Patents and the Employment Relationship: Who Owns Them?

The general rule is that, in the absence of an agreement to the contrary, an employer is entitled to a nonexclusive license to use an invention devised by an employee while he or she was working for the employer. As the U.S. Supreme Court has said, "where an [employee] during his hours of employment, working with his [employer's] materials and appliances, conceives and perfects an invention for which he obtains a patent, he must accord his master a nonexclusive right to practice the invention." In the context of patents, the foregoing rule is referred to as the "shopright doctrine." Although the employer is afforded a nonexclusive license to use the invention without paying royalties to the employee, the invention actually is owned by the employee, who has the right to exploit it commercially, such as by selling or licensing it to other users. Even where the employee works on the invention on his own time, if the employer's resources are used to any significant extent, this rule usually applies.

A wholly different situation is presented, however, where the employee is engaged by the employer to develop and work on the invention that later becomes the subject of a patent. In one case, an employee was engaged by his employer to work on a device that later became the subject of the employee's patent. The employer sought to obtain an assignment and transfer of the patent, arguing that the employee had invented the device in question while employed precisely to work on the device that became the subject of the patent. The court agreed with the employer, concluding that, while the employment relationship itself does not preclude an employee from making improvements in his employer's processes and obtaining patents for those improvements, if an employee's job involves inventing or devising such improvements, any resulting patents belong to the employer. Basically, in such a situation the employee is merely doing what he or she was hired to do.