brain x ray

Who owns your thoughts?

The law comes down firmly on the side of companies when it comes to IP ownership, but it's up to employers and employees to work out how far the protection should extend.

Who owns your thoughts? If you are a salaried employee, the chances are that your employer has a strong claim on them if they lead to a usable invention and if it's something that comes out of your day-to-day work.

Paul Gershlick, a partner at Matthew Arnold & Baldwin LLP, says the idea that employers own intellectual property (IP) developed by employees in the course of their employment is in legislation such as the Copyright, Design and Patents Act in the UK.

Many people who have signed an employment contract, particularly in jobs that involve some level of creativity, will have noticed that, despite this being captured in statutes, there is a clause that covers the same ground and can go further.

'Most sensible employers back that up. One reason is to have absolute clarity and the other is to put in place protection if an employee contributes an invention that is patented in jurisdictions where you need the cooperation of the inventor,' says Louise Fullwood, legal director of law firm Pinsent Masons.

One jurisdiction where this cooperation is needed is the US - the result of much later decisions to give employers rights over employees inventions. Professor Catherine Fisk, who has written a series of papers and a book on the history of employer and employee rights, points out that the situation was far less clear-cut in 19th century America than in the UK and Europe.

Fisk points to a famous quote from president Abraham Lincoln on his view of IP in the US of the pioneers: 'In anciently inhabited countries, the dust of ages - a real downright old-fogeyism 'seems to settle upon and smother the intellects and energies of man.'

Fisk says the degree of control that guilds in Europe had over skilled workers provided the foundation for laws that governed where they could work and who owned their IP. The early US had a choice when it implemented its own IP legislation and the view among the US courts in the 19th century was that the workers themselves should own their inventions, even if they came up with them while employed by a company.

In Lincoln's view, patents added 'the fuel of interest to the fire of genius'.

Fisk argues: 'When Lincoln's words were written in stone above the portal to the US Patent Office in 1932, the fuel of interest had been all but removed from the fire of the employee-inventor's genius.'

Barbie vs Bratz

As the 19th century drew to a close, Fisk says an increasing number of judges ruled in favour of companies owning the IP developed by their employees. However, this ownership has turned out to be more controversial in the US with a series of cases becoming highly publicised because of the perceived unfairness of the results. At the end of 2008, Barbie owner Mattel succeeded in preventing MGA Entertainment from making the Bratz dolls because designer Carter Bryant came up with the idea for the shopaholic dolls while working at Mattel. MGA's lawyers unsuccessfully argued that Bryant was on leave when he developed the dolls' look.

Parents may not miss the scantily clad Bratz dolls, which are expected to return with a new look in August, but people in the US found it dismaying that a labourer who came up with a way of removing worms from pecans could not stop his employer from using the technique without paying him for the IP because he developed the idea while at work.

An employee at a chairlift company secured the rights to his invention in 1977 because his employer expressly forbade him to work on it - before suing to own the IP he developed. Without the employer making it so clear that the invention was not part of the job, the invention would have been the company's IP.

Depending on your perspective, the law may seem fair or unfair. It is largely the product of the way in which courts play a role in economic development, Fisk claims. In a 1999 paper, Robert Merges of the Berkeley Law Center argued that giving firms control of IP improves efficiency through aggregation. 'Courts justifying the default rules for invention ownership seldom articulate the problems that would follow from widespread employee ownership of inventions.'

A similar analysis of copyrights in the entertainment business by Professor Deborah Tussey of the Oklahoma City University School of Law found that employee ownership of copyrights would be better for content creation but when it came to licensing deals, ownership by the firm is far more efficient and - because more deals could be struck - lucrative. Potentially.

Some of these issues appear today in cases that involve patents, particularly in the US where subtle differences in the way that patents are handled compared with Europe mean that employee-inventors have to be more involved in proceedings.

