One of the costliest — yet easily prevented — disasters for any manufacturing business is the failure to secure ownership of intellectual property (IP).
Here are the details you need to know.
Under law, the ownership of copyrights and inventions may belong to your employees and independent contractors unless there’s a prior written agreement to the contrary. Federal copyright law, and the laws of most states, mandate that employees and independent contractors who invent products, write materials, and develop software may be the owners of the IP rights.
In some states, an employer may only have a limited license in an invention that an employee creates while on the employer’s time clock. Fortunately, manufacturing companies can easily prevent this type of catastrophe. All U.S. states permit employers to require their employees to sign copyright, IP, and invention assignment agreements that give all rights to the company.
A well-drafted agreement can be less than a single page in length and should be written by an attorney. It requires the employee or contractor to turn over or legally assign all rights to the company. In addition, these agreements require the employee or independent contractor to assist the company’s counsel in securing and enforcing the rights.
Another good practice: Ask employees to designate, upfront, all preexisting inventions that are to be excluded, but to cover all new inventions that are in any way related to your business, even if developed during the employees’ non-working hours.
By following these simple procedures, business owners can avoid tremendous aggravation and loss of property that is truly irreplaceable. And be sure to consult with your legal advisor.
It is also important for business owners of manufacturing entities to have a basic understanding of patents in today’s complex world. Without this knowledge, you can’t protect your company’s inventions or defend yourself against lawsuits from other firms.
U.S. patents date back to the Constitution, where it says Congress can secure “for limited times to … inventors the exclusive right to their discoveries.” In other words, patents provide the owner with the right to exclude others from making, using, selling, offering for sale, or importing the invention for 20 years. Patents are granted by the U.S. Patent and Trademark Office.
Exclusive rights begin once a patent is granted, and they expire 20 years after the application is filed. Most patents are owned by companies, inventors, and universities.
If your company is granted a patent, it is only good in the United States. Americans can apply for patents individually from foreign countries, but it is usually a complex process.
Applying for a patent involves more than just filling out a simple form. The application form is a legal document, which must be accompanied by a description and drawings of the invention.
A Provisional Application
It can be expensive, but there might be a cheaper alternative. The Patent & Trademark Office offers the option of filing a “provisional application” for a patent. This lower-cost option has fewer requirements, but you must provide a detailed written description of the invention, its intended use and, if appropriate, an informal drawing.
This lets you claim “patent pending” status for one year. If you don’t follow up with a regular patent application, the provisional status will expire. You can still file for a patent on the same invention, but you won’t be able to benefit from an earlier effective filing date (these applications can’t be used for ornamental designs.)
What Can Be Patented?
The list of what you can patent includes machines, manufactured products, chemicals, computers, and applied technology. You can’t patent scientific principles or naturally occurring materials. Under U.S. law, there are three different patent types:
- A utility patent on the functional or structural aspects of an apparatus, composition of matter, method or process. (See right-hand box for a Supreme Court case defining a process.”)
- A design patent on the ornamental design of useful objects.
- A plant patent on a new variety of living plant.
Contrary to popular belief, patents don’t protect ideas. Rather, they protect the structures and methods that apply technological concepts. In return for receiving the right to exclude others, the inventor must relinquish the secrecy of the invention and fully disclose to the public the best mode of making and using the invention.
Similar to understanding how to best secure the IP of your entity, it is important when it comes to patents to consult with an intellectual property attorney for further guidance. For any questions related to this article, contact Beth Vice at bvice@vlcpa.com or 800.887.0437.
