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This Wisdom of the Crowd, compiled from questions and responses posted on the Nonprofit Organizations and Intellectual Property eGroups,* addresses whether an employee can co-own Intellectual Property (IP) created for his/her employer, a nonprofit organization (NPO).
(*Permission was received from ACC members quoted below prior to publishing their eGroup Comments in this Wisdom of the Crowd Resource.)
 
Question:
The legal department at our non-profit organization (NPO) had recently been asked to justify its standard employee pre-invention assignment agreement, which to my knowledge, is fairly standard across many industries. Most pre-invention assignment agreements state that employees assign all ownership of IP developed within the course of their employment to their employer, and do not retain any rights to the IP for personal or commercial use. I feel extremely comfortable defending our corporate policy in terms of a for-profit corporate environment, but was wondering if anyone at a nonprofit has taken an alternative approach.
One specific question that has been raised repeatedly by internal staff has been why our organization will not allow employees to co-own the IP that they create for us, since the entire mission of our nonprofit is to influence human behavior. They believe that our refusal to allow for IP co-ownership suggests that we are saying that our own employees' behavior should be completely separate from the work that they do for us.
Obviously co-ownership of IP has a number of legal issues including who would enforce the IP in litigation, who would be able to defend it, how one would go about getting consent from all parties for purposes of licensing or other exploitation of the IP, etc. A license could accomplish or solve most, if not all of these issues. Has anyone's organization taken this route or taken an alternative approach to the assignment of IP rights to employers when the IP was created by their employees?
In the event no one has taken an alternative approach, that would still be helpful information to have, if only to justify that approach internally with a statement like "generally nonprofits do it this way, and here's why... and here are some alternative ideas, like changing the messaging to employees and a patent incentive program, etc., that our company could offer employees in order to offset the perceived negative impact of our IP assignment policy."

 

Wisdom of the Crowd:

Response #1: The explanation that I have given employees, both at for-profit and nonprofit organizations is the following: the reason for the pre-invention assignment clause is that we are in a collaborative venture and we want to encourage the free flow of ideas within the organization. We also want our collaborative venture to be the primary beneficiary of these ideas. Most inventions are the result of collaboration with contributions both large and small made by many people. Even where you have come up with an invention all by yourself, it is often in response to a question posed by a fellow employee. By saying up front that all of the ideas and inventions developed in the course of the venture are to be owned by the venture, we avoid disputes and we also make sure that your contributions are not taken by another employee when they leave the organization. This way, we can make sure that the benefits of everyone's efforts stay with the collaborative venture and are used in a manner that help further the mission/assure success.

I use a similar explanation for why we ask employees to sign a non-disclosure clause.1
 
Response #2: I have just retired as Chief Financial Officer (CFO) of a medium size technology nonprofit. We always had employees sign a work for hire agreement as part of the hiring process. Any co-ownership of IP creates potential nightmare situations. These are bad enough in copyright cases but worse in patent cases. Employees leave an employer either by resignation or termination and then you are faced with trying to find them. Even in the nonprofit world they can go to competitor organizations. Employees leaving to work for the federal government are an added layer of problems because the federal government can then get involved as a party to the IP if additional documentation of any license or assignment is needed. It's tough enough that a couple of prominent grant makers try to insist on co-ownership of IP among participants in a project.
All that being said, there is one non-profit sector where forms of co-ownership are common: higher education. You might want to reach out to members with higher education institutions to learn more about their model.2
 
Response #3: I work in higher education at a university organized as a non-profit so our rules might be a little different here than what you would see in a traditional corporate environment. However, we also require all employees to assign their IP developed within the course of their employment or that used substantial university resources to the university. We avoid co-ownership for many of the reasons that you cited. We do, however, provide a small percentage of any royalty payments that the university receives back to the inventor. A lot of times our employees appreciate this approach because it allows them to create the IP, hand it off to us to commercialize, and then they still reap the benefits of the development. In the event that we do not want to commercialize the IP (either we believe we cannot or we come up with some other reason), we will assign the IP back to the inventor to provide them with the opportunity to pursue it.3
 