First to invent

Fullwood points out that the US is a 'first to invent' jurisdiction rather than 'first to file'. This means that employees' lab records prove vital in demonstrating who should get a patent. It is the reason why the key patent on the integrated circuit was so hotly contested, in the end going to Jack Kilby at Texas Instruments rather than Fairchild and then Intel's Bob Noyce. The courts had to pore over the inventors' respective notebooks to determine who was the first to have the idea.

In a 2006 paper, Dan Burk and Brett McDonnell of the University of Minnesota acknowledged: 'We have seen why the law might best assign rights to firms in such circumstances. However, this leaves employees open to exploitation, so that the opposite assignment might be better. Even if assigning rights to the firm is best, it is possible that protection of employees then requires assigning more power to employees within firms than we observe. This may be becoming increasingly true as knowledge employees become a more important part of many firms.'

Burk and McDonnell also warned that if you take the idea of firms holding IP to reduce the number of negotiations needed to advance development 'firms may integrate into inefficiently large firms that internalise the problem created by excessive property protection'.

Although the law is clear on what happens to IP created in the course of doing your job, what happens in the employee's spare time is a grey area. If the idea is along the employee's line of work then there is a good chance that the employer can claim it later. This might even capture ideas that were formed before the employee even started work at the company. A lack of records meant that games designer Paul Burrows lost the rights to one of his game designs. Burrows claimed he came up with the idea for Traktrix long before he started work at games publisher Circle in 2005.

After he started work there, Burrows proposed the game to Circle but the company went into liquidation and its IP bought by a company started by a former Circle director. Burrows worked with Crush for a while but then claimed the company infringed his IP.

Burrows lost. He could not show that he had told Circle that the idea for the game existed before he joined that company - as a result the company could not have known that the idea might not belong to it.

In cases like these, clear contracts and record-keeping are vital, says Gershlick. Even if someone has an idea before they arrive at a company, 'it may be developed further in the course of employment', says Gershlick, which can complicate the issue of ownership. A contract to take this into account will make the situation clearer.

'If employees want to show that what they did was prior to entering the employment they should make that clear or it becomes their word against someone else's,' says Gershlick.

Fullwood says where the work is done can be important: 'Was the work generally done in someone's shed or was it done on the employer's premises? And a lot tends to depend on what the employer's role is. If someone is in a software developer's role and they come up with a piece of software, it is a lot easier for the employer to say that it is a part of your job. If you are stacking shelves in a warehouse, the law would be much more on the side of the employee. It is easier to show that it is outside the course of the employment. The more technology-oriented the role the easier for the employer to show that it is theirs.'

When contracts do not specify 'in the course of employment' the size of the grey area increases. Potentially, this can cover any part of the employee's development outside the workplace. 'It is a question of what is reasonable and what isn't,' says Gershlick.

Gershlick points out that, in his spare time he writes music. Few would think an employer should own his tunes were he to pen a million-selling hit and had signed a broad contract that implied anything he created during employment should belong to his employer.

But what about the programmer who wants to contribute to the growing open-source movement? 'That sort of hobbyist role is a bone of contention,' says Fullwood. If the software has nothing to do with the employer's business, why should an employer have that right over me? Fullwood adds: 'Generally, in the UK it would be a little easier to run the sort of argument for an employer to reach through to that.'

Clear as mud

Lawyers such as Fullwood and Gershlick says don't leave it to chance: it's better to get clarity if you are not sure before the contract is signed. Clarity may not seem to be in everybody's interests. In his 2009 analysis of the Mattel-Bratz case, Professor Michael Birnhack of Tel-Aviv University argued: 'The employer, knowing that current doctrine operates in his or her favour might not be meticulous in authoring the contract, perhaps deliberately so.'

But Gershlick notes that, despite the apparent position in favour of the employer, it is worth making sure the contract is clear so that 'anything the employer wants to own belongs to the employer and not to the employee through a technicality'.

From the employee's point of view, 'if the employer is trying to get more, make sure it is not too wide so that it does not cover something like the music scenario', says Gershlick.

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