A company’s intellectual property often enables the commercialization of its products and services, its ability to license and exploit its IP rights, and to use its IP rights to conduct its internal business. It also happens to be produced almost exclusively by a company’s employees independent contractors. That’s exactly why it is imperative for businesses to lock down rights to the IP they need - securing IP rights could mean the difference between successful operation and closing shop.
Patents. Patents are a type of intellectual property that apply generally to inventions. Inventions subject to patent protection take form in a variety of ways ranging from devices, products, processes, methods, chemicals, plant varieties, and much more. While some businesses are clearly more innovative than others, inventions may emerge in any setting and should be considered regardless of the field or industry in which your business operates.
The default rule in the United States is that ownership in a patentable invention vests in the inventor or inventors of the invention, and not in a business entity. To ensure your entity has rights in inventions created by its employees or independent contractors, you should obtain a written assignment from each inventor or their assignees. Without doing so, your business will have the burden of proving a claim of ownership in the invention using purely circumstantial evidence - not typically an easy feat.
Copyrights. Copyrights are described with legalese as “works fixed in a tangible medium of expression.” In more common language, copyrights generally cover creations (rather than inventions). Copyrights exist in these creations the moment they are “fixed,” which could be the moment a musical composition or drawing is put on paper, moment a song or movie is recorded, the moment software code is written, and so on and so forth.
Copyrights generally vest in the creators or “authors” of the work, unless they are “made for hire.” Whether a work is “made for hire” depends greatly on whether the author of the work is an employee or an independent contractor. An employee produces a “made for hire” work in which the hiring company has rights if the work was either made within the scope of the employee’s employment or if the work was specifically commissioned by the hiring company. A company may have rights in works commissioned and created by independent contractors in the following circumstances if the work is:
a contribution to a collective work;
a part of a motion picture or other audiovisual work;
a supplementary work, that is, a work prepared for publication as a secondary adjunct to a work by another author for the purpose of introducing, concluding, illustrating, explaining, revising, commenting on, or assisting in the use of the other work, such as forewords, afterwords, pictorial illustrations, maps, charts, tables, editorial notes, musical arrangements, bibliographies, appendices, and indices;
an instructional text, that is, a literary, pictorial, or graphic work prepared for publication for use in instructional activities;
answer material for a test; or
The easiest way for a company to secure rights in a work, of course, is to have employees or independent contractors agree in writing that the work is indeed “made for hire.”
Trade Secrets. Trade secrets are a form of intellectual property that are most valuable when held closely by a company and kept out of the hands of the public. Trade secret protection is only available for business, financial, or technical information if the information is not generally known or ascertainable outside of the owner’s organization and control, the owner derives independent economic value or business advantage from the information not being generally known, and the owner makes reasonable efforts to preserve its secrecy. When it comes to reasonable efforts to preserve secrecy in regards to employees or independent contractors, a company should at least have in place a non-disclosure or confidentiality agreement with each employee or independent contractor. Otherwise, the company will have little recourse if secret or proprietary company information becomes public through one of its hires.
Measures For Protecting Your Intellectual Property
Companies looking to protect their intellectual property should be sure to have in place company policies and procedures for securing and protecting their rights, and they should seek to secure confirmation of their ownership in writing from all of its employees or independent contractors. This is especially true of creative or technology-related industries wherein copyrightable and patentable works often arise. To secure copyrights, employees and independent contractors should acknowledge the company’s ownership of the employee’s or contractor’s copyrightable work product that is a work made for hire under the Copyright Act in writing. To secure patent rights, employees or independent contractors should assign to the company all of the employee’s or contractor’s rights in inventions and other work product in writing to the extent that legal ownership does not automatically vest in the company.
It is important to ensure that all assignment documents create a present assignment and not a mere promise to assign IP rights on condition or at a later time. Generally, “hereby assigns” creates a present assignment should be used instead of “agrees to assign,” which requires a later written assignment to effect transfer of legal title.
About the Author:
David "Tyler" Bennett is a business and intellectual property attorney, and he is a partner at Verhagen | Bennett LLP. To learn more about David, please click here.
For questions or comments about this post, please email David directly at: David@VerhagenBennett.com
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© 2018 David T. Bennett — This article is for general information only. The information presented should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.