Response #4: I am in agreement that co-ownership of IP creates difficulties; in a prior position for a for profit company, we had some co-ownership arrangements because the employees brought aspects of the IP with them when they joined the company. When it came time to sell the company, one of the employees held the entire transaction hostage and nearly succeeded in scuttling the sale.4
 
Response #5: While I do not have a complete answer, I have seen a few universities who had a buy-back option built in to their IP agreements. Basically, if the university decides not to pursue patent protection or pay the maintenance fees on a patent application, the creator/inventor has the right to pursue individual ownership at their own expense. Sort of a "right of first refusal" for the university. While this would be expensive for the creator, it gives them some option for ownership if the employer does not wish to pursue/maintain protection.
Copyrights are a little different because ownership is automatic at fixation and registration is cheap, and I find it difficult to think of what the employee might create in the scope of their employment that the employer would not want to own.
So, maybe this idea is only practical on the patent side?5
 
Response #6: This was part of the discussion in Session 808 at the Annual Meeting last week, and my co-presenters may have some insights - Reid Cunningham and Rob Falk. The consensus is that while you can create whatever agreement works, ownership is generally cleaner and easier to manage in the long run. Quick summary of this element of our program: Perpetual licenses back can be one way to answer the concern of the person, and except in certain states, work-for-hire language may be helpful in your employment or consultancy agreements.6
 
Response #7: I think you can look to universities (non-profits) for guidance. Basically, if you pay them as employees, you should own. If you don't pay them (students or volunteers), it's a different matter depending on how sensitive you are with use of your organization's resources.
One of the reasons you want to own (instead of the employee) is basic conflict of interest. If your employees are trying to commercialize IP you paid them to create (which is the only reason they would need direct ownership rights), that creates incentives and issues where the current and future interests of the employer and individual (as well as potential co-workers, co-inventors, collaborators, and sponsors) might not be aligned. It can also create situations where there might be liability (for example, if your organization signs a non-disclosure agreement (NDA) with a sponsor/collaborator and your employee is commercializing something remarkably similar in his or her private capacity). If your organization chooses to have an individual commercialize certain IP, have an arms-length agreement where you can identify the rights and responsibilities associated with such IP to avoid problems down the road.
If the employees are pitching this issue as being related to publications, it's not uncommon amongst universities to have a separate carve out policy for handling of publications (i.e., who reviews, who signed copyright transfers, what rights are retained by the employer/sponsor, etc.)
With regards to messaging, I believe most institutions have a patent award system where there is nominal financial award for a patent filing and/or issuance (since there can be some extra work associated with prosecuting a patent). Most nonprofits (particularly if federally funded) also have a royalty sharing policy in which if the patent is commercialized a certain percentage of license fee/royalty is shared with all of the inventors (while leaving the burden/costs of patenting/commercialization to the institution). The AUTM (Association of University Technology Managers) organization has some resources that may be helpful.7
 
______________________________
1Jonathan Spencer, General Counsel, The Museum of Science Fiction (October 26, 2016).
2Janine Greenwood, retired non-profit Chief Legal Officer, National Student Clearinghouse (October 26, 2016).
3Laura A. Bautista, Associate General Counsel, Marquette University (October 26, 2016).
4Anonymous (November 11, 2016).
5Anonymous (October 26, 2016).
6Margo Hablutzel, Legal Advisor, Computer Sciences Corporation, (October 26, 2016).
7Anonymous (October 26, 2016).
Region: United States
The information in any resource collected in this virtual library should not be construed as legal advice or legal opinion on specific facts and should not be considered representative of the views of its authors, its sponsors, and/or ACC. These resources are not intended as a definitive statement on the subject addressed. Rather, they are intended to serve as a tool providing practical advice and references for the busy in-house practitioner and other readers.
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