Table of Contents

Table of Contents

Take care of your people and protect your business

The ideas, inventions, practices, and programs generated by the talented people in your company keep the doors open and the lights on. The last thing you want is for an employee to walk out the door with their invention only to turn around, patent it, and become your competition. This article will help you decide if an employee invention assignment agreement can provide your company the protection it needs, and how to craft an effective agreement.

What Is an Invention Assignment Agreement?

An invention assignment agreement is a contract in which an employee or independent contractor assigns intellectual property rights for their services to the company. These agreements typically appear in other employment documents such as confidentiality agreements or an independent contractor agreement.

The types of work an invention assignment agreement covers includes inventions, discoveries, improvements, research, developments, works of authorship, programs, applications, “know-how” and ideas.

These agreements have an important place in business, but they can create a stunted environment for innovation. Your employees may feel wary about signing away their rights to their ideas and inventions. You want to protect your investment in employees, but you also want to cultivate the spirit of creativity in the workplace.

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Should You Have New Hires Sign One?

You need to carefully consider whether or not to have new hires sign an invention agreement. Trust is an important element to good working relationships and environments. Presenting new hires with a legally binding document such as this can set the wrong tone and create divided loyalties for an employee from the onset.

You’ll want to consider your company’s business strategy, vision and liability. Once you’ve done so, consider your expectations for the employee, their talent and the trajectory for their role.

When To Use an Invention Agreement

While your company’s unique situation may look different, these situations can help shed light on when to use an invention agreement.

  • Employing workers to invent. If you are bringing on employees to invent, create or improve on behalf of your company, you’ll want them to sign an invention assignment agreement before they begin work.
  • Employing independent contractors and freelancers. When you contract workers to create solutions that may require copyright or patent protection, consider getting a signed invention assignment agreement. These agreements are often rolled into other contracts and may come as less of a surprise to contract workers.
  • Making a business case for safeguarding. If your business relies on innovations, inventions and branded solutions, you might want to make invention agreements part of your standard new-hire paperwork.

When Not To Use an Invention Agreement

Knowing when not to use an invention agreement is just as important as knowing when to use one, and these situations can help you determine if a legally binding agreement is necessary.

  • Employing workers as a stable asset. When you bring an employee on in a role not traditionally inventive, there’s no reason to burden the employment relationship with a legal document. Many great employees improve their work environment, processes and programs by incremental efforts.
  • Collaborating with partners. Collaborating with other companies or brands entangles the inventive process a little more than traditional employment or contract work. In these cases, an invention agreement simply does not cover the scenario. You will need legal help to develop an appropriate contract.
  • Not making a business case for safeguarding. If you have no intention of seeking patent protection for ideas or inventions, you should leave employees free of legal barriers if they want to safeguard their work.

Limitations of Invention Assignment Agreements

While invention assignment agreements are legally binding and enforceable, there are limitations to their purview. Several states have legislation that governs the scope of employee invention assignment agreements.

For example, California prohibits agreements from requiring employees to assign ownership of inventions created on their own time with their own resources to their employer. You need to familiarize yourself with the state requirements applicable for your business.

What To Include in an Employee Invention Agreement

There is no standard format for employee invention agreements. The language varies from one industry to another and from one company to another. It’s important to make sure your agreement fits your company needs.

With that in mind, there are three essential elements to an employee invention agreement:

1. An Assignment Provision

This provision requires that the employee assign ownership of any inventions made while employed at your company to the company itself. This element is the most important part of the agreement and it’s the only one you need to ensure ownership of your employees’ created work. Depending on the language you use, the provision might cover anything created during work hours on company property, or anything created during the time of employment.

2. A Disclosure Provision

This provision requires employees to disclose any invention, innovations or improvements they make to your company. The language should require your employee to quickly disclose detailed information to the company so that you can apply protections such as patents and copyright.

3. A Power of Attorney Provision

This provision gives you the right to exercise ownership rights over an employee’s invention with or without the employee. Effectively, you can file for a patent on an employee’s invention without their assistance or approval.

While these are the three essential elements of an employee invention agreement, some employers want to include a holdover clause to require employees to assign ownership rights to inventions for a period of time even after employment ends.

The courts enforce these clauses with hesitation. Be sure if you include a holdover clause that it extends only six months to a year after employment and applies to inventions only relevant to work done for your company.

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Questions You’ve Asked Us About Invention Assignment Agreements

The short answer is no, your company does not own the rights to every employee invention. The only way to secure ownership rights to employee inventions, improvements, ideas or applications is to get a signed invention assignment agreement. Even then, state requirements might limit the scope of your agreement.
If an employee violates an invention assignment agreement, you need to first address the issue directly with the employee to prevent further violations.You’ll want to investigate to determine the extent of the damage. If the employee is unwilling or unable to rectify the violation, you will need to seek legal counsel for next steps.

Amanda has spent over 10 years building a career in Human Resources in the non-profit sector. Her roles have included HR assistant, recruitment and onboarding coordinator, and manager of learning and professional development. Although Amanda enjoys her time as an HR consultant now, she prefers to use her experience to strengthen the field through the education and development of its practitioners.

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