The Curious Case of Intellectual Property Ownership

by Shannon Middleton and Tyler Droste

Whether we -- as attorneys -- like to admit it or not, there are a few areas of law that are somewhat unclear, and ultimately, difficult to navigate. The world of intellectual property (IP) law is one of those areas that hasn’t yet fully been explored in various jurisdictions. But at Gutwein Law, we like facing challenges head-on – no matter how murky the situation.

Take ownership rights in intellectual property between the employer and employee, independent contractor, or consultant, for example:

Let’s say Jane Smith is an engineer at Wonka Industries, an Indianapolis-based luxury chocolatier. And one day while prototyping, Jane invents an edible candy wrapper. Because Jane’s engineering abilities are top-notch, the candy wrapper doesn’t melt, tastes delicious, and the company sees it as a breakthrough in the confectionary market.

In this case, who has initial ownership and the right to use copyright, trademark, patent, and trade secret rights? Is it Jane Smith because she invented the wrapper? Or is it Wonka Industries because it was created in their facility while on company time? The short answer? It depends on various factors, including whether Jane is an employee or independent contractor, the type of intellectual property rights arising from the invention, what type of IP policies Wonka Industries has in place, and whether Jane has any written agreements with Wonka Industries regarding intellectual property rights.

Below, we’ve outlined best practices and considerations for employers seeking to secure ownership rights, as well as what employees, independent contractors, or consultants should be looking for in written agreements to evaluate the scope of the individual’s obligations to the company, how far the company’s protections extend, and what rights the individual has in his or her ideas.

Best Practices for Employers

Employers should ensure that intellectual property created with their materials, tools, and facilities is protected to the maximum extent possible. This would include: 

  • Creating intellectual property policies that provide for:
    • invention disclosure;
    • documentation of development activities, such as lab notebooks or software specifications;
    • proper trademark use;
    • confidentiality to prevent the unauthorized disclosure of the employer’s trade secrets and confidential information; and
    • written acknowledgment of these policies.
  • Obtaining written agreements with employees and independent contractors that:
    • require disclosure of pre-existing intellectual property rights that relate to the employer’s business;
    • assign to the employer all of the individual’s rights in inventions and intellectual property created during the term of the relationship (Consider whether to extend the assignment to IP created outside of working hours, for a time after the relationship ends, and/or using individual’s own resources for maximum protection depending upon state law);
    • ensure that the intellectual property assignment clauses and policies are not overly broad and comply with state law (Note: Some states have enacted laws to limit the scope as to what qualifies as intellectual property that is required to be assigned to the employer);
    • restrict an individual from acting inconsistently with employer’s ownership of intellectual property rights in inventions, such as by contesting the validity or enforceability of the employer’s intellectual property rights in work product, or filing a patent, trademark or copyright registration in the individual’s own name; and
    • cover the topics discussed in the intellectual property policies, including non-disclosure of confidential information, or alternatively, referring to such policies and having individuals acknowledge their obligations under the policies.

What Employees, Consultants, and Independent Contractors Should Look for in Agreements

In reviewing agreements regarding intellectual property rights, employees and independent contractors should be mindful of:

  • Consideration – What is the individual being paid, if anything, to sign the agreement? In some states, such as Indiana, at-will employment is sufficient consideration.
  • Scope of assignment – Who owns the IP? What work product is covered, and how broad are each party’s rights? Does the assignment cover inventions made outside of work hours or for a period after the relationship ends?
  • Pre-existing confidentiality or assignment obligations – Are there conflicts between the proposed agreement and the individual’s prior obligations to employers or contractors?
  • Obligations – Is the individual required to provide additional assistance for the company to secure ownership of assigned inventions? How much time and effort will the assistance take? Who pays for the expenses and time involved? Do the obligations extend after the relationship ends?
  • Bargaining power – Is the individual in a bargaining position to request changes to the agreement? Many entry-level at-will employees are simply not in a bargaining position to request changes.

With the above best practices in mind, are you secure from your position as an employer in need of updating your employment agreements, or an employee, independent contractor, or consultant seeking ownership of your idea? If not, Gutwein Law is here to help. If you have questions, or you’re ready to discuss your needs in more detail, give us a call at 317.777.7920, or visit our website and drop us a line: