by Gary K. Price

A growing area of concern for protection of ideas and inventions is found in the employer/ employee relation.  Frequently, key employees are entrusted with valuable business and/ or technical information, or, a question exists as to who actually owns the subject invention.  How can such issues be avoided?

The courts have consistently stated that employment alone does not endow an employer with the exclusive ownership rights to an invention, even if the invention occurred during work hours.  As such, to answer this growing concern requires consideration of important competing policies such as freedom of movement in employment and discouraging industrial peonage on the one hand, and protection of valuable business property and commercial goodwill on the other.

These difficult questions have been so often litigated that a “cottage industry” has developed in the area of employer/ employee non-compete and non-disclosure matters.  This issue often arises when employer hires an independent contractor to perform a given task, but the issue can also arise with the employee and employer who have had an ongoing employment relationship.

The court considers many factors when determining rights to ownership.  In essence, the employer’s continued control of the worker seems to be prevalent.  Other factors to consider include:

1. Whether work was performed by employee at employer’s instance and expense;
2. Was the employee (independent contractor) properly paid for his services;
3. Did employee work when he wanted (shows independence) or on employer’s schedule;
4. Did employer supply all materials;
5. Did employer pay all expenses;
6. Was work performed according to employer’s plans and specifications.

Usually, when these elements are met, the courts are less likely to grant employee ownership rights.  This is true even when the work was done at employee’s home and off-hours.

In order to avoid the question of who owns an idea or invention, it is imperative that the employer and employee enter into an agreement which accurately defines the rights of each party to the agreement.  The specifics of this type of agreement, including non-compete and non-disclosure agreements, are beyond the scope of this article, but suffice it to say that, in Indiana, such agreements are enforceable, but only to the extent reasonably necessary to protect the legitimate interests of the employer.  In short, such agreement must be fair and not far reaching.

Also, it is important to note that an employment agreement between employer and employee must be expressly understood by the parties, and executed by both parties.  Just an employee handbook containing restrictive language, which may or may not be given to employee, and probably will not be read by employee, won’t do.  There is nothing wrong with incorporating the employee handbook into the executed employment agreement, but a unilateral implementation by employer is not enough.

As previously stated, employment alone does not endow an employer with the exclusive ownership rights to an invention.  Absent a specific written agreement, the law regards a patent as such an extraordinary achievement that an agreement by the employee/ inventor to assign his invention will not ordinarily be implied within the ordinary terms of the employer/ employee relationship.  The best advice, get it in writing.