Patent Rights – Who Owns the Patent? Employee or Employer?

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In most scenarios, an employee signs a work for hire contract with an employer.  In this situation, a patent is granted in an inventor’s name but immediately assigned to the employer.  This is done because a patent can only be granted to an actual person.  However, sometimes there is no valid written agreement between the employee and the employer regarding ownership of an invention.  If there is no written contract, both parties will have to turn to state common law to resolve patent ownership.

Patent ownership will vary depending on why the employee was hired.  If the employee was not hired to specifically invent something, then the employee will retain ownership of anything he or she invents during the course of employment.  It does not matter if the invention is directly related to the employer’s business; the employer should have introduced a work-for-hire contract.

The outcome may be different if an employee is hired to create an invention.  If the employer can demonstrate it gave clear instructions to the employee on how to reduce the invention to practice, then the employer will be the rightful owner of the invention if the invention is within the scope of the employee’s employment and relates to the employer’s business.  On the other hand, if no instructions were given the employee retains the rights to the invention.  An employer has to prove more than simply having a desired result in mind.  Without instructions to arrive at that result, an employer cannot claim rights to an invention even if the invention is related to the employer’s business.

An employer may have a “shop right” to an invention.  A “shop right” is a non-exclusive, royalty-free, non-transferable license to make, sell, or use, an invention in the employer’s normal scope of business.  However, a “shop right” only arises when an employee made the invention on an employer’s time, or with the employer’s materials or equipment.   This right will last as long as a patent does and will expire when the patent term expires.  Since a “shop right” is non-exclusive, royalty-free, and non-transferable, the employer cannot benefit in any other way from the invention, but is protected from the employee’s infringement claims.