Who Owns the Invention – the Employee and Employer Conundrum

As India’s participation in global trade, including with countries with strict patent regimes, increases, the need of aligning patent policies and practices in India with global standards is being felt.

If we look globally, and particularly at the competitive needs of global groupings (ASEAN, TPP, etc) and countries with strict patent laws like the US, Germany, UK, etc, there is a call for a relook at the ownership rights of employees and employer. The stress of ‘Make in India’ on IPR further shows its future prospects, and thereby, the need for policies more in line with the international standard.

As per the WIPO website for most countries,’ if an employee has developed an invention in the execution of his/her employment contract – i.e. usually during his/her working time within the enterprise – the invention (and the related patent rights) will belong to the enterprise’.

For Patents

What the WIPO website means, in essence, is that in the absence of an assignment of invention agreement, employees will have rights over their inventions (and any related patents) unless they were hired to work on or solve a particular problem and the invention relates to that problem. Further, independent contractors own anything they invent unless they enter into an agreement to assign their rights to the company for which they are working. So, simply put, if an employee invents something while working in an employer’s factory, but which is unrelated to his job responsibilities per se, then the employee owns the patent.

The U.S. Supreme Court partially comes to the rescue of the employer since, per them, “where a [employee] during his hours of employment, working with his [employer’s] materials and appliances, conceives and perfects an invention for which he obtains a patent, he must accord his master a nonexclusive right to practice the invention”.^[1] For patents, this rule is known as the “shop right doctrine”, giving a nonexclusive license to the employer for using the invention without paying royalties to the employee, although the employee owns the invention. The employee also has the right to exploit it commercially, such as by selling or licensing it to other users. Even where the employee works on the invention on his own time, if the employer’s resources are used to any significant extent, this rule usually applies.

For copyrights

Under the Copyright Act, for major economies with minor modifications, “work made for hire” is the work done by an employee within the scope of employment and the employer has right over it. In the case of an independent contractor, the employer will not have any rights over the work. So, it is better for the employer to enter into an agreement to have claimed over the intellectual property rights.

The “scope of employment” limitation means that the employer is only entitled to rights over the works that the employee produces under the scope of the employer. For example, if you are a fashion designer by day and a songwriter by night, your employer is entitled to the rights to your designs but not your songs.

Unless there is a written agreement with independent contractors, hired to produce written content, designs, logos, etc to addresses the issue in their case, contractors will own their creations even if a company paid the contractor to produce the copyrighted work.

Here’s a list of the nine types of work done by independent contractors that can be considered work-for-hire:

1. a contribution to a collective work;
2. a part of a motion picture or other audiovisual work;
3. a translation;
4. a supplementary work;
5. a compilation;
6. an instructional text;
7. a test;
8. answer material for a test; or
9. an atlas

For work not falling into one of the nine work-for-hire categories mentioned above, some or all of the rights must be explicitly assigned by copyright to the company through an agreement. And for these nine work-for-hire categories the contractors own their creations as mentioned before.

Conclusion

• Ideally, the employers should execute an employment contract or better sign an assignment of invention agreement with the employees to secure rights over intellectual property developed by the employee. In any scenario, the employee will always retain the right to be named as the inventor, unless expressly renounced by him/her.
• The employer should enter into a written transfer and confidentiality agreement with the employee, to secure the internally developed software, reports, or important materials before the employee goes to another job. The agreement should contain the details of any work created during the employee’s tenure with the company or utilizing the company’s resources, which now belongs to the employer. In the case of an independent contractor, the employer should execute a confidentiality agreement with the individual and the company he or she is employed by, regarding the newly developed work.