6TH Loyola IP Special Focus Event

1. Loyola Law School IP Special Focus Conference on Employee-Inventor Rights 1 6TH Loyola IP Special Focus Event Employee Inventor Rights Friday, September 15, 2006

2. Loyola Law School IP Special Focus Conference on Employee-Inventor Rights 2 Welcome David Burcham, Dean Loyola Law School

3. Loyola Law School IP Special Focus Conference on Employee-Inventor Rights 3 Session 1(a)An overview of the law governing employee inventor rights US - John McDermott, Professor of Law, Loyola Law School France - Thomas Bouvet, Avocat � la Cour, V�ron & Associ�s, Paris Germany - Dr. J�rgen Meier, Patentanwalt, Vossius & Partner, Munich Japan - Professor of Intellectual Property Law, Tokyo University of Science United Kingdom - Myles Jelf, Partner, Bristows, London

4. Loyola Law School IP Special Focus Conference on Employee-Inventor Rights 4 A very brief overview of US law governing employee inventor rights John McDermott Professor of Law Loyola Law School

5. Loyola Law School IP Special Focus Conference on Employee-Inventor Rights 5 The basic �presumption� & the exceptions All invention presumptively belong to the inventor � the individual or individuals who make the invention Questions often arise as to whether the respective creative contributions of all the collaborators are sufficient to entitle them to joint ownership Exception 1: an employee may freely consent by contract to assign all rights in inventive ideas to the employer Exception 2: under some circumstances, a court may find n �implied� agreement to assign all such rights in the absence of a written agreement Exception 3: under somewhat similar circumstances, a court may determine that the employee owns the invention but the employer may have a royalty-free right to use it in its ordinary course of business

6. Loyola Law School IP Special Focus Conference on Employee-Inventor Rights 6 Exception 1: an employee may freely consent by contract to assign all rights in inventive ideas to the employer An adhesion contract is generally defined in the U.S. as a standardized contract written entirely by a party with superior bargaining power, leaving the weaker party in a "take-it-or-leave-it" position. Most employees, especially those with little or no experience, are in such a position � they have to sign it. But a contractual provision is not unenforceable simply because it�s a contract of adhesion. In California, a contract of adhesion can be fully enforced according to its terms unless some other factors exist, such as the oppressive or "unconscionable" provision.

7. Loyola Law School IP Special Focus Conference on Employee-Inventor Rights 7 Exception1 (continued) Are invention assignments agreements �oppressive� or "unconscionable� Generally not: the employee�s salary is generally considered �adequate compensation� and such agreements are therefore not �unconscionable.� The law is less clear when the employee is a part time or temporary employee (i.e. an �intern�) or where the employee is a clerical or unskilled employee.

8. Loyola Law School IP Special Focus Conference on Employee-Inventor Rights 8 Statutory Restrictions on Assignments of Patent Rights California and several other States have enacted laws to regulate employee assignments Sections 2870(a) of the California Labor Code provides: Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee 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: (1) 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 (2) Result from any work performed by the employee for the employer. Section 2870(b) adds that all provisions in employment agreement which require an employee to assign an invention excluded under subdivision are �against the public policy of this state and (are) unenforceable.�

9. Loyola Law School IP Special Focus Conference on Employee-Inventor Rights 9 Exception 2 � Implied assignments Without an express assignment, employers may still claim an employee�s inventive work where the employer specifically hires or directs the employee to exercise inventive faculties. When the purpose for employment thus focuses on invention, the employee has received full compensation for his or her inventive work. A court must examine the employment relationship at the time of the inventive work to determine if the parties entered an implied-in-fact contract to assign patent rights. Thus, when an employer hires a person for general service and the employee invents on the side, the invention belongs to the employee. However, the employer may claim ownership of the invention if the employer hires a person for the �specific purpose of making the invention.� Even if hired for a general purpose, an employee with the specific task of developing a device or process may cede ownership of the invention from that task to the employer. Teets v. Chromalloy Gas Turbine Corp., 83 F.3d 403, 38 U.S.P.Q.2d 1695 (U.S. Court of Appeals, Federal Circuit, 1996)

10. Loyola Law School IP Special Focus Conference on Employee-Inventor Rights 10 Exception 3 � Shop rights Where a employee, during his hours of employment, working with his employer�s materials and equipment, conceives and perfects an invention for which he obtains a patent, he must accord his employer a nonexclusive right to practice the invention. This is an application of equitable principles. Since the servant uses his employer�s time, facilities and materials to attain a concrete result, the latter is in equity entitled to use that which embodies his own property and to duplicate it as often as he may find occasion to employ similar appliances in his business. Dubilier, 289 U.S. at 188-89.

11. Loyola Law School IP Special Focus Conference on Employee-Inventor Rights 11 Applying the �shop rights� doctrine The proper methodology for determining whether an employer has acquired a �shop right� in a patented invention is to look to the totality of the circumstances on a case by case basis and determine whether the facts of a particular case demand, under principles of equity and fairness, a finding that a �shop right� exists. In such an analysis, one should look to such factors as the circumstances surrounding the development of the patented invention and the inventor�s activities respecting that invention, once developed, to determine whether equity and fairness demand that the employer be allowed to use that invention in his business. McElmurry v. Arkansas Power & Light Co., 995 F.2d 1576, 27�U.S.P.Q.2d�1129 (U.S. Court of Appeals, Federal Circuit, 1993)

12. Loyola Law School IP Special Focus Conference on Employee-Inventor Rights 12 Any comments or Questions? Now we will turn to the law and practice in other countries