Who owns the invention? Founders, contractors, and assignments

Patent ownership does not follow the paycheck. How to make sure your company actually owns what it builds.

Many founders assume that if the company paid for the work, the company owns the invention. For patents, in the United States, that assumption is often wrong. Patent rights initially belong to the inventors, and a company ordinarily secures those rights through a written assignment. Getting this right early is simple. Getting it right during a fundraise or acquisition is not.

Inventors own first

In the US, the rights in an invention initially belong to the person or people who invented it. A company acquires those rights through a written assignment. There are limited exceptions: an employee specifically hired to invent may be obligated to assign, and an employer may have a "shop right," a limited, non-exclusive right to use an employee's invention made with company resources. Neither is a substitute for a clear written assignment, and a shop right does not give the company ownership.

Patents also work differently from copyright here. Copyright has a "work made for hire" doctrine that can give an employer ownership automatically. Patent law has no general equivalent.

Founders

Founders often build the core technology before the company exists, or while the company is being formed. That work belongs to the founders personally until they assign it. Founder agreements should include a present assignment of prior inventions related to the business, not just of future work. If a founder leaves before signing one, the company may need that person's cooperation to fix it later.

Employees

Employees should sign an invention assignment agreement, often combined with confidentiality terms, when they start. The wording matters. Courts have treated "I hereby assign" as transferring future inventions automatically when they are made, while "I agree to assign" may only be a promise to assign later, which can lose out to another agreement the inventor signs. The Federal Circuit's decision in Stanford v. Roche illustrates the difference between a present assignment and a promise to assign. The Supreme Court's 2011 decision in that case addressed a separate issue: whether the Bayh-Dole Act automatically vested title in the university. It held that it did not.

Several states, including California, limit what an employer can require an employee to assign, In California, for example, the exclusion generally covers inventions developed entirely on the employee's own time without the employer's equipment, supplies, facilities, or trade secret information, but it does not reach inventions that relate, when conceived, to the employer's business or its actual or demonstrably anticipated research or development, or that result from work the employee performed for the employer. Agreements in those states typically need to include specific notice language, so coordinate employee assignment terms with counsel familiar with the applicable state law.

Contractors and consultants

This is the most common gap. Contractors are not employees, and absent an agreement, a contractor who invents something for you generally owns it. Consulting agreements should include a present assignment of inventions made in the course of the work. Agreements with development agencies and offshore teams need the same attention, including whether the agency has assignments from the individuals actually doing the work.

Universities and prior employers

Founders coming from a university or a prior employer may be subject to policies or agreements that give those institutions rights in inventions made during that time, or with their resources. It is worth reviewing those obligations before building the company's core technology on that work.

Inventorship is not ownership

Who is named as an inventor is a separate question, determined by who contributed to the conception of what is claimed. Naming the right inventors matters, and it is not a matter of seniority or project credit. Once inventorship is right, ownership follows the assignments from each of those inventors.

Closing the gaps

• Collect agreements from every founder, employee, and contractor who has contributed to the technology, and check the assignment language.
• Get confirmatory assignments where anything is missing or unclear, while the people involved are still easy to reach.
• Assign each application to the company at filing, and record the assignment at the USPTO promptly. Under 35 U.S.C. 261, recording within three months of the transfer, or before a later purchase or mortgage, can protect against a later transferee for value without notice. Recording is a filing step; it does not cure a defective assignment or decide ownership on its own.
• Update templates so new hires and contractors sign the right language from day one.

Where this connects

Ownership is the first thing diligence checks, and the easiest problem to prevent. It is also routine work for your corporate and employment counsel, and patent counsel should coordinate with them so assignment language and patent filings line up.