agreement."
"to pay the employee a cash award of fifty dollars upon execution of the employee of application for United States Letters Patent upon such execution or improvement, together with an assignment to [company name]."The dollar amount in this example is explained by the age of the agreement. Many agreements with low dollar amounts were written in the economic and technical boom following the second world war. In 1951, fifty dollars could cover a monthly mortgage payment. Today, fifty dollars is likely less than the company's cost to write the check. It is also often less than minimum wage for the time spent by the employee to disclose the invention and assist in securing the rights. More current agreements may offer amounts ranging from the low hundreds of dollars to $25,000 or more.
Many companies do not offer financial incentives on the theory that more rapid promotions or larger pay increases will accrue to productive employees. This also avoids resolution of the often difficult problem of determining the contribution of any given improvement to the company.
An example of a royalty sharing clause is:
"To pay to the employee for each of the employee's inventions additional compensation consisting of a percentage of any income derived by [company name] from any sale of rights in such invention or part thereof, or from any royalties which [company name] may collect from licenses to others, except the sale or license of any invention or part thereof for use outside the United States, on a sliding scale, as follows:Again, these dollar breakpoints represent an incentive for an earlier generation. In the context of contemporary economics, the employee is essentially always at 20% for any meaningful revenue stream. The clause suffers in other ways. The additional compensation is only for licenses or sales agreements with other companies, not governments, and only within the United States. Restriction to domestic sales is increasingly parochial as the world market matures.of the first $1000 or part thereof....... 30%
of the next $1000 or part thereof........ 25%
of any further sums in excess of $2000... 20%"
The existence of license agreements depends very much upon the intent of management to make such agreements: inventions and improvements often remain captive within a company in order to protect a competitive position. The schedule is also inverted with respect to industries where royalty arrangements are created by negotiation. Book publishers usually begin with small or no royalties and increase the rate as up front costs are recovered, rather than reducing it after an initial generosity.
The agreement continues:
"It is further understood and agreed that [company name] may sell such invention or improvements, or license the manufacture thereof for such price or royalty as [company name] shall in its sole judgement and discretion shall determine, or if [company name] elects to do so, grant royalty free licenses for the use of such invention, or waive future royalties for a definite or indefinite period of time on any license theretofore issued, and that the employee shall have no claim or claims against [company name] except to receive the percentages above set forth of such amounts as [company name] shall collect through sale or licenses of such inventions or improvements."The employee should assume that any decision to collect or not collect royalties and fees is strictly a business decision which includes the cost of providing the employee's share. Many license contracts use cross licensing or other terms to avoid the trouble of accounting for and collecting payments. Thus, the promised benefits may prove illusory. If a share of royalty or licensing revenue is important to you, and you are offered such a clause, it may be useful to inquire how many employees have received such payments within the last decade, and to get some idea of the amounts involved.
A final type of clause which is common in the aerospace and defense communities is:
"The employee understands that [company name] has assumed and will continue to assume certain obligations with respect to inventions and patents under or by virtue of its contracts with the government of the United States and other customers, and employee agrees that any rights under this agreement are subject and subordinate to any obligations [company name] has assumed or may assume in the future in its contracts with the United States Government and other customers."Appendix B: State Laws on Preinvention Assignment Agreements TOP
The first item of business in each statute is the basic exception to what an employer can claim:
"Any provision in an employment agreement which provides that the employee shall assign or offer to assign any rights in an invention shall not apply to an invention that the employee developed entirely on his own time without using the employer's equipment, supplies, facility, or trade secret information,...".This fundamental protection is immediately followed by these caveats to ensure fairness to the employer:
"...except for inventions that relate to the employer's business,Simply limiting the enforceability of agreements does not prevent an employer from proffering unenforceable terms. That is the next task:
or actual or demonstrably anticipated research or development,
or result from work performed by the employee for the employer."
"An employer may not require a provision of an employment agreement made unenforceable under this section as a condition of employment or continued employment."The lack of penalties for breach of this clause means that it has value primarily as a defense for the employee.
