Dallas Bar Association

Ownership of Inventions

By John A. Thomas

This note discusses the ownership of inventions. Here, “invention” means any invention or discovery useful to a business, whether patentable or not, and may include a trade secret.

A patent is a government grant of the right to exclude others from making, using, or selling the invention. Patents have the attributes of personal property, and can be assigned, mortgaged, and devised like any other personal property. State property law governs contracts to assign patents, and transfers, mortgages and devises of patents.

The default rule is that the inventor owns the invention, even if employed at the time. In the absence of a contract or implied obligation that changes the rule, the inventor can be assumed to own the invention, including rights arising under a patent on it. The courts are reluctant to find an employee agreed to transfer ownership of his or her invention.

If the employee was hired to invent, then the employer owns the invention. This may result from an employment contract, or from an implied obligation arising from the nature of the employment.

The clearest cases are those where the employer and employee have made a contract which explicitly covers the employee’s duties, and also the ownership of inventions made by the employee. Such contracts are enforceable, even if the only consideration for the employee’s performance is continued employment.

If there is no employment contract, the question is whether, from the nature of the employee’s duties, and the employer’s instructions, it can be inferred the employee was hired to invent. The leading case is United States v. Dubilier Condenser Corp., in which the U.S. Supreme Court found that the inventors did not agree to “exercise their inventive faculties in their work,” and that the invention was not within the scope of the research assigned to them. Thus, the inventors were entitled to keep their patents.

Whether the employee was hired to invent, or was otherwise obligated to assign inventions, usually requires detailed analysis of the relationship. If the employee was not hired to invent, and there is no employment contract dealing with invention ownership, then the employee, as the inventor, owns the invention. But even if the inventor owns the invention, the employer may be entitled to a “shop right.”

The shop right is a non-exclusive, royalty-free license, giving the employer the right to practice the invention. The employee-inventor is free to patent the invention and exploit it as he pleases. The leading Fifth Circuit case is Wommack v. Durham Pecan Company.

The Wommack court held the employer’s assistance in reducing the invention to practice was not necessary to its obtaining a shop right. The principal consideration is the employee’s consent. This may be shown by either the employee’s actual consent to the employer’s use, or by the employee’s use of the employer’s time and facilities to make the invention.

Essentially, the employee is estopped from suing the employer for patent infringement because of employee’s own conduct. If the shop right is characterized as an implied license, the emphasis is on employee activities such as developing the invention on the employer’s time at the employer’s expense. If characterized as an equitable estoppel, the emphasis is whether the employee’s actions, such as consenting to employer use, require he be estopped from asserting the patent right against his employer. Some courts simply analyze the circumstances and the employee’s activities to determine if would be fair and equitable to allow an employee to prevent the employer from using the invention.

Joint inventors may become joint patent owners. Under 35 U.S.C. § 116, joint inventors are joint owners, even though they did not contribute equally to each claim in the patent. In the absence of any contrary agreement, joint patent owners may make, use, and sell the patented invention without the consent of the other owners and without accounting to the other owners. The statutory rule differs from ordinary co-tenancy law, where co-tenants have a duty to account to co-owners for profits from the jointly-owned property.

Sometimes persons can become joint inventors unintentionally. Frequently inventors need to consult engineers or other experts to manufacture or perfect their inventions. If these persons conceive features which are claimed in the patent application, they are co-inventors and co-owners. There can be a fine line between making suggestions and making an invention. Unless a joint venture is intended, inventors should avoid this problem by getting an agreement that any inventions made by the consultant will be owned by the inventor.

 

John A. Thomas is a member of Glast, Phillips & Murray, P.C., representing clients in patent and other intellectual property matters. He can be reached at jathomas@gpm-law.com.

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