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Inventions Assignment Agreements

Recently, it has become a widely accepted practice for businesses to have persons working in research and development (R&D) or other creative work to enter into contracts which assign to the business an ownership interest in any inventions created while such person is employed for the business. Start-ups often use such agreements to ensure that the inventions created by multi-person research and design teams are owned by a jointly owned business.  In this context, a confidentiality and invention assignment agreement is typically signed by all founders and employees of the  company. The agreement creates a confidential relationship between the parties to protect any type of confidential and proprietary information and assigns all relevant work product to the company during the signors employment with the company.  Generally speaking, these assignment agreements are legal in most states, including Virginia.

Prior to Invention

While working for someone other than yourself, you should always, prior to working on any invention of your own, review your employment contract, with any and all amendments and other documents you have signed, to assess whether you have agreed to any pre-invention assignment terms.  Such terms might also be found in your company guidelines or an employee manual, which may  be deemed binding depending on the terms of your employment contract.

If you have already created an invention and would like to know whether the invention is subject to a pre-invention assignment agreement, you should consult with an attorney now.

What’s Usually Included in an Invention Assignment?

While there are no required terms for a pre-invention assignment, such terms are often substantially similar.   Nonetheless, through negotiation and by choosing the right employer, creative employees can enjoy favorable pre-invention assignment clauses, that provide for significant revenue and equity to be realized from one’s own creative work.  This opportunity for negotiation is why it’s so essential to have a lawyer prepare, review and negotiate your employment contracts carefully. If you don’t understand your contract, bring your employment agreement to an attorney before signing.

A typical pre-invention assignment agreement typically includes three sections: an assignment clause, a disclosure term and a power of attorney. Many agreements contain additional clauses as well.

Assignment Term

The assignment term requires a person to assign his or her inventions to the business.  This section usually transfers total ownership of the patent to the business, but often allows for some equity or revenue interest to be maintained for the inventor.  Given the significance of this term, i.e. given that this term controls the entire financial outcome of any and all inventions created by their designers, employees and employers should be sure they fully understand this section of their contract.   For example, while some terms may include only inventions created while working within the scope of employment, other contracts might assign any and all inventions, including even those which aren’t created at work.

Assignment Clause Example

Assignment of Inventions. “Employee agrees that all inventions that are (a) developed using equipment, supplies, facilities or trade secrets of the Company; or (b) result from work performed by Employee for the company; or (c) relate to or arise from the Company’s current or anticipated research and development will be the Company’s sole and exclusive property and are hereby assigned by Employee to the Company.”

Disclosure provision

Disclosure provisions are included with assignment clauses to compel an employee to inform his employer that an invention has been made.  This is sometimes necessary when an invention can be developed without the employer’s knowledge.  These clauses vary from contract to contract, but most are similar to the example included below.

Disclosure Clause Example

Disclosure. While Employee is employed by the Employer, Employee will immediately disclose to the Employer of all details of and and all discoveries, improvements, innovations and inventions, whether or not capable of being patented, copyrighted or otherwise protected, that Employee creates (whether jointly or with others) and which in any way results from or are suggested by any work that Employee may do for Employer.

Power of Attorney Section

This section authorizes the employer to register and administer the ownership rights without the assistance or cooperation of the employee. For instance, pursuant to a power of attorney, the employer is able to apply for a patent without the employee’s assistance. This section is fairly standard in all agreements, and is unlikely to be a point of contention.

Power of Attorney Example

Power of Attorney. If  Employer cannot secure Employee’s signature on any document required to obtain or continue any copyright, trademark, patent or other proprietary rights, whether due to mental or physical incapacity or any other cause, Employee hereby irrevocably designates and appoints the Employer as Employee’s agent and attorney-in-fact to execute and file any and all such documents and do all other lawfully permitted acts to further the prosecution, issuance and enforcement of patents, copyrights and other proprietary rights with the same force and effect as if executed by Employee.

Holdover clause

Many invention assignment contracts compel persons to transfer ownership of their inventions for a finite period of time after termination of employment.   The clause is intended to protect the employer’s interest and deter an employee from quitting and then patenting and marketing an invention that was designed during employment. Often times, courts are skeptical of such post-employment contractual terms because they can make it extremely difficult for an employee to find a new position.  To protect employees, courts only enforce reasonable holdover. To be deemed reasonable, a holdover clause should be for a limited time—probably no more than one year after employment ends and apply only to inventions created as a result of work performed for the employer.

Sample Holdover Clause

Holdover Clause: Employee will disclose to the Company any and all inventions, improvements or discoveries actually made, or copyright registration or patent applications filed, within 6 months after my employment with the Company ends. Employee hereby assign to the Company my entire right, title and interest in such inventions, improvements and discoveries, whether made individually or jointly, which relate to the subject matter of my employment with the Company during the 6 month period immediately preceding the termination of employment.

Patenting Following Termination

Generally speaking, an employee cannot avoid a pre-invention assignment by terminating employment and shortly thereafter patenting an invention. For example, an electronics engineer employed by a television company signed a pre-invention agreement which did not include a holdover clause. She resigns and one week after files a patent disclosure detailing her invention of a new software system that allows for faster wireless processing. The former employer files a lawsuit, arguing that the engineer wrote the software while working for the Employer and while subject to the pre-invention assignment agreement.  A court would usually find for the employer and the financial benefits of the patent would flow to the employer.

Waiver Provision

A large number of employment contracts include a section which compels employees to inventory all inventions he or she designed, developed,  created or patented before beginning work for the employer. Following this disclosure, the employee is asked to waive any and all rights to contend that any non-disclosed invention was conceived of before being hired by the employer. Waiver provisions remove a crucial argument an inventor might use to evade a pre-invention assignment: namely, that he designed the invention before beginning employment for the company and, as such, the invention is not subject to the assignment clause.

Sample Waiver Provision

Waiver: Employee has inventories in this employment contract any and all creations, designs, discoveries and inventions which, prior to being hired, employee created, designed, purchased, owned, obtained an interest in, or otherwise held.  Any discovery or invention not listed, but which arises from now until the termination of this Employment Agreement, shall be subject to the above assignment clause.

To speak with an attorney about your rights with respect to your invention, design or development, contact The Callan Law Firm, P.C. now.  To learn more about Employment Agreements, click here.