Who Own’s Employee Innovations

on May 13, 2014 by James Hunt

 

Jim Hunt2Most employers encourage their employees to find creative and time-saving methods of completing the work assigned to them.  But few employers, and even fewer employees, understand the ownership of innovations when they are discovered.  The default rule is that, without a written contract, the common law controls.  And the common law provides that employers own those inventions or innovations where the employer intended the result embodied in the invention or where the employee was specifically hired to exercise his or her “inventive faculties” or solve a particular problem. In other words, the employer and employee impliedly understood that the employee was being hired to innovate, or that the employee’s duties were changed to include innovation. Further, if an employee is hired to invent, or the duties have evolved to include innovation, even those inventions the employee creates on their own time will belong to the employer, so long as those innovations relate to the employee’s work.

Courts have determined employers to be owners of innovations where independent contractors designed specialized machines, where research and development workers invented trade secrets, and even where high-level employees invent related products to their employer’s products.

However,  absent a contract saying otherwise, if the employee is not hired to invent, the invention does belong to the employee, even if the employee:

  1. Uses the employer’s property, facilities, or resources;
  2. Receives assistance from co-workers and the employer’s contacts;
  3. Is paid by the employer for the time during which the employee worked on development of the invention;
  4. Uses knowledge or information (except for the employer’s trade secrets) that the employee would not have had but for being employed.

Despite the employee owning the invention or innovation, the employer is not, entirely, without rights. The shop rights doctrine allows the employer to use the invention free of charge. The shop rights doctrine only applies when the innovation pertains to the employer’s business and was developed on company time using the employer’s resources.

Whether you are an employer or employee, it is important to understand your rights when dealing with innovation. The attorneys at Slater, Tenaglia, Fritz & Hunt recommend a written contract between employers and employees that identify the rights of the parties.  Some businesses only use these contracts for those employees that might innovate, such as engineers, software developers, and other technical workers.  Others have used our agreements to protect innovations by all of their employees.

The attorneys at Slater, Tenaglia, Fritz & Hunt, P.A., provide clients with experienced legal representation.  We handle many types of business disputes on behalf of corporate clients, including Fortune 500 Corporations and individuals throughout New York, New Jersey, Pennsylvania and nationally. Our attorneys handle cases from pre-litigation negotiations through litigation to obtaining and enforcing judgments.  If you need assistance, or are interested in learning more, please contact us by phone at (201) 820-6001 in New Jersey or (212) 692-0200 in New York. We can also be found on Facebook, LinkedIn, Twitter, Google+, YouTube and the Internet. All initial consultations are free of charge.