Computer Assignment Agreement

December 2014 edition

Employer and employee ownership of intellectual property: Not as easy as you think

Tina A. Syring and Felicia J. Boyd, Barnes & Thornburg, LLP

Companies often hire and invest in employees to develop new products, improve processes, create new technologies and develop new markets. With this investment, it should come as no surprise that employers generally own the intellectual property created by its employees in the course of their employment. However, intellectual property that is created by an employee, other than in the course of employment, is owned by the employee not the employer. These simple principles present challenges for employees and employers alike.

Employers should not rely on assumptions of ownership

Intellectual property created during the course of an employee's employment does not equate to the employer's automatic and exclusive ownership of any and all intellectual property. In fact, employers who mistakenly believe that they own such property automatically can pay an expensive price – monetarily and through the loss of inventions or improvements – for failing to protect such intellectual property or effectively securing the rights from employees.

Critical to an employer's ownership of intellectual property is a written agreement with the employee, one which specifically assigns to the company any and all intellectual property created by the employee during the course of his or her employment with the company. Such an agreement is often called an "assignment of inventions" or "ownership of discoveries" agreement. Absent such an agreement, the employee may have ownership rights in the intellectual property he or she created while working for the company, even if the individual was specifically hired to invent a particular product or process.

To avoid disputes over whether sufficient consideration exists to support the validity of the agreement, employers should require that the agreement is executed prior to the commencement of the employment relationship, and the agreement should reflect that but for the employee's execution of the agreement, the company would not employ the individual. In the event the agreement was not entered into contemporaneous with the start of employment, the employer will need to provide additional, sufficient consideration to support the agreement. Such consideration can include, for example, a promotion, a one-time bonus, or, for example, a grant of restricted stock options. If entered into after the employment relationship has been established, the consideration must be more than a nominal amount in order to support the agreement. A dollar is not likely to constitute sufficient consideration.

Also important to the agreement is the inclusion of an addendum, wherein the individual identifies all intellectual property in which he or she has an ownership interest prior to the commencement of his or her employment with the company. If the agreement is executed after the commencement of employment (and sufficient consideration has been provided as noted above), the employer still should have the employee identify all intellectual property he or she believes to own. In the event the employee identifies and claims ownership of intellectual property that has been created during the course of employment and with company resources, and claims ownership to such property, the company should immediately work to determine if the employee truly owns it or if it is owned by the company. By doing this at the outset of the relationship and/or execution of the agreement, employers are proactively mitigating possible arguments later down the road about who owns what.

Employers also should make sure the written agreement complies with applicable state laws. For example, certain states require that the agreement include clear language carving out intellectual property created by the employee (i) entirely on his or her own time, (ii) without the use of any company property (e.g., equipment, supplies, facilities or confidential, trade secret information), (iii) that does not relate directly to the company's business or anticipated research or development, and (iv) does not result from the individual's work performed for the company. Some employers require employees to continually disclose intellectual property created outside the realm of his or her employment relationship. Again, this is done to avoid future arguments as to whether the company actually owns such intellectual property.

Next, employers should include language detailing what happens if the employee misappropriates and/or infringes upon the company's ownership of intellectual property. The agreement should contain a remedies and relief provision, which includes the right to seek injunctive relief and the recovery of attorney's fees and costs upon demonstration of the employee's breach. Often times, employers forget to include such language and, as a result, there is no meaningful "teeth" to the agreement, causing some employees to be bold in their self-interested actions.

Finally, employers should remember to use similar "assignment of inventions" or "ownership of discoveries" provisions or agreements when working with independent contractors. The independent contractor agreement should clearly state that the independent contractor's work of authorship, finished product, invention, or other intellectual property will be owned exclusively by the company, free of any royalty fee or license. The agreement also should state the independent contractor "hereby assigns" all rights in the intellectual property so to eliminate any issues if and when the company pursues a patent or copyright.

Tips for the employer:

  1. Determine if you have a written agreement with your employees and independent contractors. If so, does it include an "assignment of inventions" or "ownership of discoveries" provision? Does that provision clearly state the employee "hereby assigns" all rights and ownership in the intellectual property, trademarks and/or copyrights?
  2. Make sure the written agreement is supported by sufficient consideration. Was the agreement executed prior to commencement of employment or later? If later, what additional consideration did the company provide to the employee in exchange for his or her execution of the agreement?
  3. Have prospective employees and/or independent contractors clearly identify, in writing, any intellectual property they may own prior to commencing the employment or contractual relationship.
  4. Periodically have employees update and identify, in writing, any intellectual property in which they believe they own and make sure such intellectual property was created independent of the company's resources and the employees' duties.
  5. Conduct exit interviews with employees and independent contractors, reminding them of their contractual obligations.

