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Scope Of Inventor’s Rights Upon Termination From Their Employment Or The Applicant Company

Before I begin to provide you the information on what are the scope of an inventor(s) when he/she will be removed by his/hers employer from the employment, I would like to brief you on the applicants/individuals who are entitled to obtain the Patent rights over the inventions developed by them as per the section 6(1) of Indian Patent Act 1970.

The below are the persons who can be applied for a Patent:

  1. The actual inventors who claims themselves as a first and true inventors
  2. The assignees of the inventors who claims as a first and true inventors
  3. The Legal representatives of the first and true inventors.

Assignment Of Ownership:

In the above three scenarios which I have explained in the introduction part, the second provision applies to the Legal entities or any other third parties who wish to obtain a Patent rights on behalf of the true inventors, under whom the inventors are working for contract for service.

The assignment of the invention would take place between the employer and employee(s), where the employees have developed or undertaken the research activity of the invention during the course of their employment and may assign their rights to their employers under these scenarios:
  1. An agreement may be executed with his employer that he will assign all his rights in the name of his Company.
  2. An agreement to the contrary, that employee will also apply for a patent along with his employer in order to claim his rights.
  3. In case of no agreement executed between the employer and employee, any work undertaken by the employee during his working hours and cause for the development of the business, in the absence of the agreement, employer may claim for Patent rights.
In the first scenario mentioned above, usually during the time of entering into the contract with his employer (i.e any legal entity), the employee signs a Contract agreement or terms and conditions mentioned in the Appointment letter, that any research work undertaken during his employment, the employer will have an absolute rights over his work.

During this time, an employer shall have all the rights over employee’s invention and on behalf of his employee, employer may proceed for applying a Patent or any IP registration on behalf of his employee and obtain a Patent rights. Since, the employee has assigned all his patentable rights on his Company’s name, he may not have any rights over his invented product/process which he had undertaken during his employment ship.

In the second scenario, in case of any agreement executed in the contrary, other than employer’s rights in applying for the Patent, employee also wish to obtain a Patent rights along with the employer, he can do so by executing an agreement with his employer, that he wish to obtain patent jointly with his employer and even after his termination from his employment, he can apply for the Patent before Indian Patent Office (IPO) and obtain a Patent rights.

In this scenario, since the employee(s), will also have Patent rights and he can exploit his Patent commercially until his patent is in force, even though he will be terminated from his employment ship and entitled to receive equal undivided shares or royalties in a Patent. Again, this scenario shall arises purely based on the Policies set out by the respective organisation (i.e his employer).

(You may refer section 50 of Indian Patent Act-Rights of Co-owners of Patents).

In support to the above scenario, the Patent act under section 6(2) clearly says that:
6(2): Persons entitled to apply for Patent:
An application under subsection (1) may be made by any of the persons referred to therein either alone or jointly with any other person.

[Eg: An employee(s) along with his employer jointly may apply for a Patent]

In the third scenario, in the absence of any such agreement, the employer shall have all the rights to hold the Patent since the employee will be paid incentives or consideration for undertaking the research work during the course of his employment with his employer. The Patent may be filed by obtaining a signatures on a Patent Form-1 (Application for Grant of Patent). Under the said Form, it is clearly mentioned under column 12 (i) that:
  1. Declaration by the inventor(s)
    I/We, the above named inventor(s) are the true & first inventor(s) for this invention and declare that the applicant(s) herein are our assignee or legal representative.
By signing the said Form, inventors have assigned their Patent rights in the name of the applicant i.e. employer. This duly signed undertaken form may be considered as a prima-facie proof in case of any dispute arises between the employer and employee.

As per the section 68 of Indian Patent Act, explains that, any Registration of assignment with the Patent office is not valid unless it is in writing and duly signed by both the assignor and assignee and duly executed in the form of document embodying all the terms and conditions mentioning upon their rights and obligated by each party.

In case of any dispute arises between the assignor or assignee, (In organisation structure, the assignor is an inventor or employee of the Company and ‘assignee’ would become the employer or applicant), with respect to the transfer of IP Or validity of such person’s title vested in that Patent, shall be determined by the Competent court and until then, the Controller shall refuse to Register the assignment in the records of Patent Registry.

Indian Case Law:

a. The judgment of High Court (HC) of Bombay in Darius Rutton Kavasmaneck v Gharda Chemicals Ltd & ors (2014) SCC Online Bom 1851, rules in favor of employees to own patents in their own name if their claimed invention was not part of their scope of work. In this particular case, the defendant Managing Director had not given any instruction to invent per se and not obliged to file a Patent on behalf of the Company.

US Case Law:

b. Preston v. Marathon Oil Co, the Federal Circuit held that an employee agreement stating that an employee “hereby assign[s]” all “Intellectual Property” is an express assignment of rights in future inventions that automatically assign without the need for any additional act. The Preston case reminds us that properly drafted employment agreements are useful tools for corporate protection of intellectual property. The Preston case also illustrates how intellectual property disputes arising out of employment agreements can be bound up with state law issues.

Under Indian Scenario:

In public funded organisation, the employee does not get freedom to claim rights over his work, if he has undertaken the work outside the scope of his company’s work or developed outside the working hours without using the Company’s resources. But in other countries such as US, the law permits an employee to carry out the business if it is out of the scope of his employment business work and entitled to claim his rights over the work done by them.

Also, in most of the R&D department of any Indian organisation, any R&D personnel involved in any research activity and wish to claims over the rights of his work in order to take commercially benefit out of his work, his employment contracts make to refrains to apply for a Patent.

Foreign Countries Ip Scenario:

There are certain rules and regulations governed by the respective state laws explaining on the relationship between the employer and employee, where the respective countries provided the provisions concerning inventive and innovative activities and inventor’s rights contained in national and international laws and treaties are very useful and necessary for securing the protection of rights and interests of inventors, in particular employed inventors and innovators.

(The guidelines can be reviewed in WIPO website, where the article published by WIPO on the topic Relationship Between Employed Inventors And Employers: Legal, Contractual And Financial Questions)

Conclusion:
Based on the above aforementioned points, it is eminent to note that, the employment agreements or IP assignment clauses should be drafted in a very delicate manner so that, the employer rights shall be protected in terms of IP rights and before getting into a contract with employee. The employer should make the employee to undergo the terms and conditions mentioned with respect to his IP assignment rights before he gets appointed by the Company.

In case of any issues relating to his IP assignment, it should be discussed and make him to be aware that in case of any termination or employee at his will, wish to relieve from the employment contract, the IP rights should be vested with the Company alone. Accordingly, the agreement should be signed and executed by both the parties.

Also, the employer should be aware of their employee’s rights over the work and respect that work and not to lose their employees due to small reasons at a first place. In case, any employee wishes to relive his company on his own or employer terminates him from the employment, he should be rewarded with bonus, incentives while leaving the Company for the extraordinary work or any in depth research or inventions done by him and contributed for the development of the Company.

In case, the employee wishes to continue the work in his existing Company, his work should get recognised at a larger level and should be promoted based on the advance skill that he pursued or any inventions that he had developed during his employment tenure.

Reference:
  • Indian Patent Act 1970 sections
  • Cited case: https://indiankanoon.org/doc/76799540/
Written By: C.S. Sindhur - IP Associate, ALMT Legal, Bangalore.

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