Does Your Employer Own Your Invention? Episode 111

Why Employer Ownership of Your Invention Matters

One of the first things I ask a client who comes to me with an invention is whether the invention they came up with is in any way related to work they’re doing as an employee. The reason I ask this is that oftentimes, even though you are the inventor of something, you might not be the owner of it.

This is because, when you become an employee, you probably signed some paperwork you didn’t fully read. One of the clauses in that paperwork likely says something along the lines of: “You hereby assign all inventions made in the scope of employment.”

Proprietary Information and Invention Assignment Agreements

The wording can vary, and state laws may differ about who owns what, but these types of contracts are usually called Proprietary Information and Inventions Assignment Agreements (PIIAA) or Confidential Information Inventions Assignment Agreements (CIIA). These agreements obligate you to assign—meaning to sell—your invention to your employer.

Why Employers Want Ownership

You might think it’s unfair—you came up with the invention, so you should own it. But from the employer’s point of view, they’re paying you a salary, regardless of whether your invention works or not. In return, if you come up with something worth patenting, the employer wants the benefit of that reward.

Who Owns the Invention? The Legal Answer: Maybe

So, if you invent something and you’re an employee, does your employer own your invention? The answer to every legal question is: maybe.

Let’s look at the extreme cases where the answer is simple.

Clear Example: You’re Not an Employee

You are not an employee. You invent something and later get a job somewhere. Even if you sign an agreement saying that all your inventions are owned by the company, if the invention was created before your employment began—without using company time or resources—then it’s your invention.

Clear Example: You Invent on the Job

Now let’s go to the other end of the spectrum. Say you work at a knife factory and invent a new knife handle while using company computers, on company time, and you signed an agreement assigning inventions made in the scope of employment to the company.

That’s a pretty clear-cut case. The employer owns the invention.

Also, let’s clarify something: your name, as the inventor, will still be on the patent—because inventors are always listed—but the owner or assignee will be the company.

The Gray Area

Not everything is black and white. There are lots of gray-area situations where ownership can swing either way. It may depend on which state you’re in and on that state’s labor codes.

I’m going to talk about California because that’s where I’m located. (Just a side note: I can work with clients in every state and internationally because patents are governed by federal law.)

California Labor Code Section 2870

In California, there’s Labor Code Section 2870. It states that an assignment of an invention does not apply to an invention the employee developed entirely on their own time, without using the employer’s equipment, supplies, facilities, or trade secret information.

That sounds pretty clear. But let’s return to the knife factory. You’re careful to avoid even thinking about your knife handle design while at work. You only work on it at home using your personal computer.

You might think you’re in the clear. But not so fast.

The Exception: Relation to Employer’s Business

There’s an exception. The labor code says the exception applies if the invention relates, at the time of conception or reduction to practice, to the employer’s business—or to actual or demonstrably anticipated research or development.

So, if you came up with a new knife handle, it probably does relate to the knife company’s business. It also could have been anticipated that the company would be developing new knife handles.

This may come down to the interpretation of the word “relates.” Are knife handles related to knives? Probably yes—even if your company doesn’t make that specific product line.

Of course, you can argue that your knife company had no interest in handles—only in making sharper blades. Maybe you’d win that argument, maybe not. But it’s something to consider when determining who has rights to an invention.

Inventions Unrelated to Your Job

You might be thinking it’s hard to invent something that has nothing to do with your job. And you might be right. It’s hard to get around your employer owning your patent.

If you work at a knife factory and create a new yo-yo, you likely have a strong case that your employer doesn’t own it. But still—don’t work on your yo-yo invention during work hours or on company equipment. Otherwise, your employer could argue that they own it.

Non-Compete Agreements and Conflicts

Also, if you’re in California or another state, you may have signed a non-compete agreement. These usually state that you can’t leave the company and start a business that competes with your former employer.

Fortunately, in California, non-compete agreements are generally unenforceable. Public policy favors employees being able to move between jobs freely. But there’s a catch: even if you’re allowed to start your own company, if you do so based on ideas conceived during your prior employment, there could still be legal trouble.

California leans toward protecting inventors and employees, but nothing is guaranteed. If your idea was based on trade secrets from your old company, there’s a good chance they’ll claim they own it.

Start from Scratch

If you go to a new company or form your own, start your ideas from scratch. Don’t use anything from your previous employer. Otherwise, your old company may come after you, demanding you assign your inventions—even if you no longer work there.

General Takeaway

If you’re an employee, you likely still own your invention if it has nothing to do with your employer’s business. It really helps if you didn’t work on it during company time or with company equipment.

If your invention does relate to your employer’s business—even if you didn’t use company time or equipment—it’s still possible the company owns it. It depends on the specific facts.

The Three Ownership Factors: When, What, and Knowledge

Let’s summarize the three main factors that help determine ownership:

When – When did you conceive of the invention?

If it was during work time, that favors the company.

If it was during non-work time, that favors you.

What – Does the invention relate in any way to what the company does?

If yes, that favors the company.

If no, that favors you.

Knowledge – Did you use knowledge from your position as an employee to create the invention?

If yes, that favors the company.

If no, that favors you.

As I’ve said many times, there’s usually no black-and-white answer. That’s why attorneys exist.

Best Practices

When developing your invention, try to make sure all the factors weigh in your favor—not your employer’s.

I’m Adam Diament, and until next time, keep on inventing.