The facts behind unhappy unpaid inventors

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By David J Frenchsigning a document

A recent story published by the Ottawa Citizen on Nov. 7 tells of an individual named as an inventor on a patent for foaming alcohol hand rub who feels he has not received just treatment at the hands of his employer:

Engineer sues company he says pressured him to give up his rights to foaming hand sanitizer,” by Robert Bostelaar.

“Francisco Munoz, a chemical engineer who came to Canada from Mexico, is suing former employer Deb Brands, alleging the company unfairly pressured him to surrender his patent rights to foaming hand sanitizer.”

The story is essentially that of an employee who was asked to sign a piece of paper transferring to his employer rights in an invention for which he was a co-inventor. He signed as requested. Apparently, his employment was terminated shortly thereafter and six years later, with the invention having proved to be a substantial success, he is claiming that he has been taken advantage of and seeks compensation. But it’s more complicated than that.

Normally, in the absence of a written agreement, regular employees who make inventions own the rights to those inventions. They owe nothing to their employer unless, as a special case, they have been hired to invent. Engineers who are working in order to achieve a specific goal would normally fall into this latter category. The duty of such an employee hired-to-invent includes signing written confirmations of the employer’s ownership of any patent rights that he may generate.

In this specific case, the inventor apparently signed a written document that formally transferred rights in his invention to his employer. Such a document is normally needed in order to record the entitlement of the employer to any patent that may issue on an application or any patent that has already issued. It may be called a “confirmatory assignment.”

According to the newspaper article, the assignment document signed by the plaintiff/inventor apparently recited the payment of $2, and probably “other good and valuable consideration,” as compensation for the transfer. Such language is a standard-form recital. It is intended to take a document out of the category of a gift, which can be reversed under some circumstances, and give it the status of a contract, which is irreversible except under very special circumstances.

The basis for the inventor’s attempt to reverse what is effectively a contract that has been “signed, sealed and delivered” is the faint hope argument that he was never shown the terms of what he was signing. Under certain circumstances, a contract can be set aside on the basis that the written document does not reflect the intention of the parties who signed at the time. In order to prevent such an assertion being made, lawyers sometimes have a party initial every page of a document, although this is not essential to make a document binding.

Hired to invent?

I do not propose to go into the merits and pass judgment on this specific case. But I will address the law starting with the principle that an employer owns the invention rights of an employee who has been hired to invent. This is the background standard of the common law. It’s not necessary that the employee have signed a document in advance either confirming such status or promising to transfer patent rights in such inventions. If these facts are established in a court, the judge will order that such steps be taken as are needed in order ensure that the employer ends up with legal title to the invention. But proving things like this in court can be costly and fraught with uncertainty.

In view of this reality, many companies take the precaution of having employees sign pieces of paper in advance which, as a condition of employment, require the employee to acknowledge that the employer will own any inventions of the employee and undertake that the employee will execute such further documents as are required to perfect the title and enjoyment of such rights by the employer. Employers being who they are, these documents are more often indiscriminately required from a large number of prospective employees who are not necessarily hired to invent. It just becomes part of the hiring procedure. Because signing such a document is made a condition of employment, the document is clearly in the category of a contractual promise and not classifiable as a gift.

If these invention-capture documents were restricted to inventions generated by an employee that relate to the business of the employer, there might be some justice in their existence. In fact, in the United States the common law has invented a further principle by which, even in the absence of written agreements, employers are entitled to enjoy a “Shop Right.” A Shop Right is the privilege of an employer to use an invention made by an employee that relates to the employer’s business and to do so freely, without any obligation to pay compensation to the inventor/employee. A Shop Right arises when the employee used the employer’s facilities to conceive of the invention. No corresponding principle exists under Canadian law.

Unfortunately, these invention-capture documents may be worded so as to extend beyond inventions that relate to the business of the employer. This may seem unfair, but contracts are usually enforced by courts if there has been a true, free, exchange of “consideration” between the parties. The fact that an employee is being hired is a substantial form of consideration. The Canadian Public Servants Invention Act comes close to falling into this long-arm category:

3. The following inventions, and all rights with respect thereto in Canada or elsewhere, are vested in Her Majesty in right of Canada, namely,

(a) an invention made by a public servant while acting within the scope of his duties or employment, or made by a public servant with facilities, equipment or financial aid provided by or on behalf of Her Majesty; and

(b) an invention made by a public servant that resulted from or is connected with his duties or employment.

