Invention Assignment Agreements in Colorado

• Publication year: 1997
• Pages: 47
• Citation: Vol. 26 No. 1 Pg. 47

26 Colo.Law. 47 Colorado Lawyer 1997.

1997, January, Pg. 47. Invention Assignment Agreements in Colorado

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47

Vol. 26, No. 1, Pg. 47

The Colorado Lawyer
January 1997
Vol. 26, No. 1 [Page 47]

Specialty Law Columns
Business Law Newsletter
Invention Assignment Agreements in Colorado
by Ben Sparks, David Steigerwald

This newsletter is prepared by the Business Law Section of the CBA to apprise members of the Bar of current information concerning substantive law. This month's article was written by Ben Sparks, a shareholder, and column editor David P. Steigerwald, an associate, of the Colorado Springs firm of Sparks Dix, P.C., (719) 475-0097

An employee starts a company to market inventions made on his own time and without using his employer's resources or proprietary information. However, the employee has previously executed a proprietary information agreement that assigns to the employer "all inventions" generated during the term of employment. Should the employee and his new company fear being sued?1 Unfortunately, Colorado law is unclear as to the permissible scope of invention assignment agreements.2

Common law precedent often resolves invention allocation in the absence of assignment agreements.3 However, such agreements have become the norm for technology companies seeking to eliminate the uncertainties of common law. These agreements are generally enforceable, but when overly broad have been set aside on grounds of overreaching. For example courts consistently overturn agreements that continue invention assignment long after employment ends.4

In response to overreaching and to avoid chilling entrepreneurial creativity, several states have enacted legislation limiting the scope of invention assignment agreements.5 Although Colorado has not yet adopted such a statute, Colorado courts may look to other states' enactments in determining the limits of an assignment agreement in Colorado.

Summary of Common Law

Colorado currently follows the common law approach to invention assignment agreements. This approach is based on three fact patterns.6

In the first pattern, the employee is hired specifically to invent (the "specific inventions pattern"). Under common law, inventions generated during the course of employment are owned exclusively by the employer, regardless of whether the employee executed an invention assignment agreement.

In the second pattern, the employee is not hired to invent. However, during the hours of employment and using the employer's facilities, the employee generates inventions outside or related to the scope of the employer's business. In the absence of an invention assignment agreement, the employee generally retains ultimate ownership but is deemed to provide the employer with a perpetual, nonexclusive license to the invention (the "shop rights pattern").

The third pattern basically includes everything else. The most common situation is where an employee makes inventions on his or her own time, outside the scope of employment and without using employer facilities or information (the...