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Journal of the Patent Office Society
(employer ownership, employee ownership, and einployee ownership subject to an employer shop right), the common law could be quite arbitrarily applied. The shop right, for instance, remains the same, no matter how minimal the employer's contribution may be.
II. CONTRACTUAL APPROACH (EMPLOYEE ASSIGNMENT AGREEMENTS) Without an express or implied agreement concerning employee patent rights, the employee was free to license his invention to his employer's competitors, creating a most unpleasant situation for the employer. For this reason, and the relative ease of administration, the trend has been to move from a status relationship to a contractual one. Thus, the status approach to patent rights has for most purposes been displaced by express agreements between employer and employee which require the employee to assign to the employer patents produced in the course of employment.
Three different groups of employers will be examined regarding their patent policies with regard to their employees: industry, government, and universities.
A. Industry As employers, American corporations usually demand of its employees the following requirements:10 (1)
8 So long as the court determines that employer contribution was sufficient warrant him a license to utilize the invention—no matter how slight his contribution had been—the employee is bound to grant him that license. Sufficiency of employer contribution for a shop right varies with the jurisdiction involved.
9 In effect, the employee would be serving two masters: his employer and the employer's competitor to whom the invention was licensed.
10 For typical employee agreements see Neumeyer, Note 7, supra pp. 157-159.
The General Electric Company agreement (Form FN-348-C (3-69 Rev.) is also typical of corporate contracts; portions of this agrecment are as follows: To General Electric Company:
In consideration of my employment in any capacity with the General Electric Company and of the salary or wages paid for my services in the course of such enployment, I agree
(A) to communicate to the Company promptly and fully and to assign to the Company all inventions or significant technical or business innovations developed or conceived solely by me or jointly
October, 1974, l'ol. 56, No. 10
assignment of all patent rights in consideration of the the employee's employment; (2) prompt and full disclosure of all inventive ideas; (3) assistance of the cmployer in preparation of all necessary paperwork; and (4) maintenance of adequate records. Although most corporations demand that only technical employees sign these agreements, certain corporate employees have extended their assignment-agreements to include such cmployees as janitors and secretaries. 11
This factor inanifests the great extent to which some American corporations have gone to protect their interests. It is questionable whether a court would uphold an agreement extended to such an employee if his invention were not within the realm of the company's business; such agreement would probably be unconscionable as contrary to public policy.13
Employment is adequate consideration to support the contract; therefore the employee has no legal basis to an award other than salary.18 Awards, if any, with others from the time of entering the Company's employ until any termination of my employment, (1) which are along the lines of the business, work or investigations of the Company or of its subsidiaries or affiliate companies, or (2) which result from or are suggested by any work which I may do for or on behalf of the Company;
(B) to execute all necessary papers and otherwise to assist the Company and its nominees during and subsequent to such employment in every proper way (entirely at its or their expense) to obtain for its or their own benefit patents, copyrights, or other legal protection for such inventions or innovations or for publications pertaining to them, in any and all countries, said inventions and innovations to be the exclusive property of the Company or its nominees, whether or not patented or copyrighted;
(C) to make and maintain adequate and current written records. of all such inventions or innovations in the form of notes, sketches, drawings or reports relating thereto, which records shall be and remain the property of and available to the Company at all times.
11 Rines, “Ā Plea for a Proper Balance of Proprietary Rights”, IEEE Spectrum, April 1970, p. 43.
12 Although the Guth case cited in note 1 supra did not rule on this point, it is probably a good reference for demonstrating that the court would read such restrictions very narrowly by upholding the portions of the contract that were not restrictive or inequitable while striking out those provisions that the court deemed unconscionable.
13 "Employment” or “the continuation of employment" has been upheld as adequate consideration to create a legally binding contract: see Buckingham Products Co. vs. McAleer Mfg. Company, 108 F.2d
Journal of the Patent Office Society
may vary from nothing from Bell Telephone Laboratories to sizable grants from IBM.14 Some employers, such as AT&T, regard monetary awards to individuals as contrary to promoting teamwork and cooperative spirit. However, there seems to be evidence contrary this opinion, as most patents are credited to individual effort. 18
B. United States Government Most United States Government agencies are governed by the patent policies of Executive Order 10096 of 1950,17 and the Kennedy Memorandum of October 10, 1963."* Executive Order 10096 allows discretion on the part of the agencies and in general, follows the common law doctrine, except that the “shop right” inventions are deemed to belong to the government. Awards for civil service inventors are provided for in the Government Employees' Incentive Awards Act of 1954 (public Law 763, 83rd Congress 2nd session).19 192 (1940); Hebbard vs. American Zinc, Lead & Smelting Co., 161 F.2d 339(1947). Courts usually assume equal bargaining power between employer and employee: see Bonsack Machine Co. vs. Hulse, 57 F.519 (1893), rejecting public policy arguments.
