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    Quarterly Newsletter

    Inventions in the Workplace

    By Deborah A. Basile, Esq.
    As early as 1890, the U.S. Supreme Court addressed what is still a fundamental issue regarding inventions: as between an employer and employee-inventor, who has rights to an employee's invention? In Solomons v. United States, 137 U.S. 342, 11 S.CT.88 (1890), the Supreme Court indicated that an employer's rights in an employee's invention depend upon whether there is an express agreement between theparties. The general holding in Solomons still applies today. In general, where there is a valid agreement, the agreement controls. Absent an agreement, common law controls. Common law is the body of law developed through decided court cases rather than written statutes.

    Absent an Agreement

    The law in Massachusetts recognizes that even without a specific agreement to assign patents, an employer may still have legal rights to an employee's invention. Steranko v. Inforex Inc., 5 Mass. App. Ct. 253, 269 (1976) citing Hoyt v. Cooperation, 268 Mass. 544, 548 (1929); National Development Co. v. Gray, 316 Mass. 240, 247 (1944). Depending upon the nature of the employment and the circumstances surrounding the invention, the employer may be entitled to either an outright assignment or a "shop right" in the employee's patent. A shop right is essentially an employer's royalty-free, non-exclusive and non-transferable license to use an employee's patented invention. A shop right will exist for the life of the patent even if the employment relationship terminates earlier. Under the shop right concept, the employer can make, use and sell the patented invention even if it falls beyond the scope of the employer's normal course of business.

    For purposes of this analysis, an employee's status is categorized as one of the following: an employee may have been hired to (1) invent a specific device or solve a specific problem; (2) generally to use his inventive and problem solving skills; or (3) not to invent.

    An employee will fall into the first category if his employer pays him to design, build or invent to solve specific problems. The employee's salary is intended to compensate him for inventing; therefore, such an employee implicitly agrees to assign resulting patents to his employer. Nevertheless, the Supreme Court has held that this type of employee is not required to assign patents that are beyond the scope of his employment and unrelated to the employer's normal course of business.United States v. Dubilier Condenser Corp., 289 U.S. 178, note 7 (1932).

    An employee will fall into the second category if he is hired to use his creative and inventive skills and the employer anticipates no specific result. Such an employee does not implicitly agree to assign resulting patents to the employer. However, if the employee conceived of the invention during work hours, if the patent is within the employer's normal course of business, or if the employee was assigned tasks from which the invention would reasonably result, the employer may own the rights to the invention.

    An employee will fall into the third category if his salary is not intended to be compensation for designing or inventing new devices. Such an employee does not implicitly agree to assign any patents, even those created through his employment. Thus, the employee may own his patent or an invention growing out of his work and may market the invention for the employee's own profit. Nonetheless, while such an employee will own the patent, the employer may have a shop right if the inventor used the employer's resources or if the employer promoted the invention while reasonably expecting the royalty-free right to use it. National Development Co. v. Gray, 316 Mass. 240 (1944). Alternatively, if the employee, on his own time, using his own resources invents a device which is beyond the scope of his employer's business, the employee may own the invention exclusively.

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    		Express Agreements

    Although common law allows employers to obtain rights in employee inventions absent an express agreement, employers have been relying more heavily upon express written contracts to allocate patent rights. Written agreements are more frequently used since the common law in this area is vague and unsettled, and the results are unpredictable. Thus, employers are advised to use express written agreements rather than taking their chances with the common law. Employers should require that such agreements be signed by all employees, or at least by those employees who may in the course of their employment contribute new designs, ideas or solutions to problems which may result in unique inventions.

    Express agreements supersede the common law, and most states, including Massachusetts, recognize such agreements. Still, these agreements must be fair to both parties because courts may refuse to enforce agreements found to be overly broad, unconscionable, and overreaching. Due to the perceived inequity in employer/employee bargaining power, courts generally construe employment agreements against employers and in favor of employees. Notwithstanding those factors however, such agreements generally survive attacks based on being against policy and are generally found to be enforceable.

    Agreements requiring the transfer of all ideas, innovations and creations made in the scope of the employer's business, regardless of whether they were made during normal working hours or on company premises, have been found to be valid. On the other hand, those requiring the assignment of everything an employee does, even if it has no relation to the employer's business, are generally invalid. Provisions in employment agreements which cover inventions conceived even before employment have been held valid, and provisions which cover inventions made after termination of employment have also been held valid. However, if the length of the "trailer clause" is too stringent or too long, it may be unreasonable and violate public policy and would not be honored by a court.

    An employer should limit the scope of inventions covered by an agreement to those in which the employer has a legitimate business interest. In addition, employers should include reasonable trailer clauses, which require an employee to assign inventions or ideas conceived for a period of time after the employment is ended or before the employment began. A two-year trailer clause has generally been found acceptable, but anything in excess of two years may raise doubts as to enforceability.

    "A "shop right" is essentially an employer's royalty-free, non-exclusive and non-transferable license to use an employee's invention.
    Deborah A. Basile is a partner with the law firm of Doherty, Wallace, Pillsbury and Murphy, PC., in Springfield, Massachusetts. She is a registered patent attorney.
  • The author acknowledges the assistance of Attorney Lisa A. Swiszcz in preparing this article.
  • This material may be considered advertising under the rules of the Supreme Judicial Court of Massachusetts.



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