Employment Agreements Should Contain IP Clauses

By Debby Winters

Although most states are employment at will states, many state courts will enforce employment agreements if they have reasonable boundaries within the agreement. For a company that is developing intellectual property, it is advisable to have employment agreements for all employees that include clauses for dealing with intellectual property rights as well as confidentiality. This is especially true for small business start-ups. The agreements should contain clauses for IP disclosure and assignment.  These clauses should require employees to promptly disclose new inventions or other intellectual property to the employer upon conception, and to assign such inventions to the employer at that time.  The agreement should make it clear that the employee has an obligation to assign new inventions to the employer as a part of the employment.

New employees should sign such agreements prior to employment or on the first day of work.  Some states require additional requirements for having an employee sign such an agreement once employment has already commenced or such clauses will not be valid. These additional requirements may include new consideration, such as a raise, for signing the agreement.

Certain words have specific definitions or understandings in patent law.  For example, ambiguity could arise as to whether the employee would “conceive” and “make” an invention.  It is always best to stick with the definitions that are common to patent law.  For example, “conception” refers to “formation in the mind of the inventor, of a definite and permanent idea of the complete and operative invention, as it is thereafter to be applied to practice.”  This is more than just a vague idea; it requires definite plans for how to implement the invention.  “Make” or “reduction to practice” refers to the act of actually making the invention work for its intended purpose.

To avoid a dispute as to whether the employee developed the invention prior to employment, when executing the agreement, give the new employee the opportunity to indicate that he or she developed the invention prior to beginning their employment.  Require that the new employee prove this development by providing sufficient detail that he or she can’t later argue that vague statements constitute conception.  Unless the parties agree otherwise, the employee should retain all rights in inventions that he or she conceived or invented prior to coming to work.

The language used should requires the employee to promptly disclose inventions to the company and to “hereby assign” all future inventions.  The assignment is not required once the employment has ended and you need to chase the employee down and potentially sue him.  Instead, make it effectual as soon as inventions are conceived. Former employees are not always cooperative in the patent process for their former employers.  Therefore, you should include language that grants the employer at least a partial power of attorney to execute documents on behalf of the former employee inventor in cases where that becomes necessary.

It is always advisable to have an attorney familiar with patent law draft these clauses of your employment agreement.  If you need help with employment agreements, let me know.