This Legal Update provides guidance and drafting tips on employee intellectual property (IP) assignment clauses.
An employer's intellectual property (IP), including resources created by employees as work product, can be among the employer's most valuable assets. In the US, an employer's ownership of employee-developed IP absent an express written agreement between the parties regarding ownership depends on the type of IP (for information on the default ownership rules for each category of IP, see Standard Clauses, IP Rights Clauses for Employee Agreements (Short-form): Drafting Note: Ownership of Employee-Developed Intellectual Property). Most importantly from an employer's perspective, without a written agreement to the contrary, an employee generally owns his own inventions and any resulting patents.
To secure ownership of any inventions and patents and ensure proper ownership of all other IP created by an employee, employers should require all employees who may create IP rights in the course of employment to execute a written agreement with appropriate work-for-hire and IP assignment provisions.
In addition, to protect its trade secrets and other confidential business information, an employer should require that any employee with access to trade secrets and other confidential information execute an agreement with confidentiality clauses that, among other things, specifies the employee's obligations and the means to preserve confidentiality. For a model employee confidentiality and proprietary rights agreement and related checklist, see Standard Document, Employee Confidentiality and Proprietary Rights Agreement and Drafting an Employee Confidentiality Agreement: Best Practices Checklist.
Work Made for Hire and Assignment
Under US copyright law, a copyright-protected work prepared by an employee within the scope of his employment constitutes a work made for hire. In this case, the employer, and not the employee, is deemed the author of the work and owns the copyright in the work, unless the parties have agreed otherwise. A work made for hire clause specifies that works of authorship created within the scope of employment will be considered works made for hire under the Copyright Act.
A separate assignment of the employee's interest, including all IP rights, in all other work product is necessary to cover any work product not subject to the work-made-for-hire doctrine. The assignment clause should assign to the employer all work product created by the employee related to the employer's business or contemplated business, including all inventions, discoveries, proposals and ideas, as well as all related patents and patent applications.
The assignment clause should be drafted as a present grant to work product developed at a future time rather than a promise to assign at a future time, enabling the employer to:
Secure an actual conveyance of the employee's rights.
Minimize the risk of a successful challenge to the employer's rights at a later date.
To maximize the assignment's effectiveness, the agreement should include:
A further assurances clause in the event the employer finds it necessary or desirable for the employee to execute additional documents or assist the employer in its efforts to enforce the IP rights against third parties.
A grant of power of attorney to the employer for the purpose of executing any documents and undertaking appropriate actions, if, for example, the employee is unavailable or uncooperative.
If the employee's position makes it likely that the employee will create valuable IP rights (including inventions) as part of his duties for the company or has developed pre-existing IP that may be used in the employer's business, additional provisions may be advisable. For additional clauses and drafting tips that aim to protect the employer's IP rights in that context, see Standard Clauses, Intellectual Property Rights Clauses for Employee Agreements (Long-form).
State Law Limitations
Some states have specific statutes that limit the scope of inventions that an employee can assign to his employer. For example, Section 2870 of the California Labor Code prohibits the assignment of inventions developed entirely on an employee's own time without using the employer's equipment, supplies, facilities or trade secrets, except for those inventions that either:
Relate to the employer's business.
Result from any work performed by the employee for the employer.