Friday, February 22, 2008

On inventions developed on the employee's own time

One commenter to the DDB v. MLB post on Patently-O had written:

How about Illinois for a different view (I understand California has a similar statute but I do not have a reference to it. An interesting note on this statute is that patent lawyers I have asked about this are unaware of and cannot locate this statute but good friend who is a "generalist" found it in under five minutes when I asked him as it is part of the miscellaneous property statutes in Illinois)

Page 104 of The Complete Guide to Securing Your Own U.S. Patent by Jamaine Burrell discusses the issue. However, note that Burrell, who has written "complete guides" for currency investing and for investing in real estate liens, is NOT a patent attorney.

IPBiz notes an example at Guy Kawasaki's blog in the form of commentary by Fred Greguras:

Working completely outside of an employer’s premises and not using an employer’s trade secrets or other resources may not be enough to avoid a taint on your technology and intellectual property (“IP”) for the new business. Investors will examine the creation of IP very carefully in such a situation as they don’t want to buy into a law suit. While California law favors employee mobility it also protects employers in Labor Code Section 2870 which is part of most employee invention assignment and confidentiality agreements you sign before you begin employment with a company.

Basically, 2870 states that an employee owns an invention that he/she developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or result from any work performed by the employee for the employer.

The taint to the new business can come from the founder who is trying to continue work with his/her current employer while trying to create technology and IP for a new business or from a consultant who is “moonlighting” from a business in the same space. Some business sectors such as EDA software are notorious for litigation against departed employees who try to start a new business in the same space.

Greguras is neither a generalist nor a registered patent attorney. His bio notes: Mr. Greguras focuses on strategic legal issues for software, semiconductor-related and life sciences companies. His practice includes start-up issues and financings in both domestic and international transactions. He has represented a wide range of companies in financing, M&A, licensing and other commercial transactions, from privately held start-ups to publicly traded companies. He has also been a venture capitalist and a general counsel and CFO for a startup.

Separately, Scott Edward Walker writes:

If any employees are hired by the company, they should be required to execute two documents: (i) an offer letter agreement and (ii) a confidentiality and IP/invention assignment agreement. The offer letter agreement will set forth all of the employee's respective rights and obligations, including position, compensation (including stock options and/or other incentive compensation), benefits and, most importantly, whether the relationship is “at will.” The confidentiality and IP/invention assignment agreement is designed to prevent disclosure of the company's trade secrets and other confidential information and to ensure that any IP developed by the employee is legally owned by the company. (Note: under California Labor Code Section 2870 , an employer may not require an employee to assign rights in an invention that the employee developed entirely on his/her own time without using the employer's equipment, supplies, facilities or trade secret information except for those inventions that either: (i) relate at the time of conception or reduction to practice of the invention to the employer's business, or actual or demonstrably anticipated research or development of the employer; or (ii) result from any work performed by the employee for the employer.) Non-competition provisions may also be appropriate; however, such provisions are unenforceable in California other than in the context of the sale of a business -- though California courts will generally enforce contractual provisions that prohibit employees from soliciting the company's employees, provided that such provisions are reasonable (i.e., not overbroad) in scope and duration. Moreover, it would be prudent for the company to create an employment manual setting forth the company's policies (including with respect to equal opportunity/non-discrimination and sexual harassment) and establishing the parameters of the employer-employee relationship

Note previous discussion of the Patently-O post which appears on the IPBiz post: More on the DDB Case

In DDB v. MLB, the issue is how close the four patent applications filed by Barstow while he was employed by Schlumberger are
to the work of Schlumberger. The district court in DDB v. MLB placed those applications (which became patents) far closer the CAFC seemed to. To bring this issue around to Poshard and Wendler and SIU, contemplate words written by Peter Gregory on self-plagiarism:

Maybe work is different for university people, but I think those words belong to his former employer. For example, I can steal from my former employer by using documents I wrote or inventions I patented while I was there, that is how employment works. Just because you aren't sued doesn't mean it isn't wrong.


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