Continued Employment as Consideration

Here is a nice article that worries whether continued employment is sufficient to create an enforceable obligation to assign inventions to an employer: “Is Continued Employment Enough to Uphold Invention Assignment Agreements?

The brief answer is, yes.

Add the qualifications: under Wyoming state law, for at-will employees.

The distinction in a footnote:

The Wyoming Supreme Court distinguished its previous ruling in Hopper v. All Pet Animal Clinic, Inc., 861 P.2d 531 (Wyo. 1993), which required separate consideration, other than continued at-will employment, for a non-compete agreement, noting “there is a fundamental difference between non-competition agreements and intellectual property assignment agreements,” and that the stability of the business community is served by not requiring additional consideration for intellectual property assignments. Preston, 277 P.3d at 87.

I am boggled to understand what the “fundamental difference” is between non-compete agreements and intellectual property assignment agreements. The whole point of an invention assignment agreement is to enable an employer to prevent inventors and others from exploiting an invention in competition with the employer’s own interest in exploiting the invention.

Before university administrators breathe a fickle sigh of relief, we should recognize that university faculty–at least those with tenure or in a tenure track–are not at-will employees. For their research, they might not be employees at all–they aren’t assignable to research tasks and are not hired to invent, the university does not control their choice of research or collaborators or publication or disclosure. Surely they are not at-will employees. The university cannot “let them go” on a whim–and certainly therefore not on a whim tied to not assigning their inventions to the university–as if they were at-will employees after all.

The article above was written by attorneys in a law firm. That’s okay. But why is it that all these articles are written for the benefit of “employers”? Here’s the closing moral of the article (my emphasis there at the end):

Lesson for Employers

At first blush, the implication of the Preston holding is to provide a federal-level, unified resolution to the question of whether continued employment constitutes sufficient consideration for an assignment contract. However, because this decision was rendered under Wyoming state law, it may not be capable of being universally applied. Nonetheless, the Federal Circuit’s opinion certainly provides guidance to employers concerning how best to structure intellectual property assignment agreements to ensure that their rights are protected.

These articles rarely end up with a lesson for employees–how to avoid the clever bluster and legal leverage of over-reaching employers.

Look at the start of the article:

It is a common misconception that employers automatically own the rights to intellectual property created by their employees. Specifically for patents, the default is that an invention and any patents covering it belong to the inventor, unless an agreement is established to the contrary.

So far, so good. An employer has no “right” to an employee’s invention, as a result of employment. An employer and employee have to reach some agreement other than that of employment to change the default that an inventor owns. But there is hope for the poor, deprived employer:

Nonetheless, the absence of an agreement does not necessarily preclude an employer from claiming a right to an employee’s invention. In such situations, an employer may be entitled to a “shop right” to use an invention while the employee retains ownership

Yes, the employer may avoid an employee-inventor’s demand to stop using an invention or a claim for compensation, even without an invention agreement. So the purpose of an invention agreement has to be something other than either of these matters–it has to be things like being able to stop competitors, or being able to profit from the inventor’s invention by suing others or licensing the invention out. These are the “rights” that must be negotiated. The effort of the article, then, is to find a clever way for an employer to force potential employee-inventors to give up the rights they otherwise have as a matter of federal common law regarding inventions.

If employment can’t do it, then how about as a condition of employment? Well, that’s iffy, too, since there needs to be consideration for acquiring inventions that’s beyond that of employment without the acquisition of inventions. So, for a safe harbor, how about a threat to terminate employment cast in the form of continuing employment is the consideration for the agreement to assign inventions. Ah.

Now look at that last sentence of the article again:

Nonetheless, the Federal Circuit’s opinion certainly provides guidance to employers concerning how best to structure intellectual property assignment agreements to ensure that their rights are protected.

Work it. Employers have no rights, as a default of public policy, to employees’ inventions. The only way employers get rights beyond shop rights is by contracting for those rights. The rights are not natural rights, not even equitable rights–they are rights established by a contract with offer, acceptance, and consideration. Employers don’t have any rights to be “protected” here. That’s a nonsense gesture that implies the very fantasy world that was disclaimed in the opening paragraph. Employers have no rights in inventions until they contract for them. The article then expresses some relief and reassurance that employers can force employees–at least those at-will–to give over their rights to inventions with the threat of being fired being presented as “consideration” for the deal.

