Overreaching IP Assignments in Employment Agreements

Intellectual property (“IP”) assignment agreements are thorny subjects for employees at both mature and early stage companies. Many employees are skeptical about entering into these agreements because they want to retain ownership of the ideas they create while they are away from work. These days, the line between work and one’s personal life are increasingly more difficult to distinguish. For those who have been working from home for the last year, the two paradigms might seem to have merged into one entirely. Accordingly, employees who have entered into IP assignment agreements should evaluate the wording of their agreements carefully.
 
Broad IP assignment agreements might be unenforceable depending on the state the IP holder works in. For instance, suppose an inventor signs an employment contract with an IP assignment clause that reads:
 
In consideration for the compensation the Company pays to me, Company shall own all of the rights to the inventions and work product that I create or conceive during the term of my employment.
           
Under this language, any and all inventions that an inventor worked on while employeed would presumably be owned by the company, regardless of …. This broad language, however, would likely fail to meet California’s requirements for IP assignment agreements. Under California Labor Code § 2870, an intellectual property agreement should be more tailored to capture work within the time, place, scope, and function of an employee’s employment. Several other states, including Delaware, Minnesota, and others, have similar requirements.

Other states, however, take a more employer-friendly approach. In Nevada, for instance, employers have a right to patentable inventions as a default under Nevada Stat. § 600.500. In New York, where there is no statute directly on point, the law is even less clear. A recent case in the Southern District of New York demonstrates how broad IP assignment agreements can reach in New York. In Novasparks SA v. Enyxfpga, Novasparks designed and marketed financial data processing systems, and it had several employees who worked on these systems’ code. Some of Novasparks employees then left to form Enyxfpga and shortly thereafter Novasparks sued Enyxfpga—alleging that the departing employees breached their employment agreements by using the IP the employees developed while at Novasparks. The employment agreement in question provided that:
 
[A]ll intellectual property rights and know-how in and to any creation or invention developed by [employee] in relation to [their] internship and in particular to the Project in any form whatsoever (including in particular, technical inventions, software, computer programs, integrated circuits, designs, plans or any other technical, commercial or other documents).
 
The court stated that this employment agreement was worded broadly enough to capture inventions conceived while the Enyxfpga employees worked for Novasparks, and thus found the employees breached the agreement.
 
But even if New York accepts broader language, the time, place, scope, and function requirements remain critical components when evaluating an IP assignment agreement. These four factors help form the basis for what courts refer to as an employee’s “scope of employment.” At bottom, one’s scope of employment captures what they were hired to perform. If you were hired by a biotech company to research and develop new gene therapies, then any gene therapies you develop would probably fall under the scope of your employment. However, if you develop a language learning program, that program would likely fall outside the scope of your employment.
 
As such, there are steps inventors can take to escape the grip of broadly worded IP assignment agreements. To minimize the likelihood that your employer can claim rights to your invention, the following four tips can help demonstrate that your IP was developed outside the scope of your employment.

Start recording everything. Maintaining meticulous records helps reduce questions surrounding ownership over the new IP and can help prove your ownership. Write down your project dates, including the start date, in a diary and keep track of its development stages, including any discussions with third parties that you have had. You can also maintain an electronic record by sending an email to your personal address that documents your contributions.

Use your time wisely. Make sure you work on your project outside of your work hours. This means focusing on your project only in the evenings and weekends if your work hours are from nine to five. If you work on your project during work hours, you can risk the employer claiming rights to it.

Use separate devices. Similar to the point above, make sure you work on your project using your own devices. Do not use your employer’s computers, tools, copiers, scanners, or other devices for your personal work. Use only your own personal computer or laptop. This means that any inspiration you get while working should be written on paper and pen, and not on your office device. Likewise, use only your personal email when communicating about your invention. 

Use your own money.Finally, make sure you fund your project using your own resources. This means using your own money to pay for expenses like electricity, paper, permits, and raw materials. Do not claim money from your company for any IP-related expenses. If you use your employer’s money to pay for any parts of your invention, you risk jeopardizing ownership of it.
 
Ultimately, whether an employer can claim ownership over your intellectual property will depend on (1) the language in your employment agreement, (2) the nature of the intellectual property and its relationship to your employment, and (3) your state’s laws. However, following the four steps listed can ultimately decrease the likelihood that an employer could successfully claim ownership of your intellectual property.