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Opportunities exist for employees to own their ideas

Where there is no employment agreement, policies or written agreements to assign rights to the employer, employers may still successfully assert ownership rights in employee inventions created during the course of the employee's employment. The lynchpin to an ownership analysis is often whether the idea was created "in the course of the employment." It is not sufficient for an employer to point to a paycheck and lay claim to all of an employee's ideas. Rather, the idea at issue must have been created during the course of the employment relationship. Thus, close examination of the relationship may reveal that the employee owns the ideas because they were developed outside of the employment relationship.

A primary focus of this analysis will be the reason for the hire of a particular employee. If the employee was hired to create intellectual property as part of their job, the employer will be the owner of the intellectual property. Thus, examination of the written employment contract and the duties described therein can be determinative of the ownership inquiry. Absent a written agreement, the courts will look to the nature of the position and whether the employer gave directives or set goals for the employee to achieve. Ideas which stem from these directives will generally belong to the employer. Consideration needs to be given to all the circumstances.

For example, care must be taken when asserting ownership simply because the idea was conceived or developed at home, during non-working hours or using personal equipment. The fact that an employee used the employer's equipment is not enough by itself to show that the employer should own the intellectual property created with the use of that equipment. Similarly, it is not enough for the employee to claim ownership simply because he or she used their personal equipment or conceived the idea at home. The analysis will delve deeply into the role the employee played at the company and whether the idea stemmed from that role. Thus, the employee in the shower at home who suddenly conceives of the long sought after solution he has been working on at his job cannot claim ownership of the idea simply because the idea arose in the shower. Likewise, an employer cannot claim rights to an employee's creation of a computer software game built at home where the employee's work role bears no relationship to game creation, even where the employee took notes during work hours related to his game ideas or tested those ideas on employer-owned computers.

One must also consider whether there is, in fact, an employee-employer relationship. In many cases, the hire is one of an independent contractor. This too is a multi-factor analysis, but one with significant consequences. Independent contractors generally own what they conceive in the absence of written agreements specifically transferring ownership of the same to the contractor. For example, under federal copyright laws, ownership of copyrightable works is generally held by the author (the individual who creates it), with the express of exception of works made by employees during the course of their employment. This exception does not apply to works made by independent contractors. Independent contractors will own the copyright unless: (1) the work falls within one of nine statutorily specified types of works and there is a written "work-for-hire agreement" between the creator of the work and the company who commissioned its creation; or (2) the copyrights are assigned in writing by the contractor. The nine types of works that qualify as works for hire are narrow: a contribution to a collective work, part of a motion picture or other audiovisual work, a translation, a supplementary work, a compilation, an instructional test, a test, answer material for a test, and an atlas. Fall outside these categories and the copyright belongs to the independent contractor.

Patent ownership, like copyright, is presumptively owned by the inventor, i.e. the employee inventor. Employment agreements will usually require assignment of ideas, including patentable ones, to the employer. Even if such an agreement is not in place, employee ownership may not result in exclusivity of use or exploitation of that idea. The employer may still hold "shop rights" in the process or invention whose development it supported. The idea of shop rights simply gives an employer who provided funding, materials, tools, or work time for the project nonexclusive royalty-free rights to use an invention. The employer may not assign or transfer any shop rights to another unless expressly allowed, with the exception of a transfer of the employer's business as part of a business sale.

Contracts will play a role in the ownership of trade secrets as well. Absent a contract, state law will govern ownership. This is a patchwork of laws and decisions which may assist the employee to assert ownership over a trade secret or attack the notion that the idea is a trade secret, where a contract does not exist or is not sufficiently specific with respect to the idea at issue. If the idea is not protected by copyright, patent or trade secret law, the idea is free for any and all to take, regardless of one's current or former employment relationship.

Finally, trademarks and slogans are not typically the subject of ownership disputes. Trademarks belong to those who use them, not those who create them. Thus, the company which uses a mark to promote a service or good will own the mark and the goodwill associated with that mark. Disputes over trademark ownership in an employee-employer relationship would be atypical.

Tips for the employee:

  1. Examine your employment agreement. What did you agree to do? Understand what you sign before you sign it and seek legal advice if you are unsure of what rights you have retained.
  2. Look at any other agreements executed and determine whether consideration was paid for the execution of those agreements. Agreements signed after you are employed will be open to challenge if additional, or insufficient, consideration was not provided for these new obligations.
  3. Keep records documenting the creation of your ideas on your own time, with your funds and your own equipment. Do not rely on memory and do not assume that ideas worked on at home or on your own time belong to you.
  4. Review non-compete agreements to assess their enforceability and reasonableness. Certain states will not enforce any non-compete agreements even those agreements which have the effect of hindering the freedom of employee job changes and which are not labeled as "non-compete" agreements.
  5. Were you an employee or an independent contractor? The difference matters in determining ownership and should be reviewed by a legal professional.

