Everyone has a story about an Intellectual Property (IP) experience in the workplace, for IP is at or near the heart of a company’s value – how could such stories not surface? Most of these stories embrace two maxims, which are the focus of this article. Hopefully, remembering these maxims will help employers ensure that intellectual property created in the workplace stays there.
Formulate intellectual property rights and obligations in employment contracts
A common misconception is that all intellectual property generated by its employees belongs to the company. While this is the general rule, the rule is not absolute and its exceptions are not narrow. For example, employees who own intellectual property prior to hiring do not automatically relinquish that property when they are hired. Therefore, companies must ensure that there is a distinction between pre- and post-recruitment intellectual property to avoid ambiguity and uncertainty. This is especially true if the Company hired the employee with the expectation that the employee’s intellectual property would be used in the Company’s operations and/or business prior to hiring.
A more likely exception occurs when an employee creates intellectual property—an invention or method, trade secret, copyright, or trademark—in an area outside the employee’s area of employment. In this case, most courts rule that the employee and not the company owns the innovation. In the best case, the company can assert a so-called “shop right” – a non-exclusive license to use the innovation within the company – on this IP without having to pay the employee a license fee.
But even this limited right requires that the employee used company resources to create the intellectual property. Otherwise, the company probably doesn’t even have a right to shop. And regardless of the company’s shop rights, the employee can license their intellectual property to anyone of their choosing, including the company’s competitors. This is the case even if the employee used company resources to create this IP.
How does a company overcome these problems? By ensuring that every employee signs an employment contract…
