The Employee's Idea, The Employer's Property: How to Capture Employee Intellectual Property

Employers, particularly those not in the technology fields, may be unpleasantly surprised to learn that an employee generally retains ownership and patent rights of whatever he invents during the course of his employment.  The good news for Oregon employers, however, is that they are free to contract around this rule and require that, as a condition to employment, their employees assign their patent rights to their employer.  Moreover, unlike other states, Oregon lacks employee statutory protection for such agreements, so no magic language or limitations are required. Advising Oregon employers up front about the need to protect the ownership of this valuable intellectual property can save employers significant costs, time, and headaches down the road.

Ownership of Inventions

An inventor is presumed to own his inventions.  Tees v. Chromalloy Gas Turbine Corp., 83 F.3d 403, 407 (Fed. Cir. 1996).  This remains true after a person becomes employed.  It is the general rule that an employee retains ownership and patent rights of whatever she invents during her employment, even if she conceived it or reduced it to practice in the course of her employment, and even if her invention relates to company business.  See, e.g., Mainland Indus., Inc. v. Timberland Machines & Eng’g Corp., 58 Or. App. 585, 589 (1982); Banks v. Unisys Corp., 228 F.3d 1357, 1359 (Fed. Cir. 2000).  Indeed, the employee may retain her ownership rights to the invention even if her employment furnished her with the opportunity for the conception of the idea, and even if she only gained the requisite skills, scientific knowledge and inventive faculties through her employment.  Further, this is true even if the patent is for an improvement on a device or process used by the employer. 

There are two exceptions to this general rule.  First, the employer may obtain the right to the employee’s future inventions by obtaining an express written grant or assignment of the employees inventions and patents; and second, where the employee is specifically hired for the express purpose of inventing something (in which case there is an implied agreement that the employee’s inventions will belong to the employer).  Banks, 228 F.3d at 1359.

Inventorship Agreements

It is generally well-settled under state and federal law that an employer can condition employment on an express grant of the employee’s future inventions and patents to the employer, although there do not appear to be any Oregon cases directly on point.  Moreover, unlike other states, such as California and Washington, which have statutory protections that apply to the employee’s assignment of his patent rights in an employment agreement, Oregon has no such limitation.  For instance, in both Washington and California, the employer is statutorily prohibited from contracting for an assignment of the employee’s inventions that are developed entirely on the employee’s own time and expense and which do not relate to the employer’s business.  (RCW 49.44.140; Cal. Labor Code, § 2870.)  Moreover, in both California and Washington, the employer must expressly advise the employee that the agreement does not apply to inventions developed entirely on the employee’s own time and expense and which do not relate to the employer’s business.  (RCW 49.44.140; Cal. Labor Code § 2872.)

Although there is no case law on point, arguably in Oregon an employment contract can require the employee to assign all of the inventions and patents that he conceives and develops during his employment, without any carve outs regarding the time, place and subject of the invention.  Indeed, at least one Oregon court stated that the place and time of the conception of the invention should not be dispositive of whether an employee or the employer owns the invention because it is difficult to understand how an employee can cut his mind off and on at will – i.e., think of things only during the lunch hour or after-hours and then claim that he was not working for the company at the particular moment when the idea strikes. Mainland Indus., Inc., 58 Or. App. at 591.  On the other hand, it is possible that an Oregon court may find that a provision requiring the transfer of all of the employee’s ideas – irrespective of the scope of the employer’s business and the relation between the employee’s idea and the employer’s business – is overbroad, over reaching, and unconscionable.

Drafting the Agreement

There is no particular form of agreement for assigning the employee’s inventorship rights to the employer.  It makes sense, however, to include it as part of the initial hiring documents in connection with other provisions regarding non-compete, non-solicitation, and confidentiality.  Drafting tips are set forth below:

Scope of Assignment.  A conservative, yet thorough and well written employment agreement will require the employee to assign all of his intellectual property and patent rights for inventions that relate to the employer’s business, that are conceived or developed using the employer’s equipment, supplies, facilities, or trade secret information, or result from any work performed or skill obtained by the employee for the employer – irrespective of whether the invention is conceived on the employee’s own time.  Inventions and intellectual property should be as broadly defined as possible in order to capture all possible inventions, conceptions, discoveries, improvements, and ideas, whether jointly or solely invented by the employee.

Disclosure and Cooperation.  The agreement ought to also require the employee to timely disclose any inventive activity, to maintain documentation of the invention, and to cooperate and to assist the employer in obtaining patent rights.  Prompt disclosure should preclude and prevent an employee from withholding an invention until after his separation from employment (in order to try to claim sole ownership of the invention).  Likewise, documentation of the conception of the invention will (hopefully) tie the invention to a particular date, which may be important for establishing priority against third parties or for proving that the invention was created during the term of employment.  Finally, at some point the employer will need the assistance of its employee/inventor, either during employment or post-separation of employment, for obtaining, enforcing, or defending the patent rights.  For example, the employee may need to execute an assignment in favor of the employer, or sign declarations or provide information in connection with patent lawsuits.  A cooperation clause will prevent the employee from holding the employer hostage by refusing to assist with the protection and enforcement of the patent. 

Post-termination Trailer Clause.  The agreement should also include a post-termination clause, which requires the employee to assign inventions or ideas conceived for a period of time after the employment ends.  These “trailer clauses” protect against the employee withholding his invention until immediately after his separation from employment in order to wrongfully maintain ownership of the invention.  Although there are no Oregon decisions directly on point, trailer clauses have been analogized to noncompetition provisions, so to be safe, the trailer period should not be longer than the permissible non-competition provisions. 

Remedies.  A comprehensive agreement should also include a remedies provision which supports a temporary restraining order and preliminary and permanent injunction to enforce the performance of the inventorship clauses.

Conclusion

Intellectual property rights are valuable assets.  Sophisticated and well-advised employers should capture these rights up front as part of their standard employment documentation.

Originally published in the summer 2016 edition of the Oregon Association of Defense Council's publication, The Verdict.

Endnotes

[1] Tees v. Chromalloy Gas Turbine Corp., 83 F3d 403, 407 (Fed Cir 1996).

[1] See, e.g., Mainland Indus., Inc. v. Timberland Machines & Eng’g Corp., 58 Or App 585, 589 (1982); Banks v. Unisys Corp., 228 F3d 1357, 1359 (Fed Cir 2000).

[1] Banks, 228 F3d at 1359.

[1] RCW 49.44.140; Cal Labor Code, § 2870.

[1] RCW 49.44.140; Cal Labor Code § 2872.

[1] Mainland Indus., Inc., 58 Or App at 591.