Does Your Company Own Its Workers’ Ideas?

A television drama series recently focused one of its episodes on the ownership of ideas created by an employee of a business. The series, “Fairly Legal,” airs on the USA Network and follows the life of a mediator as she tries to simultaneously resolve her professional mediation cases and navigate the challenges in her personal life.  The episode titled “Believers” first aired on February 24, 2011.  In it, the main character is asked to mediate the termination of a young employee who has invented a device and ensure the device is returned to his employer.  Despite having assigned all rights to the invention to his employer in an employment agreement, the young inventor wants to keep his device and steals it from his employer’s offices.

This issue is important for all businesses.  Do your company’s employees create intellectual property?  Are you sure that your company owns their ideas?

Absent any contractual provisions, an employer will normally own the copyrights to any creative works created by its employees as part of their employment responsibilities.  On the flip side, independent contractors usually continue to own the copyrights to works they create unless they have signed a work-for-hire provision that assigns away all rights to their work.  Regardless of these default rules, companies should include contractual provisions in all employee and independent contractor agreements.  Including such provisions benefits all parties by (1) clarifying any confusion on who owns rights to the ideas, (2) reducing the risk of litigation, and (3) reducing the risk of lost rights due to misclassification of workers as independent contractors versus employees.

Inventions, on the other hand, are subject to different rules, and companies should always include provisions in their contracts stating that workers assign to the company all rights to inventions created on the job.  However, here in Minnesota, companies must be cautious not to overstep the bounds of what can be legally assigned.  Minnesota Statutes Section 181.78 prohibits employers from requiring their employees to sign away rights to inventions that were not created on company time or with the use of the company’s equipment, supplies, facilities or confidential trade secrets.  However, to receive this protection, the invention cannot be related to the employer’s activities.  The employer is also required to give the employee written notice that the contractual provision assigning inventions does not apply to inventions created on the employee’s own time, with the employee’s own resources, and without any connection to the employer’s business activities.

In short, all companies should make sure their contracts assign to them the rights to the intellectual property created by their employees and independent contractors.  However, they also need to be sure the assignments do not violate the law or else the assignments will be invalidated.