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Typically, ownership of an idea or invention is determined by whom and in what context the creation took place. An individual who invents something entirely on his own, for example, retains complete ownership. An individual hired by a company for the purpose of creating new products or ideas, on the other hand, will likely have given up those rights to his or her employer as one of the conditions of employment.

Employment Agreements

Employees are not required by law to assign their inventions to their employers, but employers can gain ownership through various types of agreements. Like any contract, an employment agreement may be written in any manner agreed upon by both the employer and the employee. The employer may claim all ownership rights, the employee may retain them or there may be some combination of the two. The key elements are that the agreement must be in writing and signed by both parties.

Disclosure of Inventions

One common element of the employment agreement is a disclosure clause. A disclosure clause, or disclosure provision, requires an employee to notify his or her employer of all inventions created during the course of employment that:

• Are relevant to the company's business
• Come out of tasks and assignments that are part of the employee's job responsibilities
• Were created using any of the company's resources (time, materials, space and so forth)

Such a provision gives the employer the right to assess the invention and decide whether or not it will assert any claims of ownership.

In addition to inventions created during the course of employment, some employers require that new employees provide them with a list of all inventions created prior to employment. This practice serves to prevent potential disputes over inventions that may or may not have been created during employment, and this practice can protect both parties in the long run.

Pre-Invention Assignments

In addition to disclosure of previous inventions, many employee agreements will require the employee to relinquish to the employer ownership rights over all inventions created during the course of employment. Because they are assigned at the start of employment and before any inventions are actually made, they are commonly known as pre-invention assignments. This type of agreement gives the employer complete control over the copyright, patent and licensing of everything created by its employees. It also gives the employer the right to use the invention as it sees fit, with or without input from the employee.

Most often, pre-invention assignments are utilized with employees hired specifically for the purpose of invention and innovation. These individuals are paid for their creative efforts and provided with many resources to assist them. Because the employer assumes the entire burden of risk, it wants to reap the benefits of its investment.

Some states have laws limiting the scope of pre-invention assignments. These laws prevent an employer from assuming ownership of inventions that are created by employees completely outside the scope of employment. A pharmaceutical chemist, for example, who designs model cars in his garage on Saturdays will not forfeit his ownership rights for inventions created on his personal time to the company he works for, regardless of whether or not there is an assignment in place.

Pre-invention assignment agreements may be part of an initial employment agreement, or they may take place later. If such an agreement is made after an employee is hired, the employer is required to offer "consideration," or valuable benefit other than continued employment, to the employee. For example, employees could be offered stock options in exchange for signing the agreement.

Questions for Your Attorney

• What is the best method to use to get ownership of employees' inventions?
• Must I have an employment agreement to claim the rights to an invention created by an employee during work hours when that employee was hired for the express purpose of creating new products for my company?
• An employee that I hired six months ago is refusing to sign a pre-invention assignment agreement in exchange. May I terminate the employee without getting into trouble?

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