Companies vs. Inventors: 8 Critical Things to Know About Patent Rights Ownership

In 2017, the United States Patent and Trademark Office (USPTO) issued 318,849 utility patents. Patent applications have increased by 5.2% since 2016. The total number of applications was about 380,000. This is a positive sign for inventors and innovators.

However, with the increasing power and access to technology, more people are now capable of innovation. Today’s inventors are in office cubicles, delivering presentations, making sales calls, or just everyday people.

And though it everyone has a dream of  being wildly successful in entrepreneurship, most of them aren’t aware of their patent rights.

Patent rights are rights conferred by federal law on a person filing a patent. It is a proprietary law granted by the federal government.

If you’re employed by a company while creating a patent, there are several critical things you need to know about patent rights and how your employment contract may affect them. Read on to learn eight comprehensive tips to protect yourself.

Who Owns the Patent Rights?

We’ve all seen this happen. An employee works for a company. Suddenly, while walking the dog, he/she has a Eureka moment and alters or remakes a different instrument or software or rather, inserts an idea.

Then when he files a patent or tries to, his company sues him and pursues litigation against him. Businesses are extremely wary of idea theft themselves. Thus, before you read further, you must know who owns the rights to your idea.

The general understanding of the law is that in the absence of any agreement, an employer has an exclusive license to any invention or innovation created by an employee while he or she works for the said employer. If you work in a technical field you likely signed an employment contract that should have some information as far as patent rights go. (typically near sections on moonlighting)

This is also referred to as “shop rights,” where an employer can use your idea or product without paying you any royalty, fees and without liability. What gives them the right?

This right is based on the presumption that their contribution through equipment, materials and time has financed or enabled your idea.

So while you may file patent rights, your employer may still have shop rights. This law is also applicable to independent contractors, especially if the employer provided the means to innovate. It’s important to read your employment contract if you’re serious about developing technology independently of your employer. The verbiage may be far more restrictive than you think, or even no existent. But generally it will be written in favor of the employer. That said, it’s not impossible that employers may be willing to alter language that makes you uncomfortable. As always, if you do have serious concerns it can pay off to consult an attorney.

While language around these ownership rights may feel unfair, imagine what would happen if an employer spent millions researching something, you make a breakthrough, and then leave to go develop the idea. Obviously this would be unfair for the employer. People typically run into problems though because language can be extremely unfair (to the affect that they “own” all ideas that you have during employment) so be careful evaluating what you’ve signed.

What thus can a new innovator or inventor do?

Educate Yourself About Patent Rights

Spend some time understanding the definition of patent rights. Understand the difference between patents, trademarks, copyrights, and trade secrets. Patents can last twenty years. They grant you the exclusive, legal right to manufacture or market your unique and tangible product.

Trademarks last ten years. They include phrases, proper nouns or names, sounds or symbols that identify with a product or service.

Copyrights are generally to protect creative and artistic expression either in verse, song, writing, art, or any tangible medium. And they usually last the lifetime of the author plus fifty years.

Trade secrets can include a chemical composition, pattern, formula, device or data that would give the user an edge over competitors. This is covered by state law.

Understand State Law

The Federal Patent Office confers patents, not the state. However, once your patent rights have been issued, the definition of rights to the patent will be decided under state law.

Often, businesses will make an employee sign an NDA (non-disclosure agreement) to hand over any patents you may have created while working for them.

This applies to all sorts of intellectual property rights as well. One must only look at Walmart’s Patent Suit against Eolas Technologies Inc., where a federal judge denied having the case moved from Texas to California, to get a general idea.

There are some states that passed laws limiting employers claims over their employee’s side project inventions and innovations. These laws are powerful enough to render assignment agreements null and void.

Know the Difference Between Inventor and Owner

An inventor is non-negotiable. What that means, is someone who hasn’t contributed to the conception of the product is not an inventor. Only if a person has contributed to creating and conceptualizing the patented product can he be called an inventor.