An employer may  have an interest in a given invention. Such an interest may be a matter of equity, such as when an employer hires someone to invent, specifies where research needs to take place to solve a problem, or provides resources to assist in an effort to do something that’s not been done before. An employer may also have an interest in inventions made by employees when those inventions are directed at what the employer does or sells or intends to do. That sort of interest is not necessarily equitable–arising from circumstances of involvement–as it is a matter of seeking profitable advantage. An employer might have an interest in such inventions because those inventions would assist the employer–the company–in conducting its business, which might also include preventing others from moving in on its business or developing competing products or methods or worse obsolescing products or methods. That is, this sort of interest in owning inventions is competitive. To prevent inventors from owning is to seek to restrain inventors from competing. It is to create sanctions for competing, or even for having the opportunity to compete. Thus, patent agreements not based on the equity of circumstances, and not based on a mutual, voluntary agreement, are necessarily non-compete agreements, however else they are labeled. Patent agreements that are imposed on employees as a condition of their employment but without a scope limited to equitable circumstances are necessarily also non-compete agreements.

And if a patent agreement is compelled, based on continued employment, that does not restrict itself to inventions that a company might reasonably have a competitive reason to acquire, is simply unconscionable. Any patent agreement that states or implies that as a condition of employment, all your inventions are belong to us regardless of our existing or reasonably foreseeable business, is unconscionable. The same is still true if a company claims its future business now includes making money from whatever an employee might invent. That’s just a nonsense excuse for taking. Such a thing can only matter if someone is hired to invent. It cannot be reversed with the claim that everyone is hired to invent so that the company can exploit inventions for money–unless of course the company is dedicated entirely to patent licensing or trolling. In general, then, if an employer demands employee inventions up front and without limitation to equitable circumstance inventions, the agreement is also a non-compete agreement. If the scope of the agreement is not limited to the company’s reasonable business interests, then the agreement should not be enforceable.

No court should find cause to compel an inventor to assign inventions to an employer without (i) equitable circumstances or (ii) in an area of the company’s legitimate business activity or foreseeable business active and if not either of these two areas then (iii) with consideration independent of employment that is consistent with the future value of the invention. Another way–if the invention is independent of employment, then the consideration too must be independent of employment. It is a reasonable agreement if an employer offers–“if you invent outside of equitable circumstances or our company’s current or foreseeable business, we will pay you the future value of your invention (as determined by an independent third party if we cannot reach a mutual agreement on that value) in exchange for your assignment”–and the employee accepts that offer. But then, what courts decide is often a roll of the dice.

A few states have laws that purport to invalidate employment agreements that require a broader assignment of inventions, but these laws don’t consider patent agreements or non-compete agreements, and in practice these laws provide a statutory basis for restricting inventor rights over what common law provides.

University administrators–vile ones rather than the merely fickle–use this same tactic of continued employment on university faculty, even though faculty are mostly not at-will employees. Even the Fenn court reasoned that if an inventor remained employed after having invented, the inventor must have chosen to accept the employer’s demand for assignment, since, after all, the inventor chose not to quit and therefore must have accepted the implied standing university offer of continued employment and hence must also have agreed to assign. Continued employment cannot be the consideration for inventors giving over their rights to inventions beyond those equitably assignable or tied to a company’s business.

University technology transfer operations, much as administrators may attempt to make it appear that a university is in the business of transferring technology of any sort, are not a legitimate part of a university’s business, and faculty inventors are generally not hired to invent, assigned to research activities, or take direction from university administrators–faculty with regard to their research and inventing activities are not servants unless they expressly agree in specific situations to become servants.

We might add that there’s a long-standing argument that inventors ought to own their inventions, ought to be the ones to decide just how and when to seek patents and how to exploit those patents, short of interfering with the business of their employers when the inventions have been made using an employer’s resources or in other circumstances that call for a shop right. Where are the law firms that are ready and public with their support for federal common law the way it is? Why do so many law firms see their profit in work to undermine or preempt federal common law on invention ownership and the public policy that runs with it?

The common assumption appears to be that employers should have automatic rights in inventions, that this ought to be the default public policy. This is the dream of the Moloch state, of the corporate borg, of the managerial class. Inventions get stockpiled for institutional profit-taking. Whoop. Even if that assumption is given free play in industry, why should university administrators adopt this same attitude with faculty? What happened to the idea of preserving a class of investigators that were free of institutional claims to inventions? That would appear to be a key distinctive element in university invention policy. And now that’s pretty much gone. Borg rules, and law firms tend to serve borgs, I guess.

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