Know the Law: Who Owns Intellectual Property Created by Employees?

Scott C. Rand
Counsel, Corporate Department
Published: Union Leader
October 8, 2018
Image of Intellectual Property box

Q: Who owns intellectual property created by employees? 

A: It is widely assumed that when someone is hired to create a work product, intellectual property rights will be owned by the hiring party.

However, that is not always the case. If there is a written agreement, the details of intellectual property ownership are often spelled out.

Written agreements addressing intellectual property ownership are common, particularly where the employee is hired in a creative capacity. Sometimes, such agreements will take the form of an intellectual property assignment agreement.

In other cases, there may be provisions governing intellectual property ownership within a larger employment agreement.

In the absence of a written agreement addressing ownership, there are default rules that apply. The most common types of intellectual property created by employees are copyright and patent. The default rules under copyright law are different from the default rules under patent law.

Under copyright law, the “work for hire” doctrine governs ownership of copyrightable works created by employees. Under the work for hire doctrine, the employer owns the copyright in an employee’s creative works, including written documents, audiovisual works, graphic art works, software code and others, so long as the work was created within the employee’s scope of employment and the employee is an actual employee, as opposed to someone hired as an independent contractor.

The provisions of copyright law dealing with works for hire created by independent contractors are more complicated.

However, the general rule is that, in the absence of a written agreement, copyright in works created by an independent contractor is owned by the independent contractor.

The default rule for patent ownership, absent a written agreement, is that inventors own the rights in their inventions. This is true for employees and independent contractors.

There is an exception if an employee was “hired to invent” something specific or solve a specific problem. It should be noted that the “hired to invent” doctrine usually does not cover employees that are hired in a technical or creative capacity generally, such as an engineer or product designer.

In cases where the employer does not own an employee-created invention, the employer may still have some limited rights to utilize the invention, known as a “shop right.”

A shop right is an implied license granted to the employer if the invention was created during work hours or with employer funds, facilities or resources.

However, from an employer’s standpoint, rather than attempting to rely on a shop right or assuming that an employee was “hired to invent” something, it is always better to have the employee sign a written intellectual property assignment agreement.