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

447

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

employee–inventors 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 employee–inventors. 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 oyee–inventor 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

employee–inventors 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 Employee–Inventors .................... 467

3. Reputational Concerns of Employee–Inventors

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 employee–inventors 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. §§ 100–156 (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 employee–inventor once the invention is made yet still

granting employers a remedy should an employee–inventor 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

mobility10—outcomes 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 employee–inventors 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 employee–inventors if the employee–inventor used

the resources or equipment of the employer to invent the patented subject. See Shop Right, BLACK’S

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, BLACK’S LAW

DICTIONARY (10th ed. 2014).

7. See infra Part III (describing the imbalance of power between employers and

employee–inventors 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 employee–inventors with state law causes of action and trade secret law).

9. See infra notes 156–63 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 263–65.

12. See infra Section IV.A (proposing that employers implement right of preemption provisions

to remedy the imbalance of power).

13. See infra notes 160–66 and accompanying text.