Note that these terms apply to all public servants and not just those hired to invent. The concluding words, “connected with his duties or employment” are very broad. Accordingly, faced with the breadth of this Canadian statute, it’s hard to say that a formal agreement that captures the inventions of an employee, howsoever arising, is unfair and should not be enforced by the courts.

3M’s example

As an example from the private sector, we can turn to a document posted by 3M Corporation of Minnesota on the Internet. This is, amongst other things, an assignment document intended to be signed by an employee of a contractor providing services to 3M in the capacity as a “seller.” The document reaches down into the seller’s organization to extract patent rights from employees who are not even employed directly by 3M. Here are some of the principal clauses:

(The 3M Assignment)

D. With respect to Inventions made, authored or conceived by Worker, either solely or jointly with others during the 3M Assignment or within one year after the 3M Assignment ends, whether or not during normal working hours or at 3M’s premises, Worker will:

1. Keep accurate, complete and timely records of Inventions, which records will be 3M property and be retained on 3M’s premises.

2. Promptly and fully disclose and describe such Inventions in writing to 3M.

3. Assign, and does hereby assign, to 3M or its designated affiliate all of Worker’s rights to such Inventions, and to application for letters patent, copyright registrations and/or mask work registrations in all countries and to letters patent, copyright registrations and/or mask work registrations granted on such Inventions in all countries (collectively referred as “Registrations”).

4. Acknowledge and deliver promptly to 3M (without charge but at 3M’s expense) such instruments and to do such other acts as may be necessary in 3M’s opinion to preserve property rights against forfeiture, abandonment or loss and to obtain, defend and maintain all Registrations and to vest the entire right and title thereto in 3M or its designated affiliate.

The Parties acknowledge that this Section 2D does not apply to an Invention developed entirely on Worker’s own time and for which no equipment, supplies, facility or trade secret information of 3M was used and that does not: (a) relate directly to 3M business or to 3M’s actual or demonstrably anticipated research or development; or (b) result from Worker’s work during the 3M Assignment.

Note the far-reaching extent of some of the clauses:

  • “inventions” are defined very broadly in a preceding clause to include “ideas … and works of authorship …. that: (1) relate directly to 3M business; ….or (5) is developed during the 3M Assignment.”
  • within this definition it covers all inventions made, authored or conceived by Worker
  • during the 3M Assignment or within one year after
  • all records will be 3M property
  • the Worker must assign, and does hereby assign, to 3M ….. all of Worker’s rights
  • and must do such other acts as may be necessary in 3M’s opinion to preserve (its) property rights

This may appear to be onerous, but there is a saving clause stipulating that this document:

  • does not apply to an Invention developed entirely on Worker’s own time and for which no equipment, supplies, facility or trade secret information of 3M was used and that does not: (a) relate directly to 3M business or to 3M’s actual or demonstrably anticipated research or development; or (b) result from Worker’s work during the 3M Assignment.

But we must read this saving clause carefully. Subparagraphs (a) and (b), above, really define the outside limits of the claims that can be made against such a worker. Unfortunately, workers are asked to sign documents like this all the time. They don’t have much choice: they feel that their jobs may be at stake. Certainly, they will cause trouble for their boss if they do not sign as requested. So they sign.

Nothing will come of this act if no inventions are made.  But if the individual does conceive of something important …

While such agreements may be in widespread use, they are not universal. In the cases where an employee is actually hired to invent then, it is totally justified for the employer to wish to obtain a document establishing this fact in writing. On the other hand, many firms simply neglect to document the status of employees being hired-to-invent. These are the cases that eventually have a prospect of ending up in court.

David French is the principal and CEO of Second Counsel Services, which provides guidance for companies that wish to improve their management of Intellectual Property. For more information visit www.SecondCounsel.com.

/// COMMENTS

One Comment »
  • Stephen Murray

    February 07, 2016 12:00 pm

    Interesting article. I am close to finishing a book titled “Davis and Goliath – One Inventor’s Struggle with the Mismanagement and Theft of Intellectual Property.” Davis in my book is W.R. Davis Engineering. “Goliath” is the Canadian Department of National Defence. The intellectual property is an infrared signature suppression system to protect warships and tactical aircraft from being targetted by heat seeking missiles. I was a public servant co-inventor in this story. As was the case in the biblical story “David and Goliath,” Davis did indeed slay Goliath. Davis is wealthy today. The inventors and the Crown got nothing. But the Crown’s negligent acts were to blame for most of outcome. Everything that could have gone wrong in the story did go wrong. My book may interest you. Hope to have it published by year end.

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