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Small and medium-size businesses need to deal in advance with the potential problems of competing ownership claims to patents and other intellectual property rights. In the absence of a written employee invention agreement, employers subject themselves to the hazards of current and former employees claiming ownership of patent rights as either the sole or joint inventor of patentable inventions made within the scope of their employment. Advance steps need to be taken to avoid the litigation expense and possible loss of valuable patent rights that can result from these disputes. With the increased attention given technological innovation in recent years, it is common knowledge that patented inventions give their owners a 20-year monopoly that generates huge royalty fees and that is often the most valuable asset of a business. Patents extend not only to new and improved machines, articles of manufacture and chemical and biological compositions, but also to computer-implemented methods of doing business, including computerized data processing systems heavily used by those in the financial and telecommunications services sectors of the economy. Despite their increased awareness, the owners of many small to medium-size businesses often take no precautions against unexpected ownership claims to patentable inventions made by their company employees. The problem of conflicting ownership claims to patent rights may first arise when an employee/inventor refuses to assign patent rights to the employer during the patent application process. The problem can also appear when a former employee seeks to have an issued patent corrected in order to list the former employee as a sole or joint inventor. An employer may not realize there is a problem until it discovers a former employee using, or licensing another to use, the company’s patented invention, claiming entitlement as a joint inventor of the technology. In addition, if a company seeks to enforce its patent against an infringer, the infringer frequently seeks to invalidate the patent, claiming that its owner intentionally failed to identify all joint inventors in the patent application. Regardless of how the issue arises, it can have grave consequences for a company’s patent rights. SHOP RIGHT Absent an express agreement to the contrary, the employee — not the employer — owns the right to patent an invention that the employee made as a sole or joint inventor within the scope of employment, unless the employee was either hired or later directed either to solve a specific problem or exercise “inventive faculties” in an area. General employment to do research, design or devise methods of manufacture or generally improve products does not qualify as employment to invent. This result may seem unfair to the employer who is paying the employee’s salary and might reasonably expect to own any employee invention made on the job using company material, equipment and other employees. As a result, employers are often surprised to learn that they only have a “shop right” to use an employee’s patented invention. Shop right allows the employer to make and use the invention without having to pay a royalty to its employee, but this right cannot be sold to another and is nonexclusive. The employee/inventor, on the other hand, can resign and go into competition with the former employer. The employee can also sell or license the patent rights to a competing company. The employer’s problem is further complicated if an invention involves multiple inventors. In the absence of an assignment of patent rights to the employer, each of the joint inventors can make, use and sell a patented invention. Each can also license it to another, without the permission of the other joint inventors and without having to account to them for any profits. As a result, the discovery of a valuable invention often produces questionable claims of joint inventorship and protracted litigation. MUDDY CONCEPTS The concept of joint inventorship is one of the muddiest concepts of patent law and can bog a company down in litigation with a former employee claiming to be a joint inventor. Generally, a joint invention is the product of a collaboration between two or more people working together to solve the problem addressed. The issue of joint inventorship is governed by 35 U.S.C. � 116, which provides that “inventors may apply for a patent jointly even though 1. they did not physically work together or at the same time; 2. each did not make the same type or amount of contribution; or 3. each did not make a contribution to the subject matter of every claim of the patent.” This code provision sets no explicit lower limit on the quality of inventive contribution required for a person to qualify as a joint inventor. A joint inventor must, however, contribute in some significant manner to the conception of the invention. The basic exercise of the normal skill expected of one skilled in the art, without an inventive act, does not make one a joint inventor. Therefore, a person will not be a joint inventor if he does no more than explain the real inventor’s concepts that are well-known and within the current state of the art. To avoid these problems, sophisticated companies regularly require their employees to sign “employee invention” or “intellectual property” agreements. Under such agreements, the employee agrees to timely disclose all inventions to the employer and to assist in applying for “Letters Patent” including providing lawfully required oaths of inventorship. The employee also typically agrees not to use or divulge the employer’s trade secrets or confidential information and agrees to surrender all documents concerning the company’s business on termination of employment. The agreement can also provide that any work of authorship, including any computer program created as a company employee, is a work made for hire under the copyright laws to which the employer has exclusive title. As the economic importance of intellectual property ownership continues to grow, small-business owners need to regularly use employee invention or intellectual property agreements just like Fortune 500 companies have been doing for decades. When a valuable invention or improvement is made, the written agreement helps the employer avoid litigating the complex issues of whether an alleged employee/inventor qualifies as a joint inventor or whether the employee/inventor was hired to solve a specific problem. Without the written agreement, the employee — not the employer — may reap the rewards of the patent monopoly. John S. Torkelson is a patent attorney with Carrington, Coleman, Sloman and Blumenthalof Dallas, Texas. He is also an engineer.

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