The common law regarding employee-inventors is extensively developed and designates invention rights to employers and employees depending on the specific facts of the individual situation. In determining who ultimately owns the invention, courts assess factors including the employee's function in the company, the subject matter of the invention, and the employer's resources expended in the invention's development. In most instances, however, startups are hesitant to depend on the courts and desire more extensive rights than the common law provides. In order to achieve greater protection, startups require their employees to sign a invention assignment agreement.
An invention assignment agreement is an agreement signed by an employee or of a startup that requires the employee or to disclose all innovations made, conceived, developed, or reduced to practice during his or her employment or engagement with the startup and to assign all right, title, and interest in all such innovations, including rights in any patents, copyrights, trade secrets, rights of priority, and other proprietary rights, to the startup. An invention assignment agreement also typically requires employees to assist and cooperate with the startup to execute all documentation necessitated by the assignment or required by a government agency during the registering of intellectual property. Such agreements should require the employee to list any preexisting innovations that should be excluded from the assignment so that any new innovations are more clearly identifiable. Because of the importance of intellectual property in a typical technology startup, a startup should have each employee sign an invention assignment agreement before performing any work for the startup. This will ensure that the startup, and not the employee, owns all intellectual property.
Absent an express agreement between the startup and employee, courts will apply common law principles to determine the rights of the parties regarding employee inventions. The startup/employee relationship does not necessarily entitle the startup to ownership of inventions made by the employee even if the inventions are related to the employment or business. The law does not recognize the routine contract of employment as including the products of the inventive genius of the employee. Generally, ownership is given to the employee although the startup may have an implied license to use the invention. Ordinarily the startup will be given the benefit of all the employee's mechanical skill, but the courts draw the line when inventive talent enters the picture.
The nature of the employment, the subject matter of the invention, and the resource contributions of the startup are individual factors the court considers to determine the extent of ownership in an employee invention or patent. The three categories of employment defining the nature of employment are: (1) Specific Inventive Employment - employment for the express purpose of creating startup-specified inventions; (2) General Inventive Employment - employment to design or construct methods of manufacture; (3) General Employment - all others including management. Although the employee enjoys the presumption of ownership of his invention, if the employee was hired for the specific purpose of inventing a defined process or product, and this goal is achieved, the startup is entitled to the invention. This is true even in the absence of an express contract giving the startup the right of ownership. Startup-specified inventions made by an inventive employee are considered the property of the startup, even absent a pre-invention assignment agreement. This is because the employee has only produced that which he was employed to invent and is therefore bound to assign his intellectual property to the startup. Even if the employee was not hired solely to invent, but for the specific purpose of developing and perfecting a process or a product, any intellectual property that results from the work would be assigned to the employer. However, the mere fact that an employee makes an invention in the line of, or related to, his employment, does not by itself give the startup ownership rights.
General inventions, those made partly or wholly at the startup's expense but not at the startup's specification, are the property of the employee-inventor. General inventions may be developed by any category of employee, including the specific-inventive employee. In these situations an startup may retain a nonexclusive right or license to practice and use any invention made by an employee. The breadth of the startup's rights will depend on the extent to which the employee used the startup's property in making the invention. The startup is not entitled to the ownership of a general invention under the common law. An invention made on the employee's own time, and not at the startup's expense, is the property of the employee even if the invention relates to the business of the startup. As long as the employee conceives, develops, and perfects his invention on his own time and at his own expense, the startup will not be entitled to the invention. The employee ordinarily has the burden to show that he made the invention and that the startup did not provide him with information which enabled the inventor to make the product or process. The presumption of inventorship is in favour of the startup. The burden of proving who made the invention is on the employee.