14 See generally Neumeyer, note7 at 87-88. Also provided with the G.E. argeement is a Form entitled “Reasons for the Employee Confidential and Proprietary Information Agreement”, which reads in part:
While the Company holds out no promise of additional compensation for assignment of inventions or for other specific innovative contributions (the awards given in connection with the filing of patent .applications being considered token payments only), it is Company practice to recognize all service of whatever nature by proper adjustment of the salaries of employees, by advancement in opportunity, by assignment of added responsibility, and otherwise. Innovative ability in general is recognized just as selling ability, executive ability, and other valuable capabilities are recognized.
15 Siegel, “The Employee Inventor-An Economist's View”, 47 Journal of the Patent Office Society (JPOS) at 498 (1965).
16 Id, p. 498.
173 C.F.R. 292 (1949-1953 Comp.); "Providing for a Uniform Patent Policy for the Government with Respect to Inventions made by Government Employees and for the Administration of Such Policy".
18 3 C.F.R. 238 °(SUPP. 1963). “Presidential Memorandum and Statement of Government Patent Policy."
19 For case studies of government employer patent policies see generally Neumeyer, Note 7 supra at 207-423.
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Government contractor rights are set out in the Kennedy Memorandum. Under this document, ownership of inventions made under federal contracts is divided into two groups: (1) the government retains title to the invention, or (2) the contractor maintains rights to the invention subject to a government “shop right” 20 Corporations with both governmental and commercial divisions are apt to either transfer any new concepts from the governmental to the commercial department or to disregard them.21
C. University University patent policies, in general, tend to be more liberal than that of industry. They may range from total non-interference with employee inventor rights (Harvard University) to the granting of worthwhile percentage bonuses to creative employees after compulsory assignment.22 However, government contracts with universities usually require that university employee invention rights be reserved to the government, creating minimum latitude for significant individual
20 See Neumeyer, Note 7 supra at 245-246. “Contractor" is defined in the Kennedy Memorandum as “any individual, partnership, public or private corporation, association, institution or other entity which is a party to the contract” (Sec. 4(c)). Contractor employees are not a party to the contract and are, therefore, subject to the contractor's own patent policy. Thus, the Kennedy Memorandum has had little effect upon contractor employees' patent rights.
21 See Rines note 14 supra at p. 45. Rines reports that one company's NASA operations produced four inventions in a five-year program, while the corresponding commercial department filed 30 to 50 applications per year in the same five year period. See also Sanders, "Government Versus Industry Financed R&D”, 10 Patent, Trademark and Copyright J. of Research and Education, 51 (1966), for the disparity between government and company funds necessary for patent output. Approximately 10 times as much government funding compared with industry funding is necessary for patent. output.
2 See generally Neumeyer note 7 supra at 425-495. See also the Rutgers Camden Law School Bulletin, 1973, p.42, which requires all Rutgers Law Students to submit to the university's patent policy, which in turn requires all Rutgers graduate and undergraduate students to assign to the university all patents emanating from university connected research as a condition of enrollment. In return the student receives 15 percent of any gross income received from. the patent.
Journal of the Patent Office Society
university patent policy at institutions with large federal research contracts.23
III. LEGISLATIVE APPROACH Certain European Countries 24 and Japan have decided that employees are entitled to compensation beyond salary for their inventions and have, therefore, granted them remuneration through statutory remedies. Three areas of inventive activity are generally covered: (1) Service inventions are those made by the employee both within the scope of his employment and within the field of business activity of the employer; (2) dependent inventions are inventions made by an employee outside the scope of employment, but within the field of the employer's business activity; and (3) free inventions are those made by an employee outside the scope of his employment and outside the field of business activity of the employer.
Service and dependent inventions would usually belong to the employer subject to employee compensation, while free inventions would belong to the employee. These statutes usually balance the invention's value and the employee's contribution to determine compensation; Appendix A, Table I presents a matrix of international employed inventor rights, showing the applicable statute, how compensation is determined, and the rights of the employee in Free Inventions.
Two statutes of interest are those of West Germany and the U.S.S.R. Nazi Germany adopted an extensive patent compensation statute in 1936; the present West German law of July 25, 1957, incorporates the basic features of the previous legislation.26
23 Neumeyer, note 7 supra at 488. 24 Italy, Netherlands, Austria, Sweden, W. Germany, Switzerland.
25 Free Inventions under some statutes can be acquired by the employer through a negotiation or a compensation agreement. See Table I, infra.
26 All information on the West German Statute was gathered from Calvert, "Encyclopedia of Patent Practice and Invention Management,” Reinhold, 1964, PP. 233, 238-242; and Schmied-Kowarzik, “Employee Inventions Under German Law" 54 JPOS 807 (1972).