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Employers, Employees, Independent Contractors, and Intellectual Property: Whose Right is it Anyway?

Posted by Res Nova Law | Jun 21, 2017 | 0 Comments

Employee-Created Intellectual Property:

If you're a creative employee, you may be wondering who owns the intellectual property rights to your creations. Employee-created assets can involve all types of intellectual property, including trademarks, logos, designs, illustrations, literary works, photographs, software, and even plants. The general rule is that employers own the rights to intellectual property created by their employees in the course of employment. Conversely, employees generally own the rights to the intellectual property they created outside the course of employment.

What Does "In the Course of Employment" Mean?

There are many factors to consider when determining what counts as being "in the course of employment." However, the most important inquiry can be simplified as: whether the employee's duties involve the development of that type of intellectual property. If the employee's normal job duties include developing that type of intellectual property, then the employer owns the intellectual property. If the employee's normal job duties are unrelated to the intellectual property, then the employee owns the intellectual property.

This can be illustrated by the following examples:

Example 1.A software developer is employed at a tech startup, where her job is to develop computer software for home automation, i.e., smart homes. She's also an indie game developer on nights and weekends. Each night after leaving the tech startup, she takes her work lap top home and develops a roleplaying game that allows smartphone and tablet users to collect and battle mythical creatures. The game is a huge success, and the developer and tech startup are in a dispute over ownership of the game.

Who should win? Answer: the developer owns the rights to her game, because developing games was not part of her duties as an employee of the tech startup. The fact that she created the game on a company computer is irrelevant to ownership of the intellectual property, but she may still get in trouble for unauthorized use of company equipment.

Example 2. A product designer is employed at a sportswear company, where his job is to design a foam-cushioned running shoe having a completely novel outward appearance. The sportswear company wants to obtain a design patent on the shoe, but the team of designers is having trouble coming up with an innovative design. The product designer has a "Eureka!" moment while on vacation overseas, and attempts to patent his design. The sportswear company finds out, and claims the rights to shoe design.

Who should win? Answer: the sportswear company owns the rights to the shoe design, because developing patentable shoe designs is part of the product designer's duties as an employee of the sportswear company. It is irrelevant that the designer was on vacation when he came up with the idea.

What About Independent Contractors, e.g., Consultants?

Although an employer owns intellectual property created by its employees in the course of employment, the same rule does not apply for intellectual property created by independent contractors and consultants. Rather, the default rule (i.e., without a contract stating otherwise) is that a contractor or consultant owns the intellectual property that she creates, and she may then license the intellectual property to a company for limited use. However, the parties may contract around the default rule.

For example:

Example 3. A brewing company hires a graphic illustrator as an independent contractor, to create an original piece of artwork for product packaging. The brewing company loves what the illustrator came up with, and pays the illustrator to use the artwork on its beer bottles. However, the parties never discussed intellectual property ownership or licensing. Six months later, the brewing company finds out that the illustrator has been selling prints of the same piece of artwork in local galleries and sues for copyright infringement.

Who should win? Answer: the illustrator owns the rights to her artwork, because the default rule is that an independent contractor or consultant owns the intellectual property that she creates. The brewing company, on the other hand, has an implied license to use the artwork on its product packaging.

Don't Forget to Have a Good Contract in Place:

Most people don't read contracts before signing them, but it's a very good business practice to review employment and independent contractor agreements very closely, so you don't potentially sign your rights away. (Alternatively, maybe you do want to sign your rights away if it's for the right price.) It can also be a smart idea to have an experienced intellectual property attorney review and help you negotiate particularly important contracts, whether you're an employer, employee, or independent contractor.

 At Res Nova Law, our friendly and knowledgeable attorneys can advise you on the different types of intellectual property (including patents, trademarks, copyrights, and trade secrets), and how developing and protecting your intellectual property can help your business generate revenue and grow. As experienced litigators, we can also help you resolve intellectual property disputes and avoid potential litigation.

Get in touch today for a free, 20-minute initial consultation.

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