Companies grow and change, enter new business areas, merge with other companies, and otherwise encounter circumstances that may require a new or changed assignment agreement:
"An employer may require his employees to agree to an agreement enforceable under this section as a condition of employment or of continued employment."Circumstances where the employer gives employees an afternoon or a few days to return a signed agreement are not satisfactory. A requirement for a new or changed preinvention assignment agreement potentially becomes a decision over whether to remain with the employer. The employer should grant an acceptance period of reasonable length for employees to find other employment. It should at least be commensurate with the period allowed outside recruits for acceptance of an offer.
Ordinary citizens are not expected to know the law in full detail. Thus, disclosure of the statute is often required:
"The employer must, at the time the agreement is made, provide a written notification to the employee that the agreement does not apply to inventions falling under the exceptions created by this section."While disclosure of the law is laudable, the ideal time for notification is at disclosure of the assignment agreement rather than at the time of signature. A common form of notification is to simply provide a copy of the statute.
Next, there is a statement of responsibility:
"The employee shall bear the burden of proof in establishing that an invention qualifies under this section."This sets the basic terms of an employee's legal strategy in a dispute. The company is presumed to possess the rights unless the exceptions created by the statute are demonstrated to apply. Kansas and Washington add a further burden:
"Even though the employee meets the burden of proving the conditions specified in this section, the employee shall disclose, at the time of employment or thereafter, all inventions being developed by the employee, for the purpose of determining employer and employee rights in an invention."While the duty to disclose even personal creations during employment is ordinary, this trailing clause has NO TIME LIMIT. Outside of Kansas and Washington, trailing clauses are left to the discretion of the drafter of the agreement and can be altered or negotiated. Privately drafted trailing clauses (and they are not that common), are for periods typically ranging from six months to two years, not an employee's remaining career!
Given that most confidential knowledge from a former employer rapidly becomes stale, indefinite trailing clauses are a classic example of law that creates such a burden in its literal observance that it is virtually designed to be ignored, yet still serves as a trap for the unwary.
Illinois includes a statement of what most courts would hold:
"This act shall not preempt existing common law applicable to any shop rights of employers with respect to employees who have not signed an employment agreement."Another statement of the obvious is found in Utah law:
"This act shall not apply to any right, intellectual property, or invention that is required by law or by contract between the employer and the United States Government or its agencies, or a state or local government to be assigned or licensed to the United States."This is legally obvious because Federal law preempts state law. Another statement of the legally obvious is:
"This act shall not apply to an agreement between and employee and his employer which is not an employment agreement."While these paraphrased clauses are not an exhaustive sum of the provisions of the various states, they are the main ones. The following references are for those interested in the actual statutes. As of this writing, the extant state laws limiting preinvention assignment agreements are:
|California||CA Labor 2870 - 2872|
|Delaware||19 Del.C. s 805|
|Illinois||765 I.L.C.S. 1060/2|
|North Carolina||G.S. s 66-57.1|
|Washington||RCWA 49.44.140, 150|
|Utah||UT ST s 34-39-1, 2, 3|
Appendix C: Types of Intellectual Property TOP
When engineers use the word "patent", a utility patent is usually what is meant since this is the category most germane to engineering. A utility patent is a government grant of the right to exclude others from making, using, selling, or offering to sell an invention of a process, apparatus, or composition of matter. There are also design patents, which protect shapes, decorative embellishments, and ornamental features. A third category is plant patents, which protect asexually reproduced botanic creations, such as new varieties of flowers or crops.
As part of the tradeoff between the needs of inventors and those of the public, one of the requirements for a patent is that it contain a sufficiently clear description of the invention for others skilled in the field of the invention to understand and apply it. Once issued, the contents of the patent are in the public domain (not the patent rights). The legislative intent is to grant to the inventor a limited monopoly right to exclude others from making or selling the instances of the invention, yet enable others to understand and obsolete or improve the invention, hopefully in the form of more patents. By this means, the progress of the technical arts is made as rapid as possible. A secondary benefit for society is that the accumulation of patents serves both as a technology library and documentation of the history of technology.
