ASSIGNED ALL MY RIGHTS AWAY: The Overuse of Assignment Provisions in Contracts for Patent Rights

Author:Emily A. Sample
Position:J.D. Candidate, The University of Iowa College of Law, 2019; B.S. in Chemical Biosciences, University of Oklahoma, 2016
Pages:447-490
SUMMARY

Many companies rely on the use of assignment clauses to grant themselves ownership of intellectual property created by their employees. Many of these contracts target patent ownership rights, are overly broad, and prevent employee–inventors from receiving fair value for the work they provide to their employers. When the clause collects patent ownership rights, these contracts reduce the... (see full summary)

 
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ASSIGNED ALL MY RIGHTS AWAY:
The Overuse of Assignment Provisions
in Contracts for Patent Rights
Emily A. Sample*
ABSRACT: Many companies rely on the use of a ssignment clauses to grant
themselves ownership of intellectual property created by their employees. Many
of these contracts target patent o wnership rights, are overly broad, and prevent
employeeinventors from receivi ng fair value for the work they provide to their
employers. When the clause collec ts patent ownership rights, these con tracts
reduce the motivation to innovate a nd restrict the mobility of employ ees. As a
result, many scholars challenge th e principle of assigning away intellect ual
property in initial employment co ntracts. Only some of this criticism is
warranted because businesses may valid ly claim some of the inventions
created by their employeeinventors. Ma ny businesses hire with the intent to
innovate a specific invention, a nd basic principles of agency la w and shop
right doctrines would indicate tha t the invention belongs to the business.
Without that invention, many businesses ma y struggle to survive and raise
revenue. Because economic realities ha ve changed since the Framers wrote the
Patent Clause into the Constitution and Congress in itially passed the Patent
Act, both the employer and the empl oyeeinventor share rights to ma ny
inventions, possessing legal rights to th e invention and personhood rights to
the invention, respectively. To resolv e this conflict, corporations should modify
existing contracting practice to rely on righ t of preemption provisions, courts
of all levels should consistently interpret con tract law in light of patent law
terms of art when patent ownership s uits reach them, and Congress shoul d
authorize the ability to termina te patent rights assignments to empower
employeeinventors and promote m ore equitable consideration a nd
compensation for inventions created by their employees.
I. INTRODUCTION ........................................................................... 448
II. PATENT LAW AUTHORIZES THE USE OF ASSIGNMENTS................. 451
A. FOUNDATION FOR PATENTS .................................................... 451
* J.D. Candidate, The University of Iowa College of Law, 2019; B.S. in Chemical
Biosciences, University of Oklahoma, 2016.
448 IOWA LAW REVIEW [Vol. 104:447
B. CASE PRECEDENT ................................................................... 454
III. CORPORATIONS TAKE ADVANTAGE OF ASSIGNMENT
PROVISIONS BY MAKING ASSIGNMENT A CONDITION
OF EMPLOYMENT ......................................................................... 461
A. IMBALANCE OF POWER ........................................................... 461
1. Corporate Needs Have Displaced the Age of
the Sole Inventor ......................................................... 464
2. Courts Offer Corporations More Remedies
than They Offer to EmployeeInventors .................... 467
3. Reputational Concerns of EmployeeInventors
Impact Their Productivity ........................................... 470
B. STATE LAW OFFERS EMPLOYERS PROTECTION AFTER THE
TERMINATION OF EMPLOYMENT ............................................. 473
1. Trailer Clauses Allow Employers to Acquire
More Intellectual Property .......................................... 473
2. Courts Favor Employers When Determining
Time of the Conception of the Invention .................. 475
3. Corporations Reserve Rights to Maintaining
Operational Secrecy .................................................... 478
IV. PRIVATE BUSINESSES AND PUBLIC GOVERNMENT SHOULD
WORK TOGETHER TO RESOLVE THE INEQUITABLE
ASSIGNMENT OF EMPLOYMENT INTELLECTUAL PROPERTY ........... 481
A. RIGHT OF PREEMPTION CONTRACT PROVISIONS ....................... 481
B. JUDICIAL INTERPRETATION OF CONTRACTS REDEFINED ............. 485
