Patent Laws when using Consultants

You are the Director of IT for a mid-sized company.   You hire a consultant and, while doing work for you, they create an incredible new invention.  Since you hired them and paid them for work that resulted in the invention your firm owns it, right?  When it comes to patent laws, you should pause and look at the facts.

What a lot of technology people don’t realize is, that if you are not careful, your contractors may own the rights to the work they produce.  When a consultant or employee develops an invention, trade secrets or processes, it is not protected by copyright law, but may be protected by patent laws.   But, who will be entitled to the patent? Who owns the invention, process, or other trade secret information?  In order to protect yourself/your company, you need a well-written invention assignment clause that will settle that issue.

Note:  This is different than the Work-for-Hire provisions which we discussed in a separate blog, Part 1 – Do You Own the Work of Your Consultants and Employees? (Copyright Laws)

The invention assignment clauses assign the inventor’s right, title and interest in the invention to another party.  You will want to consider this provision for both consultants and employees.  In the employment relationship, the clause will assign and transfer all rights to the employer. Here is an example of how an invention assignment clause might read:

Employee agrees that all inventions s/he develops;  a) using Company’s equipment, supplies or trade secrets; b) resulting from work s/he performs for Company; or c) relates to Company’s current or anticipated research and development will be Company’s sole and exclusive property, and I hereby assign all right, title and interest in same to Company.

Note that the assignment does not cover inventions made by the employee or contractor on his or her own time, using his or her own resources that do not involve any misappropriation of the employer’s trade secrets or other confidential information. Note also, that while the above only covers actual inventions, your attorney might want to provide language that is properly worded to cover ideas.

As always, I recommend you check with your attorney in the state you operate to obtain language that will meet your state laws and requirements on patent laws.  Some states have imposed restrictions on invention assignment clauses.

This blog is not legal advice and does not create an attorney-client relationship!

Copyright Laws when using Consultants

Copyright Laws when using Consultants

You are the Director of IT for a mid-sized company; you hire a consultant to write some code to handle a process, creates some dashboards, and you ask them to write a manual to document the processes.  Your firm doesn’t have a legal department, so you grabbed a contract from the internet that states the basics.  Unfortunately, it does not have a clause that clarifies that the company owns the work product.  In this case, the consultant will own the code, the dashboard design and the manual!  Hmmm…not the results you were expecting?

What a lot of technology people don’t realize is that if you are not careful, your contractors may own the rights to the work they produce.  Under the U.S. copyright laws, the rights belong to the original author unless the contract specifically designates a “works-made-for-hire clause”.

Copyright laws provide the creator of an original work exclusive rights to its use and distribution, usually for a limited time, with the intention of enabling the creator of intellectual property (i.e. the author, the artist, code developer) to receive compensation for their work and be able to financially support themselves. Typically, the duration of copyright is the whole life of the creator plus fifty to a hundred years from the creator's death, or a finite period for anonymous or corporate creations. Some jurisdictions have required formalities for establishing copyright, but most recognize copyright in any completed work, without formal registration.

So when your consultants wrote the code and wrote the manual, they were the creators.  One can also argue that, in designing the dashboard design, it was artistic in nature and, therefore, also their creation.

When you engage consultants, you want to include language in the contract that clarifies you, as the client, own the work.  For example:

Contractor agrees for itself and its personnel, that all documents, deliverables, software, systems designs, disks, tapes and any other materials (collectively, “materials”) created in whole or in part by contractor in the course of or related to providing services to the XYZ company shall be treated as a “work for hire” for the XYZ Company…

What about employees?  Do you need to have them sign an agreement assigning rights to the organization?  The law presumes that such works created by an employee in the course and scope of his or her employment relationship are the employer’s property.  (U.S. Supreme Court has told us so in Bleistein v. Donaldson Lithography Co., 188 U.S. 239 (1903).)  But you may want to consider still including a works-for-hire clause in your employment agreements, to put the employee on notice that such works are the property of the employer. This could serve as a little reminder to the employees.

NOTE: Inventions are NOT covered under copyright law.  So if your employee develops any invention, secret formula or process or anything else, it might be classified as a trade secret and may be governed by patent law. Discussion of patent assignment will be covered in a separate blog ( Part 2 – Do You Own the Inventions of Your Consultants and Employees?  (Patent Laws)

As always, I recommend you check with corporate counsel to obtain language that will meet your state laws and requirements.

This blog is not legal advice and does not create an attorney-client relationship!

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