By law, a patent issues in the name of the actual inventor(s). A joint inventor must actually conceive and contribute some element that is covered in the claims. A technician or other individual who works on the invention under the direction of the inventor(s) is not a joint inventor unless they make an independent contribution. Nor can anyone legally be included as a joint inventor merely as a matter of courtesy or recognition.
Given the technical content inherent in a patent application, the Patent and Trademark Office (PTO) has its own procedure for registering individuals who wish to act on behalf of inventors seeking patents. One requirement is an adequate technical background. An undergraduate degree in engineering, physics, chemistry, or a similar technical discipline is required, or sufficient equivalent experience. Most attorneys lack this grounding in the technical arts. In fact, this is one of the few areas of law where non-attorneys are allowed to practice. Non-attorneys must pass the same qualifying examination on PTO law and practices as attorneys, and after registration are known as "patent agents". They perform exactly the same function as patent attorneys in assisting clients to obtain patents, though they cannot bring suit for infringement or otherwise provide legal services beyond practice before the PTO. Thus the fraternity of patent attorneys and patent agents is a small and exclusive one compared to the legal profession as a whole.
The very nature of a patent is that it is property entitling the owner to sue others for infringement. The labor and expense of doing so is left entirely to the patent owner. Some industries are sufficiently specialized that there is a scarcity of relevant literature, leaving little for the PTO to research. This makes it possible to obtain patents (not necessarily valid) even for common industry practices within that niche, and to entangle competitors in legal battles for years.
Patents can also be used as a marketing tool. A patent can add a cachet to advertising copy and imply that competitors are old hat or inferior, notwithstanding that a new idea might not be superior to an established one.
They are also used as a negotiating tool for cross licensing
agreements, which may include trade secrets and other "know how".
In some industry segments, licensing income from intellectual
property can rival that derived from manufacturing.
Finally, there are those occasional hardy individuals who labor
to make money by patenting an idea and licensing or selling the
rights. The difficulties and rewards of doing this are beyond
the scope of this guide, but the stories of those who have
traveled this route are instructive and interesting reading for
others who would do so.
The basic concept is that some spark of creativity or originality
must be present for copyright protection. For instance, a new
column format for a telephone directory may be a protectable
element, but the courts have held that an alphabetical list of
the actual names, addresses, and numbers is not. Code fragments
whose instruction content is dictated by utilitarian
considerations such as speed of execution or efficiency, such
that any competent software author driven by the same goals will
tend to converge on the same sequence, are also not protectable
The other basic concept is that only the expression of an idea or
function is protected, but not the idea itself. The idea of a
spreadsheet is not copyrightable, although a particular choice of
screen representation may be. A copyrighted schematic is no
barrier to creating a new schematic directly from inspection of
equipment, for the ideas embodied in the equipment are not
protectable by copyright, and the new schematic is an independent
Decompiling code is an obvious and often used means to discover
the workings of software products. The information so gained
should be abstracted before application. The use of "clean room"
techniques is one formal approach to insulating ideas from
expression of the ideas. However, if a new work is created with
nontrivial reference to a previously copyrighted one, the new
work may be classified as a derivative work. Derivative works
are not considered original notwithstanding that considerable
originality may have been included and much labor expended. Such
dodges as recoding a program in a different language such that
the resulting code bears no obvious resemblance to the original
has not been a barrier to successful infringement suits by the
Copyrights have long terms of protection compared to patents.
The term is the life of the author plus 50 years. In the case of
works for hire (written by an employee or as a paid assignment),
the term is the shorter of 100 years from creation or 75 years
from publication. This also applies to anonymous or pseudonymous
A trademark can have an indefinite life if it is used properly.
However, a trademark can be lost if its use is abandoned for a
sufficiently long period, or if it is too successful and becomes
generic for the product or service that it represents, for
instance linoleum, cellophane, aspirin, and escalator. While
trademarks are often suggestive (but not descriptive) of the
products they represent, the strongest are often those that are
arbitrary or nondescriptive, such as Apple brand computers.