C. CONGRESSIONAL ACTION ....................................................... 486
V. CONCLUSION .............................................................................. 489
I. INTRODUCTION
As many corporations spearhead research and development in the
United States, most of the inventive expectations are the responsibility of
employees rather than shareholders or directors. Such products are
frequently patentable under the Patent Clause of the Constitution and the
provisions of the United States Code.1 It is well-settled law that the inventions
of employeeinventors do not immediately vest in their employers.2
Employers were concerned that they could lose the invention on which they
1. U.S. CONST. art. I , § 8, cl. 8; 35 U.S.C. §§ 100156 (2012).
2. See Solomons v. United States, 137 U.S. 342, 346 (1890); Am . Cyanamid Co. v. Hubb ell,
76 F.2d 807, 807 (3d Cir. 19 35). But see United States v. Dubilier C ondenser Corp., 289 U.S. 178, 187
(1933) (holding that inventions assign to employers if the invention was the reason for employment).
2018] ASSIGNED ALL MY RIGHTS AWAY 449
had relied and invested.3 For equity purposes, courts authorized the equita ble
remedy of shop rights,4 and employers began contracting with employees to
make the employer the patent owner.5 These contracts utilize automatic
assignment clauses, requiring no affirmative action on the part of the
employer or the employeeinventor once the invention is made yet still
granting employers a remedy should an employeeinventor attempt to claim
the patent in his or her name.6 Courts have primarily treated assignment
clauses favorably, even though employers have drafted them to disadvantage
the inventors they hire by collecting inventions beyond the scope and term of
employment. 7 Courts have also expanded the protections available to
companies beyond contract law.8 These provisions and their interpretations
by courts have begun to reduce innovation 9 and restrict employee
mobility10outcomes not anticipated by the Patent Clause of the
Constitution.11
To resolve these concerns, corporations should alter the provisions from
automatic assignment clauses to right of preemption clauses to better
represent the interests of the potential employee12 and simultaneously
improve the work ethic of their employees, which can greatly benefit the
corporation.13 Another important step that should be taken to resolve
inequity between employers and employeeinventors would be changing
3. See Solomons, 137 U.S. at 346.
4. “Shop rights” are a remedy for employers that grants them im munity from liability for
infringing a patent belonging to one of their employeeinventors if the employeeinventor used
the resources or equipment of the employer to invent the patented subject. See Shop Right, BLACKS
LAW DICTIONARY (10th ed. 2014) (“ An employer’s right to an irr evocable, nonas signable,
nonexclusive, royalty-free license in an employee’s invention, if the employee conceived and
developed the invention during the course of employment and used company funds and materials.”).
5. See infra Section II.B (describing the history of assignment clauses in emplo yment
contracts through historical jurisprudence).
6. As used i n this Note, “assignment clauses” are the contractual provisions that “assign,”
or grant, the ownership of patent rights to someone other than an inventor or joint inventor. See
RESTATEMENT (SECOND) OF CONTRACTS § 317 (AM. LAW INST. 1981); Assignment, BLACKS LAW
DICTIONARY (10th ed. 2014).
7. See infra Part III (describing the imbalance of power between employers and
employeeinventors through the use of adhesion contracts, trailer cl auses, noncompetition
restrictions, and resource allocations).
8. See infra Section III.B (desc ribing the way state courts allow more legal opportunities for
employers than they do for employeeinventors with state law causes of action and trade secret law).
9. See infra notes 15663 and accompanying text.
10. Employee mobility refers to “ the ease by which a skilled employee can leave one job,
join another company, and immediately apply his or her skills.” Charles Tait Graves & James A.
DiBoise, Do Strict Trade Secret and Non-Competition Laws Obstruct Innovation?, 1 ENTREPRENEURIAL
BUS. L.J. 323, 324 (2006) (emphasis added).
11. See infra text accompanying notes 26365.
12. See infra Section IV.A (proposing that employers implement right of preemption provisions
to remedy the imbalance of power).
13. See infra notes 16066 and accompanying text.

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