Does Your Employer Own Intellectual Property You Create?

Intellectual property rights can be a concern for employees regarding works created or developed within the workplace context. In many cases, employees who create a product or develop an idea while on company time will find that they do not own the intellectual property rights to their creations.

Employees need to understand what intellectual property is, who owns the intellectual property, how the ownership of such rights is determined, and what impact their employment agreement might have on their specific intellectual property rights.

Employees' rights to intellectual property

Many people typically think of copyrights and patents as conveying IP rights to the creator or the inventor of the work in question, so it's important for employees to understand that there are exceptions to this general rule for works created or developed within the workplace context.

"The Copyright Act automatically assigns authorship to employers rather than employee creators or inventors in two specific situations," says Michele Martell, an intellectual property attorney who has counseled businesses from The Muppets to the WWE to Crayola, as well as many individual inventors and creators.

The first situation is where an employee develops the work within the scope of their employment, and the second occurs when the employer specifically orders or commissions the work from the employee. In both of these situations, the employer is seen as the author of the work in question.

"Broadly speaking, if an employee creates new intellectual property as part of their job, the employer owns that intellectual property," explains Martell. "For example, if you're an engineer and you design a more efficient engineering process, creating that new intellectual property is part of the job you've been hired to do."

But if an employee creates intellectual property that's unrelated to their job, the situation becomes murkier. "If an accountant for the company, rather than an engineer, came up with that same engineering advancement, for example, there would be an argument that the work isn't within the scope of their employment," Martell notes.

The same type of intellectual property ownership rules in the employment context also applies to patents, with one exception.

"In situations where an invention is of 'outstanding benefit' to the employer, it may be possible for the employee to claim some form of compensation," Martell says. For example, this "outstanding benefit" exception might arise when an employee's invention generates huge profits for the employer.

Intellectual property rights and the employment agreement

Given the way both the copyright and patent legal frameworks apply in workplace situations, it may feel like you have little control over any intellectual property you subsequently create or develop during your employment. However, it's important to keep in mind that the terms of your employment agreement will impact your IP rights as well.

Abe Cohn, partner of Cohn Legal, PLLC, notes that the typical employment agreement will have some sort of IP ownership clause that affirms the employer's rights to the employee's work.

"For most companies, the fact that the company will own the IP developed by the employee is a given and non-negotiable," he says. "Still, for intellectual property that is highly complex and sophisticated, it may be worth trying to negotiate an increased salary or even equity stake in exchange for a complete intellectual property ownership/assignment clause," he advises.

Agreements for work that falls outside the scope of employment

You also need to be wary when it comes to ideas you may want to develop that don't fall within the scope of your employment.

Martell points to the Hollywood entertainment industry, where employers typically take the stance that they own any intellectual property created by an employee, even if it's outside the scope of their employment, and even if it was created during the employee's personal time.

If you have personal plans to develop or create intellectual property that isn't related to your employment, Martell has the following advice.

"If you are being asked to sign an employment contract that purports to grant ownership in intellectual property, don't be afraid to negotiate to specifically exclude any intellectual property projects that aren't related to the job," he says.

While not always cut and dried, intellectual property created within the workplace context is typically deemed to belong to the employer, not the employee, even though the employee is the creator or inventor of the work in question.

As an employee, however, you're not necessarily limited to this arrangement. The employment agreement provides you with the opportunity to negotiate certain exclusions or gain additional compensation for any intellectual property that might be created over the course of your employment.