Trade names, trade dress, and service marks are similar to
Once made public, trade secrets cannot be recalled and are
permanently lost as secrets, regardless of how the knowledge came
to be public. The only recourse is to seek damages and/or
criminal prosecution against those responsible if fraud,
carelessness, or malicious intent can be proven, and appropriate
treatment of the knowledge as secret information - not merely
confidential or proprietary information - can be demonstrated.
Copyrights were originally intended to keep publishers from copying each others books without payment. Many commercially valuable forms of property have managed to shoehorn into this concept, so that copyright protection has been extended to motion pictures and sound recordings, computer software, paintings, architecture, and even decorative belt buckle designs. Copyright protection is automatically extended to new works, and lack of a formal copyright notice no longer means that the work is automatically in the public domain.
Trademarks are the logos and stylized lettering that businesses use as a shorthand identity. For instance, everybody recognizes General Electric and International Business Machines just by their initials, and the NBC television network by a sequence of three tone chimes. The commercial value of these recognition aids is considerable, thus trademarks have a long history of legal protection.
Trade secrets are the only form of intellectual property that cannot be made public without losing protection. What does and does not constitute a trade secret depends very much on how the secret knowledge is treated and protected, not merely on the fact that it may not be widely known. Consequently, trade secrets may have an indefinite life, such as the carefully guarded formula for Coca Cola, or a very short life if few or no security precautions are taken by the owner.
Finally, there are those occasional hardy individuals who labor to make money by patenting an idea and licensing or selling the rights. The difficulties and rewards of doing this are beyond the scope of this guide, but the stories of those who have traveled this route are instructive and interesting reading for others who would do so.
The basic concept is that some spark of creativity or originality must be present for copyright protection. For instance, a new column format for a telephone directory may be a protectable element, but the courts have held that an alphabetical list of the actual names, addresses, and numbers is not. Code fragments whose instruction content is dictated by utilitarian considerations such as speed of execution or efficiency, such that any competent software author driven by the same goals will tend to converge on the same sequence, are also not protectable by copyright.
The other basic concept is that only the expression of an idea or function is protected, but not the idea itself. The idea of a spreadsheet is not copyrightable, although a particular choice of screen representation may be. A copyrighted schematic is no barrier to creating a new schematic directly from inspection of equipment, for the ideas embodied in the equipment are not protectable by copyright, and the new schematic is an independent creation.
Decompiling code is an obvious and often used means to discover the workings of software products. The information so gained should be abstracted before application. The use of "clean room" techniques is one formal approach to insulating ideas from expression of the ideas. However, if a new work is created with nontrivial reference to a previously copyrighted one, the new work may be classified as a derivative work. Derivative works are not considered original notwithstanding that considerable originality may have been included and much labor expended. Such dodges as recoding a program in a different language such that the resulting code bears no obvious resemblance to the original has not been a barrier to successful infringement suits by the original authors.
Copyrights have long terms of protection compared to patents. The term is the life of the author plus 50 years. In the case of works for hire (written by an employee or as a paid assignment), the term is the shorter of 100 years from creation or 75 years from publication. This also applies to anonymous or pseudonymous works.
A trademark can have an indefinite life if it is used properly. However, a trademark can be lost if its use is abandoned for a sufficiently long period, or if it is too successful and becomes generic for the product or service that it represents, for instance linoleum, cellophane, aspirin, and escalator. While trademarks are often suggestive (but not descriptive) of the products they represent, the strongest are often those that are arbitrary or nondescriptive, such as Apple brand computers.
Trade names, trade dress, and service marks are similar to trademarks.
Once made public, trade secrets cannot be recalled and are permanently lost as secrets, regardless of how the knowledge came to be public. The only recourse is to seek damages and/or criminal prosecution against those responsible if fraud, carelessness, or malicious intent can be proven, and appropriate treatment of the knowledge as secret information - not merely confidential or proprietary information - can be demonstrated.