Who owns the invention?


Introduction:

Ownership of inventions can be confusing.  The inventor may not be the owner.  If there are more than one inventor, it is possible that each separately owns an undivided interest in the whole with independent rights to exploit the invention.  This is problematic.

Often the invention is made by an employee of a company.  The invention is typically created as part of the employee’s work for the company.  Most companies require each employee to sign an employment agreement including a provision that any invention made in the course of employment to be the property of the company.

Correctly identifying the inventor(s) can be important, even if the rights in the invention have been “assigned” to the employer via the employment agreement.

Rights in an invention are most often created by patenting the invention.  The option is to attempt to maintain and exploit the invention as a trade secret.  This also can be problematic. See my articles regarding Prior Use Defense and Trade Secrets vs. Patenting.

Discussion:

Assuming that protection and right of commercializing the invention is to be via seeking patent protection, it is necessary that each inventor sign a declaration of invention confirming that the inventor(s) are, in fact, the inventors of the invention described in the identified patent application.  Again, this is required even if the rights to the invention are owned by a third party, e.g., the inventor’s employer.  

Patent rights can be bought and sold the same as other property.  

Employer-Employee Invention Rights

Actual ownership of the invention can be disputed.  Typically such disputes are resolved by state law, even though patents are a creation of the Federal government.  Typical disputed facts are the circumstances of the creation of the invention, i.e., was the subject matter within the scope of the inventor’s employment, was the invention created using employer equipment, etc.  The typical employment agreement is intended to address these issues and confirm ownership is possessed by the employer.

Assignments

Ownership of inventions is transferred by means of “assignments”.  These assignments are recorded in the US Patent Office and are of public record.  This is similar to real estate deeds and easements being recorded in a county office and open to public inspection.  Failing to properly record a patent assignment document is problematic.

Joint Invention 

Assuming that the invention was not created under circumstances requiring it to be assigned to a third party, e.g., an employer, each inventor owns an undivided share in the invention with independent rights to exploit or commercialize the invention.  A co-inventor is under no duty to share profits with the other inventors.

My advice to co-inventors is to form a business organization.  The business organization should receive ownership of the invention via each inventor executing an assignment to the business organization.  The organizational documents of the business entity (corporate bylaws, LLC charter, partnership agreement) should specify the rights and duties of each participant/inventor, particularly if there is a later dispute among the business owners/inventors.  The business entity organizational documents should specify how decisions regarding exploitation of the invention are to occur and the manner in which profits are to be distributed and expenses shared.  Leaving each inventor with an undivided share and ability to independently exploit the invention can be disastrous.  This undivided share arrangement can greatly hurt the value of the invention, particularly if there is a third party interested in purchasing or licensing the invention.

Patent Application

The patent application documents require that the inventors be identified, as well as identify the true applicant, e.g., employer, if the applicant is different than the inventor.  However, identifying the parties in the patent application documents does not substitute for proper creation and recording of assignments from the inventor.  

Conclusion:

Absent the execution of a proper assignment, the ownership of a patented invention remains with the inventor(s).  This can be problematic if there are multiple inventors. 

Ownership in inventions subject of patent protection (or applications for patent) are conveyed by means of written assignments identifying the patent or pending patent application.  The assignment identifies the inventor/assignor and the recipient/assignee.  The original assignment is signed by each inventor.  The assignee may be the inventor’s employer, a business entity created by the inventor, or a third party purchaser.  The assignments are recorded in the US Patent and Trademark Office.  

© David McEwing, 2020