IP Ownership

Bill NaifehIntellectual Property - General

Business owners and even non-IP attorneys are often confused by intellectual property rights.  Because copyrights, patents, trademarks, and trade secrets fall into the rubric of intellectual property, they often believe that each right is treated in the same way as the other rights.  For instance, a common belief is that because a business owns the copyrights generated as a result of the works of its employees, the business also owns the patent rights.  Actually, nothing could be farther from the truth.

In the U.S., copyrights, patents, trademarks, trade secrets have different legal origins.  Consequently, there are differences not only in the term of legal protection, but in how each right is created and the default ownership of each right.

For instance, copyrights created by employees in the course of their employment are automatically owned by the company.  However, copyrights created by consultants or contractors in the course of their engagement are NOT owned by the company unless there is a written contract with “magic words” stating that any work produced is a “work for hire.”  This means that if you hire a consultant to design a logo for you without a written agreement, you do not own the copyright in the logo.  You may have an implied license to use the logo, but you do not own the copyright and may not have standing to enforce the copying of the logo under copyright law.

In contrast to copyrights, patent rights created by employees in the course of their employment are NOT owned by the company unless there is a written contract to the contrary.  The same is true for consultants and contractors.  Many small businessmen are confused by this principle.  They know enough to realize that their company owns the copyrights for work created by their employees, so they think the company also owns the patent rights.  That is one reason why it is important to have an assignment of patent rights in every employment and consulting agreement.

Trademarks generally cannot be owned by the employees because they are created as a result of use.  It is the company that uses the trademarks, not the employees.  However, even with trademarks, businessmen need to be careful.  Many small businessmen will initially file for intent-to-use trademarks in their own name.  Yet, they are shocked later when they find that they cannot transfer the trademark to their business.

Written contracts can change the default ownership so that the company paying for the work owns all of the rights. So, as painful as it may be, it is important for small businessmen to invest in well drafted contracts to ensure they actually “own” what they think they are buying.