Martensen IP Offers Valuable Insight into Managing Employee-Associated IP Risks
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Everyone has a story about an experience with intellectual property (IP) in the workplace, because IP lies at or near the heart of a company’s value – how could such stories not surface? Most of these tales encompass two maxims which are the focus of this article. Hopefully, recalling these maxims will help employers ensure IP created in the workplace remains there.
Spell Out IP Rights and Duties in Employment Agreements
A common misconception is that the company owns all IP generated by its employees. While this is the general rule, the rule is not absolute and its exceptions are not narrow. For example, employees who own pre-employment IP do not automatically relinquish that ownership when they are hired. Thus, companies must ensure distinctions between pre-employment and post-hiring IP are made to avoid ambiguity and uncertainty. This is especially true if the company hired the employee in anticipation of using the employee’s pre-employment IP in company operations and/or dealings.
A more likely exception occurs when an employee creates IP – an invention or method, trade secret, copyright, or trademark – in a field beyond the employee’s employment scope. In that case, most courts hold that it is the employee, not the company, who owns the innovation. At best, the company will be able to assert a so-called “shop right” – a nonexclusive license to use the innovation within the company – to that IP, without having to pay a royalty to the employee.
But even this limited right assumes the employee used company resources to produce the IP. If not, the company likely will have no claim even to a shop right. And regardless of the company’s shop rights, the employee will be able to license their IP to anyone of their choosing, including the company’s competitors. This is the case even if the employee used company resources to create that IP.
How does a company overcome these problems? By ensuring every employee signs an employment…
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