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06.08

What You Need to Know about Pre-Assignment Agreements to Protect Your Intellectual Property

By Dr. Robert J. Kuntz, P.E., IEEE Member

This article has been reprinted with permission from the August 2002 issue of the Institute. Copyright 2002 IEEE.

The only specific right the U.S. Constitution grants to citizens is ownership of their intellectual property (Article I, Section 8, Clause 8).

But employees now working for technical companies, academic institutions and government likely signed a contract that pre-assigned their intellectual property to their employers.

Most engineers initially learn about pre-assignment agreements when hired. The agreements require employees to confidentially disclose their discoveries to their employers, who determine whether they will be treated as trade secrets, submitted for patents, copyrighted or buried in corporate proprietary files. Past studies indicate that only one of every 10 disclosures results in a patent application. The other nine may never see the light of day for several reasons. This does not account for discoveries never disclosed.

The contract also probably contained a "trailing clause" that transcends termination of service for a specified time. These clauses can be barriers to future employment because of the agreement's non-compete covenants — making engineers with highly specific expertise unemployable in an open job market.

Employers say they should own an employee's intellectual property because they pay a salary and provide infrastructure and resources. Those against pre-assignment call these agreements "adhesion contracts," because they are unilateral, signed under duress (no signature means no job) and predispose a Constitutional right.
Moderates believe that a "shop right" approach is fair. This term is derived from English common law, in which a business owner or employer has a non-exclusive, license-free use of an employee's invention, but the inventor retains title rights for all other uses.

The U.S. Department of Defense (DoD) is one such organization that retains a shop right for inventions that are first conceived or reduced to practice under a DoD contract. The contractor or employer retains title rights for all other uses, limited by national security regulations.

The issue of employee inventor's rights was considered in the U.S. Congress, but without resolution.

Nearly 30 years ago, in the 87th Congress, the subcommittee on Patents, Trademarks and Copyrights questioned how corporations could demand patent rights in addition to monetary compensation from the DoD when they do not practice that policy in their own employment contracts. Admiral Hyman Rickover addressed the subcommittee and tied employed inventors' incentives to the Constitution's intent.

He said the law should be changed "to increase incentives for employed inventors who get no benefit whatsoever out of the patent system as it has evolved. We might consider whether we ought not to go back to the original intent of the Constitution and devise some reward for inventors, whether they are government or industry employees." The latter is now a reality as a result of the 1986 Federal Technology Transfer Act affecting employees of government-owned and government-operated laboratories.

In 1963, California Congressman George Brown introduced legislation to make pre-invention assignment agreements an unfair labor practice. The bill never received a hearing.

In 1970, Congressman John E. Moss introduced a bill that covered both "service inventions," which relate directly to an employee's job assignment, and "free inventions," which are not related to the employee's job assignment and done on their own time with their own resources. He introduced successive bills; the last was in 1977. All were referred to the Subcommittee on Intellectual Property of the House Judiciary Committee, but none were heard.

California, Delaware, Illinois, Kansas, Minnesota, North Carolina, Utah and Washington have pre-invention assignment law in their labor codes. Some laws broadly define the scope of assignment agreements to include any intellectual property that "relates to the business of the employer, to the employer's actual or demonstrably anticipated research or development, or which results from any work performed by the employee for the employer."

Employers believe they must protect their interests, but employee inventors think the statement is so broad that a diversified corporation can take ownership of almost any invention, nullifying the law's purpose. Because intellectual property is a federal matter, most researchers believe legal conditions affecting ownership fall under federal jurisdiction.

Questions still remain. Does the common U.S. business practice of pre-assignment carry out the Constitutional purpose — "promote the progress of science and useful arts" — or is it an impediment to America's ability to compete in the global marketplace? Is national economic development and trade balance a matter of national security?

The aforementioned questions should be the basis for any debate on the pre-assignment of intellectual property issues. Rights of inventors and employers are important, but the Constitutional purpose establishing intellectual property transcends.

IEEE-USA Wants Feedback on Pre-Assignment Agreements

IEEE-USA wants your thoughts, experiences and suggestions about intellectual property pre-assignment agreements.

Please submit your response by e-mail to pre-assignment@ieee.org

This is a research program. All submitted data is voluntary and will be used for informational purposes only. Any reports and findings will be depersonalized. If you wish to receive results from this investigation, so indicated in your e-mail by providing contact information.

Dr. Kuntz has conducted extensive research for more than four decades on invention, innovation and intellectual property. Dr. Kuntz is a licensed professional engineer and a Fellow of the National Society of Professional Engineers. He is also a member of IEEE-USA's Intellectual Property Committee. Comments may be submitted to todaysengineer@ieee.org.