Who Owns Intellectual Property – Employee or Employer?

When an employee leaves your company, it’s important to know who is the owner of any intellectual property that employee created while working for you. The general rule is that an individual owns the rights to anything they have created, regardless of whether they were employed by someone else at the time. There are however, two very important exceptions to this rule. The first is the “work for hire” doctrine which arises where an employee is hired to invent something. Under this doctrine, where the employee invents or creates something that is within the scope of their employment (i.e. what they were hired to do), the employer will in fact own the rights to this work.

What about an invention by an employee who was not specifically hired to invent? In this scenario, because it is not a “work for hire”, the employee (and not the employer) retains the rights to the invention. The employer may however have a right to use the employee’s invention, even if the invention is patented and even after that employee leaves the company. This right is called a “shop-right” and is a royalty-free, irrevocable and non-transferable right to use the invention. Factors considered when determining whether an employer has a “shop-right” include whether the employee allowed the employer to use the invention, whether company time, materials or equipment were used in the development etc.

The second exception to the general rule is where the employee has entered into a written contract assigning rights in anything they create, during the term of their employment, to their employer. This is obviously the safest approach for employers and it is strongly recommended you make sure that all new employees sign this kind of contract when they join your company. By having a clear assignment agreement in place, you can avoid costly disagreements over ownership that may arise when the employee leaves the company down the road.

Image by Flickr user Joebeone (Creative Commons)

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