Tcl - Four Strategies for Controlling Employee-created Ip - April 2007 - Labor and Employment Law

• Publication year: 2007
• Pages: 31

36 Colo.Law. 31 Colorado Lawyer 2007.

2007, April, Pg. 31. TCL - Four Strategies for Controlling Employee-Created IP - April 2007 - Labor and Employment Law

The Colorado Lawyer
April 2007
Vol. 36, No. 4 [Page 31]

Articles
Labor and Employment Law

Four Strategies for Controlling Employee-Created IP

by Eric J. Moutz, Adrian Eissler

Labor and Employment Law articles are sponsored by the CBA Labor and Employment Law Section to present current issues and topics of interest to attorneys, judges, and legal and judicial administrators on all aspects of labor and employment law in Colorado.

Article Editor:

John M. Husband of Holland & Hart LLP in Denver - (303) 295-8228, jhusband@hollandhart.com

About the Authors:

Eric J. Moutz is an attorney with the Boulder office of Hogan & Hartson, LLP. He specializes in complex commercial litigation, including matters related to intellectual property rights
- (720) 406-5365, ejmoutz@hhlaw.com. Adrian Eissler was a summer associate with Hogan & Hartson, LLP in 2006 and is expected to join the firm as an associate in 2007.

This article reviews recent developments in case law concerning the validity and enforcement of arbitration agreements. The article also discusses some of the implications these cases may have for practitioners drafting arbitration agreements.

Intellectual property (IP) - whether in the form of trademarks, copyrights, trade secrets, patents, or inventions - often is the most valuable asset of a business. When IP assets are developed by employees, either on or off the clock, it is critical to establish who actually owns and controls them

As a general matter, employees retain ownership and control over their inventions; however, there are four important exceptions under Colorado law: (1) where rights to employee inventions are addressed by an express employment contract (2) where an employee is hired to create the IP in question (3) where the employee creates IP using employer resources or acquiesces in the employer's use of the IP; and (4) where the information collected or created by the employee can be protected as a trade secret of the business. This article provides an overview of these four exceptions, including relevant case law and statutory authority.

Securing Rights to Employee-Created IP
Through Employment Agreements

The best way to establish ownership rights to employee-created IP is by using a well-written agreement that spells out the obligations and rights of the employer and its employees.(fn1) Such an agreement can obligate an employee to treat an employer's business practices as confidential or to assign IP rights to the employer for little or no compensation beyond the usual salary and benefits. Aside from being readily enforceable, a written employment contract also has the advantage of defining the parties' expectations concerning IP rights before a conflict arises.

Employer Ownership of Employee-Created IP Implied at Law

Even in cases where an express employment contract does not exist or is unenforceable, an employer still may have a right to IP created by its officers and certain employees. The Colorado Court of Appeals has recognized that both corporate officers and employees hired to invent may be under a duty to assign IP rights to the employer. In Hewett v. Samsonite Corp.,(fn2) the court concluded that a patentable invention becomes the property of the employer if the employee was "hired [o]r paid to invent" it. The court elaborated in Scott System, Inc. v. Scott, stating:

If an employee's job duties include the responsibility for inventing or for solving a particular problem that requires invention, any invention created by that employee during the performance of those responsibilities belongs to the employer.(fn3)

Similarly, an employee who has a broad fiduciary responsibility to the employer may be impliedly obligated to turn over any IP rights he or she acquires that relate to the company's business. For example, in Scott System, the court found that a corporate officer has a "fiduciary duty" to the corporation's shareholders that "obligates" him or her "to assign a patent to the corporation if the invention was developed while he or she was employed by the corporation and it is related to the corporation's business."(fn4)

The principal limitation on these decisions is that the IP must relate to what the employee was hired to create or the problem he or she was hired to solve (in the case of employees) or the business of the corporation (in the case of officers). Neither Samsonite nor Scott System imply that an employee must assign to the employer any IP he or she creates, no matter how unrelated to the scope of the job duties. Therefore, an employee who: (1) is not...