When a company pays an employee or vendor to create intellectual property (IP) it is a common assumption that the company owns the created work, for example, as a “work for hire.” That is not always true. As an example, ownership of patentable inventions belongs first to the individual inventor or jointly to co-inventors — even when the invention is conceived in the course of employment — and passes to the company only through a written assignment. Copyrighted works such as writings, music, art, photos, software, screenplays, etc., may be works for hire but care must be taken if the creator is an independent contractor where work for hire status is the exception, not the rule. Typically, the failure of the company to secure ownership of the IP surfaces at the worst moment, such as during a financing round; an M&A diligence review; or when attacked by a known infringer that the company now lacks standing to sue. The fixes are almost entirely contractual and preventable. Below are some tips to avoid problems.
1. Coordinate. Company legal, HR and procurement should coordinate. Typically, HR onboards and offboards employees, and procurement interacts with vendors and contractors. In-house or outside legal should provide standard IP forms with appropriate language.
2. Present Grant. The IP forms should include a present grant of rights up-front, in writing, for any future inventions or work product. For inventions, the Federal Circuit has drawn this line sharply: only present-tense executing verbs (assigns, does hereby grant and assign) transfer title automatically, while “shall be the property of” and “will be assigned” are future promises only and will require a second signed agreement to convey title to the company.
3. In Writing. The transfer of rights should be in writing. Modern execution methods qualify. Courts have enforced click-through or electronically signed acknowledgments as valid assignments.
4. Build in Cooperation, Disclosure and Power of Attorney. Include a further assurances or cooperation clause requiring future employee or contractor assistance to perfect title, and/or secure a power of attorney so the company can execute documents itself if the individual becomes unavailable or uncooperative. For inventions, include an invention-disclosure obligation so any inventions surface while the relationship still exists and ownership is clean.
5. Extra care for Joint-Ventures, Work-for-Hire, and Independent Contractors. Legal should be intimately involved in any joint-venture, work-for-hire or independent contractor work that involves IP. These arrangements require careful and informed consideration to ensure that IP is owned as intended by the parties.
6. Record Assignments to Protect Priority. An unrecorded patent assignment is void against a later bona fide purchaser for value without notice unless recorded in the USPTO within three months of its date or before the later purchase. Copyright has an analogous regime, and recordation provides constructive notice (if the work is registered and properly identified), and conflicting transfers are resolved by a recordation-timing priority rule. See Parsons’ following article “Global IP Assignments: WIPO’s New Pilot Platform Brings Modern Convenience to IP Assignments” for more information on one-step assignment recording.
The foregoing is not intended to be an exhaustive list of issues and others also exist. The above information is for general informational purposes only and is not intended to substitute for professional legal advice.
Parsons Behle & Latimer’s IP attorneys can assist you in assessing your AI best practices with respect to all your intellectual property needs and can be reached by calling 208.562.4900.
