• Employer Intellectual Property Rights: Common Misconceptions
  • October 23, 2003 | Author: David G. Oberdick
  • Law Firm: Meyer, Unkovic + Scott llp - Pittsburgh Office
  • Employers have become increasingly aware of the value associated with intellectual property developed by their employees and contractors. However, misconceptions continue to exist concerning the scope of intellectual property rights that flows naturally to an employer or principal and those which must be protected proactively through negotiation and contract. For example, copyrightable works, such as software/computer programs and website designs and formats, belong to an employer when these copyrightable works are created by an employee in the scope of his or her work. When an independent contractor, such as a freelance software programmer or independent website designer, creates the same works, however, the copyright on these works belongs with the independent contractor unless the parties agree otherwise in writing. On the other hand, patent rights will generally remain with either an employee or independent contractor unless the parties reach some other agreement. The ownership of copyrights and patents in these differing situations is discussed in more detail below.

    Copyright Protection

    Employers and companies are generally familiar with the "Work Made For Hire" doctrine. This doctrine, which arises under the United States Copyright Act, provides an employer with the status as an author and copyright owner of "a work prepared by an employee within the scope of his or her employment." Significantly, however, the "Work Made For Hire" doctrine does not apply to independent contractors or others falling outside the status of an employee. As a result, when an employer or company hires a software programmer, for example, to help design a computer program for the company, the copyright associated with the work product of that contractor remains with the contractor. The same principle applies to the hiring of a photographer or website designer as an independent contractor. In all of these cases, the copyrights associated with the ultimate work product do not automatically pass to the hiring company.

    In the case of an independent contractor, therefore, it is necessary for the company and the independent contractor to enter into a written agreement which specifically assigns all intellectual property rights in the contractor's work product, including any copyright, to the hiring company.

    Patent Protection

    Another misconception with the "Work Made For Hire" doctrine is that it applies to both copyrights and patents. The general rule with patents, though, is that an employee or independent contractor retains the rights in inventions made within the scope of his or her employment or contracted work. This general rule is set aside where either an express agreement exists giving the hiring company such patent rights or the employee/independent contractor was specifically hired to invent the patentable subject matter (a device, chemical formula, business method, etc.).

    Therefore, we recommend that all companies include intellectual property assignment provisions in both their employment and independent contractor agreements. These assignment provisions should reference all intellectual property rights, including both copyrights and patents. In the case of independent contractor agreements in particular, reference should be made that any copyrightable works created by the contractor fall within the concept of a "work made for hire." Typically, these assignment provisions also include language which obligates the employee or independent contractor to disclose any copyrightable or patentable subject matter and to cooperate with the employer/company in obtaining any applicable intellectual property protection. Confidentiality provisions are also recommended in the context of these types of agreements.

    Retroactive Protection

    In many cases, issues concerning the scope of intellectual property rights protected by and assigned to an employer/company arise after the initial employment or retention of an independent contractor. For example, these issues may arise during efforts to sell a company or certain of its assets including, for example, a product incorporating a computer program. In these instances, obvious concerns exist regarding a company's ability to perfect the intellectual property rights which it believed it had possessed in work product created by an employee or independent contractor. Fortunately, Pennsylvania law allows for retroactive assignment of intellectual property rights. In Harsco Corp. v. Zloticki, the Third Circuit recognized that retroactive intellectual property assignment provisions are supported by adequate consideration in the nature of continued employment because patent assignment agreements only impact property rights and do not impact a person's ability to earn a living. Therefore, the concept of new or additional consideration, which is required to support restrictive covenants or non-compete agreements, is not applicable to intellectual property assignment agreements.