Many individuals and businesses incorrectly assume they own all rights in any intellectual property (IP) related to their business simply because they purchased content or paid a third party to prepare, and mistakenly believe that just because a person “works” for them or is a co-owner, they or the company own any IP that person creates. However, the overriding principle is that the creator or inventor of IP is the owner, subject to applicable state and federal legal doctrines. The nuances in determining IP ownership are exacerbated by current common remote working environments, so great care needs to be taken in memorializing rights in IP ownership.
Concerns for Rights in Copyrights, Patents, Trade Secrets and Trademarks
Ownership issues in the copyright arena are fraught with problems, as the oft-cited “work-for-hire” doctrine is generally not as broad as most think, and simply paying someone to create something does not transfer ownership of the IP. If the creator is an outside contractor, a written assignment is necessary, but if the creator of such work is an employee of a business and the work is “created within the scope of his or her employment”, then the copyrights in the work are owned by the business. However, as remote work places cause shifts in responsibilities and needs, what is the scope of employment? Is it determined when the individual is hired? Their job description as subsequently established? Or, what they are being paid to do now?
As to patents, the U.S. adheres to a first to file ownership structure. Depending on state law, a patent right is owned by the business and is assigned as a matter of law under the “hired-to-invent” legal doctrine. However, this doctrine is often much narrower than many business owners would like. When not assigned under “hired to invent” doctrine, businesses often have the so-called “shop-right” doctrine to fall back on, giving the company a non-exclusive and non-transferrable license to the invention, though such a “shop-right” may not be what the company needs to accomplish its business objectives. Thus, as responsibilities – and business needs – shift in remote work environments, the scope of rights that would fall under the “hired to invent” doctrines come into question.
Ownership considerations with respect to trade secrets largely track those related to patentable technologies. However, in the context of trade secrets, the threats are not so much in the ownership determination, but in the risks that remote workplace environments present. In this regard, businesses need to evaluate: 1) what guidelines with respect to confidential information and trade secrets are in place; 2) what security networks/infrastructure are being used to access and protect confidential/trade secret information; and 3) what types of policies are in place with respect to personal devices and any communication on social media and like networks.
For trademarks in the US, the first user or registrant of a trademark owns the rights in the mark, logo, or design. However, many marks, logos and creative designs used in marketing and advertising are created by non-employees or contractors. While the new mark, logo or design may be original, the use of a new mark that is nonetheless confusingly similar to another’s mark can give rise to liability. Remote workplaces tend to reduce the likelihood of clearance efforts, exposing to risk. Moreover, such non-employees and contractors may file for registration of such marks, logos and designs and related domain names in their own names in the interest of “helping” their client, but then fail to transfer over such interests prior to their work relationship being terminated arise.
Besides questions arising due to IP created by employees and contractors, additional issues arise in small business contexts where “business owners” may not be deemed “employees” for the purposes of determining IP ownership. Unless the owner is employed by the company and hired for the purpose of creating IP or are otherwise working within their scope of employment, ownership rights in the IP are likely retained by the creator/owner and not the company, absent a written agreement assigning such IP to the company.
Avoiding IP Ownership Disputes
Despite complexities, IP ownership rights can often be correctly secured at relatively moderate expense. Given current remote workplace environments, companies and owners may want to consider the following:
- Review all contracts and employee agreements. Any contract, such as a partnership or operating agreement, an employment agreement, or a consulting agreement for creators or other inventors can be addressed to contain more certain IP ownership and assignment provisions dictating who owns the IP, particularly in remote working environments. Where deficiencies are identified, short IP assignment agreements or amendments to prior agreements can often be prepared and executed by employees and third-party contractors to ensure that a company owns the IP prepared on its behalf.
- Job duties and tasks should be clearly identified. Changes in responsibilities should be documented such that if an employee is in the business of designing, creating or inventing any new IP, there is a clear communication to the employee or third party that the relationship gives rise to an obligation to assign such new IP.
- As employees' working environments become remote, businesses must understand that arguments will undoubtedly arise to certain design, creative or inventing activities took place using the employee’s resources (technology, home, etc.) as opposed to the business’ resources. Written agreements with well-drafted provisions and defining a clear scope may resolve these issues but should be in place before (not after) the creative and inventive activity takes place.
Overall, disputes over IP ownership can significantly impact a company’s value and growth potential. Therefore, entities may wish to invest a relatively small amount of time and money into continuing to correctly secure the IP they should own in the current remote working environment, saving them the headache of attempting to correct mistaken or undesired IP ownership prior to any deal or acquisition.