GOVERNMENT TECHNOLOGY/Securing technology patent rights
City and county workers often are discovering technological solutions to workplace problems that are beneficial to their employers. Many of those inventions are patentable and could be valuable to the governments if properly exploited through licensing programs.
However, local governments normally are not prepared to deal with valuable inventions by their employees. Corporations, universities and state governments routinely require their employees to sign over the rights to any potential patents as an initial condition of employment, but counties and cities generally do not have such agreements. Local government officials need to understand the law regarding employee inventions, and to review or create policies accordingly.
Last year, Cocoa, Fla., was involved in litigation against two of its employees over who owned the rights to a technology patent potentially worth $300 million in licensing royalties. Seven city employees designed a new bacterial-based method of removing hydrogen sulfide gas from water, and the process was incorporated into a water-treatment plant built by the city. Later, a patent was obtained for the new technology in the name of the seven employees. Five of the employees agreed to turn over their patent rights to the city, but two refused.
Through litigation, the city attempted to force those two employees to turn over their patent rights, but a Florida state court of appeals held that they jointly owned the patent along with the city. Thus, all three parties (the city and the two employees) may independently license the technology to others. The result was not satisfying to any of the parties because buyers are not likely to pay much money for the patent when one of the other patent owners could sell the same rights to either that buyer at a lower price or to a competitor.
State law governs the question of who owns a patentable invention or a non-patentable trade secret. In most states, if the local government employee has not signed an agreement giving the patent rights to the city or county, the employer generally has no right to the ownership of that patent.
However, there are two ways in which a city or county may have some rights. First, the local government may have a right to a patent if the employee was specifically “hired to invent.” In that case, courts reason that the employee should not own the patent because he or she already has been compensated for his or her work. If, however, an employee is hired or directed to make improvements in a certain area, a court generally will find that those job requirements are not specific enough and that the employer does not own the patent.
Second, under the “shop right” doctrine, a local government receives a royalty-free and nontransferable right to use the invention if its resources or facilities were used by the employee when creating the invention or putting it into practice. That doctrine essentially allows a local government to use the invention for free, but it gives that city or county no other rights, including the right to license to others. Under those conditions, the employee retains the patent rights and may issue licenses to others to use the invention.
Generally, in the absence of an agreement, an employee who invents a new technology on the job will have the right to any resulting patent. If a local government disputes the employee’s patent rights, the result may be lengthy and costly litigation, with no one profiting from the patent. That uncertainty can be avoided if, instead of trying to secure the rights to a patent after the fact, local governments make sure employees sign an agreement turning over any potential patent rights.
The author is co-chair of the patent practice group for New Haven, Conn.-based Wiggin & Dana.