This Barnes & Thornburg LLP article should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer on any specific legal questions you may have concerning your situation.


About the authors

Tina A. Syring is a partner in Barnes & Thornburg LLP's Minneapolis office and a member of the firm's Labor and Employment Law Department. Ms. Syring counsels clients on a variety of labor and employment issues, drafts and negotiates executive compensation agreements, and works with employers on the impact of social media. Ms. Syring was selected for inclusion in the 2011, 2012, 2013 and 2014 editions of Minnesota Super Lawyers®, and was named a Minnesota Rising Star by Minnesota Law & Politics. In 2013 and 2014, Chambers USA recognized Ms. Syring as an up and coming lawyer in the area of Labor & Employment: Minnesota.

Felicia J. Boyd is a partner at Barnes & Thornburg LLP's Minneapolis office and is co-chair of the firm's Intellectual Property Department. Ms. Boyd focuses her practice on complex intellectual property litigation and has led plaintiff and defense litigation on a large variety of claims related to patents, copyrights, trademarks, and trade dress. Ms. Boyd was recognized by Chambers USA for her IP Litigation practice and has been included in The Best Lawyers in America for the years of 2010-2015 in the field of intellectual property law. In 2013, Minnesota Lawyer named Ms. Boyd as one of its "Attorneys of the Year" and Minnesota Monthly recognized her as one of "Minnesota's Best Lawyers."


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ASSIGNMENT AND TRANSFER AGREEMENT

This Assignment and Transfer Agreement (“Agreement”) is made as of _________ __, 20__ (“Effective Date”) between ________________. (“Assignee”), and ________________ (“Assignor”). In consideration of the mutual promises and covenants contained in this Agreement, the parties agree as follows:

1. Definitions

1.1 “Assigned Property” means the property listed in Exhibit A and all Intellectual Property and Intellectual Property Rights forming a part of, embodied, in or necessary for use of the property.

1.2 “Intellectual Property” means all technology and intellectual property, regardless of form, including without limitation: published and unpublished works of authorship, including without limitation audiovisual works, collective works, computer programs, compilations, databases, derivative works, literary works, maskworks, and sound recordings (“Works of Authorship”); inventions and discoveries, including without limitation articles of manufacture, business methods, compositions of matter, improvements, machines, methods, and processes and new uses for any of the preceding items (“Inventions”); words, names, symbols, devices, designs, and other designations, and combinations of the preceding items, used to identify or distinguish a business, good, group, product, or service or to indicate a form of certification, including without limitation logos, product designs, and product features (“Trademarks”); and information that is not generally known or readily ascertainable through proper means, whether tangible or intangible, including without limitation algorithms, customer lists, ideas, designs, formulas, know-how, methods, processes, programs, prototypes, systems, and techniques (“Confidential Information”).

1.3 “Intellectual Property Rights” means all rights in, arising out of, or associated with Intellectual Property in any jurisdiction, including without limitation: rights in, arising out of, or associated with Works of Authorship, including without limitation rights in maskworks and databases and rights granted under the Copyright Act (“Copyrights”); rights in, arising out of, or associated with Inventions, including without limitation rights granted under the Patent Act (“Patent Rights”); rights in, arising out of, or associated with Trademarks, including without limitation rights granted under the Lanham Act (“Trademark Rights”); rights in, arising out of, or associated with Confidential Information, including without limitation rights granted under the Uniform Trade Secrets Act (“Trade Secret Rights”); rights in, arising out of, or associated with a person’s name, voice, signature, photograph, or likeness, including without limitation rights of personality, privacy, and publicity (“Personality Rights”); rights of attribution and integrity and other moral rights of an author (“Moral Rights”); and rights in, arising out of, or associated with domain names (“Domain Name Rights”).

2. Assignment. Assignor hereby perpetually, irrevocably, and unconditionally assigns, transfers, and conveys to Assignee and its successors and assigns, all of Assignor’s right, title, and interest in and to the Assigned Property. Assignor further perpetually, irrevocably, and unconditionally assigns, transfers, and conveys to Assignee and its successors and assigns all claims for past, present and future infringement or misappropriation of the Intellectual Property Rights included in the Assigned Property, including all rights to sue for and to receive and recover all profits and damages accruing from an infringement misappropriation prior to the Effective Date as well as the right to grant releases for past infringements. Assignor hereby waives and agrees not to enforce all Moral Rights and all Personality Rights that Assignor may have in the Assigned Property.

3. Consideration. In consideration for assignments made by Assignor under this Agreement, Assignee will pay Assignor $________ dollars.