An owner is negotiable since the ownership can be transferred to another individual. This is particularly true if the owner has contributed financially or through equipment.

Why is this important?

A patent holder can sell all his patent rights to the owner or they can form a joint partnership and the proceeds could be divided.

If there are two inventors, then they are called joint inventors and each inventor will own the patent. Each inventor can also market, license or sell and receive monetary compensation without having to share it. You may remember what happened with Facebook’s conception.

To avoid legal issues, you must have agreements made.

Sign Agreements

This brings us to agreements. To prevent the exploitation of inventors and owners, you must have agreements signed that identify the owner and inventors.

Also, how your invention will be commercially sold, how any disagreements will be solved, what will happen if one inventor wants to go ahead and others don’t, and other considerations should also be covered in the agreement.

If you don’t want your employer to get their hand on your patents, don’t sign an employment agreement handing over invention rights. On your first day at work, go over the documents you’re required to sign with a fine-tooth comb.

Nondisclosure and confidentiality agreements generally have clauses in them which claim all rights to your work while in their employ.

Read your employment agreements, sales contracts, and technology transfer agreements. Look for reassignment clauses in them. You won’t be able to identify the clauses yourself, which is why you need an attorney.

Hire A Patent Attorney

A patent attorney can help you when it comes to your patent rights. Work with an attorney who specializes in patents, because he will be the best person to advise you. There are a lot of gray areas when it comes to patent rights for ideas developed at home and on your own time without assistance from your employer.

A good patent attorney can evaluate your case if you’re looking to file a patent while employed. They can also help you by going through agreements, making agreements and guiding you on how to move forward after you file your patent.

And no, they cannot steal your patent idea. Bar rules and state laws put lawyers under an automatic NDA for all their clients including previous, potential and disengaged clients. A regular attorney can’t file your patent. Patent attorneys have special licenses to practice at the USPTO. Some of them even have engineering undergraduate degrees. This can be very useful especially if you decide in which category your patent needs to be filed.

File Your Provisional Patent? Or What to Do Next?

Speed to market has always been the ethos of the startup world. And especially so in the world of inventions. But While the specific steps you choose to take after determining whether you can proceed with your invention may vary from person to person, it’s important to remember that just having an idea is the start. Below is some suggested reading, and I’ll continue to go into other facets of what you should know about patent rights ownership.

A provisional patent application gives you 12 months from the initial filing date to confirm or expand your submission and could be a good first step. Once you submit your patent, you have ample time to do a dry run in the market and see if it works.

If you make any changes to your invention, you can file additional applications and then fold them all into one, when you make your final application. Even a provisional patent that has been well written can secure a license or raise capital.

Investigate International Patents

Patent rights differ all over the world. Patent rights in the US may not be the same or equal in value, in let’s say China. Find out if you have key competitors, especially out of the country. Also be especially wary of competitors in key markets you’re trying to target.

US patent laws are only applicable within the United States. They can’t protect you in Europe, China, or any other country that you haven’t filed a patent in.

Thus, there’s no such thing as an international patent. But there exists and an international agreement, Patent Cooperation Treaty (PCT).

For U.S. applicants, a PCT application can be filed a year after a corresponding U.S. application has been submitted. Consider this step, if you’re planning to take your invention overseas. But keep in mind, copy cats may spring up, and it can be tremendously expensive to prosecute them from abroad.

Think Long Term

You must think long and hard about the future. If you’re thinking of filing a patent, you must think about the time it will take, the cost it involves and the above steps and information. Having an idea is just the start!

You will need to create a strategy, decide which innovation has to be legally protected, which attorney will help you file your patent, who are the owners and inventors, and if there is a market for your invention.

Wrapping Up

If done right, you can actually live off your intellectual property. Working with a patent attorney makes a difference, as they can assist you with the type of patent rights applicable to you and advise you about your options for the future.

Contact us today if you need help applying for a patent to protect the rights to your invention.