Employee Invention Rights in the Twenty-First Century

By Orkin, Neal; Burger, Sarah | Labor Law Journal, Spring 2005 | Go to article overview

Employee Invention Rights in the Twenty-First Century


Orkin, Neal, Burger, Sarah, Labor Law Journal


American employers may exercise unimited powers to obtain the invention rights of employees by requiring them to sign pre-employment contracts assigning all rights to the employer. Legislative remedies protecting employed inventors have been proposed, but have been unsuccessful. Congressional attempts to enact a federal statute regulating employee inventor rights have remained dormant since 1984. Presently, the only option for employed inventors is judicial relief which has settled into a century and a half-old quagmire of employer oriented decisions.

Other industrialized nations, most notably Germany and Japan, have enacted statutes mandating employee compensation. To stimulate invention and to compete with al lied technical advances, Germany enacted a 1942 statute requiring reasonable remuneration to employed inventors. A Library of Congress 1983 study revealed that the German statute functioned well and was enthusiastically supported by employers and employees alike.1

A Japanese statute has provided employees with the right to compensation since 1959. Historically, awards had been minimal and rarely challenged by employees due to culture and custom. Recently, however, a Tokyo district court awarded $189.8 million (20 billion Yen) to a former researcher at a chemical company, a far cry from the $ 190 (20,000 Yen) bonus he had received previously from his employer.2

We shall examine the current American law and propose a solution for U.S. employee inventors.

COMMON LAW

The common law of patent ownership is a state judicially determined doctrine that exists in the absence of an express or implied contract between an employer and employee. The federal courts of the United States may also have jurisdiction when presented with federal issues such as patent validity or a diversity of citizenship between parties to a suit.

Common law of ownership differs somewhat between jurisdictions, but its application results in any one of three resolutions: (1) employer ownership; (2) employee ownership; and (3) employee ownership subject to an employer owned shop right - a non-exclusive, non-assignable, royalty-free license for the employer to use the invention for the duration of the patent. There is a dearth of recent cases involving common law, so we shall focus on established precedent.

Employer ownership

An inventor is bound to assign an invention to his or her employer either when the inventor had been specifically hired to invent, or had been assigned tasks to devote his or her efforts to solve a particular problem in the course of employment. Employees are considered "hired to invent" when they are paid by another to develop and/or process machinery for manufacturing a specified product.

In Standard Parts v. Peck,3 the court found that an employment contract existed under which the employee, Peck, was to devote his time to the development of a process and machinery, in exchange for a monthly salary of $300 and a bonus of $660 at the conclusion of the employment. The court therefore considered him "hired to invent" by his employer.

The concept of "hired to invent" applies not only to employees, but to business to business relationships as well. In Reddi-Wip, Inc. v. Knapp-MOnarch Co.,4 Knapp-Monarch Co. was hired by Reddi-Wip Inc. to develop a valve for dispensing whipped cream. There was no fixed obligation for Reddi-Wip, Inc. to pay Knapp-Monarch Co. any type of commission, and Knapp-Monarch Co. had the understanding that only if the structure were successful, the costs and profits would come from sales of the device to Reddi-Wip, Inc. Reddi-Wip, Inc. paid Knapp-Monarch Co. $8,000 for expenses incurred in developing the valve device as agreed upon in previous written correspondence. The relationship was not destroyed if in hindsight Knapp-Monarch made a bad bargain. The court ruled that Knapp-Monarch should not be permitted to interfere with Reddi-Wip's exclusive use of the valve structure and that they were entitled to perpetual exclusive use. …

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