4. Confidentiality. Assignor must not use any Confidential Information assigned as part of the Assigned Property except for the benefit of Assignee. Assignor must not disclose such Confidential Information to third parties. Assignor must take reasonable steps to maintain the confidentiality and secrecy of such Confidential Information and to prevent the unauthorized use or disclosure of such Confidential Information. Any breach of these restrictions will cause irreparable harm to Assignee and will entitle Assignee to injunctive relief in addition to all applicable legal remedies.

5. Representations and Warranties. Assignor represents and warrants to Assignee that: Assignor exclusively owns all right, title, and interest in and to the Assigned Property; Assignor has not granted and will not grant any licenses or other rights to the Assigned Property to any third party; the Assigned Property is free of any liens, encumbrances, security interests, and restrictions on transfer; to Assignor’s knowledge, the Intellectual Property that is assigned as part of the Assigned Property does not infringe Intellectual Property Rights of any third party; and there are no legal actions, investigations, claims, or proceedings pending or threatened relating to the Assigned Property.

6. Indemnification. Assignor will defend, indemnify, and hold harmless Assignee, and Assignee’s officers, directors, shareholders, successors, and assigns, from and against all losses, liabilities, and costs including, without limitation, reasonable attorneys’ fees, expenses, penalties, judgments, claims and demands of every kind and character that Assignee, its officers, directors, shareholders, successors, and assigns may incur, suffer, or be required to pay arising out of, based upon, or by reason of: the breach by Assignor of any of the representations or warranties made by Assignor under this Agreement; Assignor’s use of the Assigned Property prior to the date of this Agreement; or Assignor’s failure to perform its obligations under this Agreement.

7. Further Assurances

7.1 Assistance. Assignor will take all action and execute all documents as Assignee may reasonably request to effectuate the transfer of the Assigned Property and the vesting of complete and exclusive ownership of the Assigned Property in Assignee. In addition, Assignor will, at the request and sole cost and expense of Assignee, but without additional compensation, promptly sign, execute, make, and do all such deeds, documents, acts, and things as Assignee may reasonably require:

(a) to apply for, obtain, register, maintain and vest in the name of Assignee alone (unless Assignee otherwise directs) Intellectual Property Rights protection relating to any or all of the Assigned Property in any country throughout the world, and when so obtained or vested, to renew and restore the same;

(b) to defend any judicial, opposition, or other proceedings in respect of such applications and any judicial, opposition, or other proceedings or petitions or applications for revocation of such Intellectual Property Rights; and

(c) to assist Assignee with the defense and enforcement of its rights in any registrations issuing from such applications and in all Intellectual Property Rights protection in the Intellectual Property.

7.2 Power of Attorney. If at any time Assignee is unable, for any reason, to secure Assignor’s signature on any letters patent, copyright, or trademark assignments or applications for registrations, or other documents or filings pertaining to any or all of the Assigned Property, whether because of Assignor’s unwillingness, or for any other reason whatsoever, Assignor hereby irrevocably designates and appoints Assignee and its duly authorized officers and agents as its agents and attorneys-in-fact, to act for and on its behalf and stead to execute and file any and all such applications, registrations, and other documents and to do all other lawfully permitted acts to further the prosecution thereon with the same legal force and effect as if executed by Assignor.

8. Miscellaneous

8.1 Injunctive Relief. A breach of this Agreement may result in irreparable harm to Assignee and a remedy at law for any such breach will be inadequate, and in recognition thereof, Assignee will be entitled to injunctive and other equitable relief to prevent any breach or the threat of any breach of this Agreement by Assignor without showing or proving actual damages.

8.2 Binding on Successors. This Agreement will inure to the benefit of, and be binding upon, the parties, together with their respective representatives, successors, and assigns, except that Assignor may not assign this Agreement without the consent of Assignee.Assignee may assign this Agreement in its discretion.

8.3 Governing Law and Jurisdiction. This Agreement will be governed by, and construed in accordance with, the laws of the State of New York without reference to its conflict of laws provisions.With respect to any dispute arising out of or related to this Agreement, the parties consent to the exclusive jurisdiction of, and venue in, the federal and state courts located in New York County, New York.

8.4 Amendment and Waiver. This Agreement may not be amended or modified unless mutually agreed upon in writing by the parties and no waiver will be effective unless signed by the party from whom such waiver is sought. The waiver by any party of a breach of any provision of this Agreement will not operate or be construed as a waiver of any subsequent breach.

8.5 Severability. If any provision of this Agreement is held invalid by any court of competent jurisdiction, such invalidity will not affect the validity or operation of any other provision, and the invalid provision will be deemed severed from this Agreement.

8.6 Entire Agreement. This Agreement is the entire agreement concerning the subject matter hereof. It supersedes all prior and contemporaneous agreements, assurances, representations, and communications between the parties.

[Assignor] [Assignee]

By:_________________________ By:____________________________

Title:_______________________ Title:__________________________


EXHIBIT A

PROPERTY

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