Business owners invest significant time and money into helping their companies grow. Whether it’s developing new products, marketing campaigns, software or proprietary processes, intellectual property (IP) provides a competitive edge vital to business success.
But what happens when an employee creates the intellectual property? Who owns the IP: the employee or the employer? The answer isn’t as straightforward as some people assume.
IP comes in many forms
IP includes a variety of intangible business assets, such as:
- Trademarks, including business names, logos and slogans
- Copyrights that protect written materials, software, photographs, songs and other creative works
- Patents covering inventions and certain technological advancements
- Trade secrets, such as customer lists, manufacturing processes and formulas
The general rule is that any IP created by an employee in the course of their regular job duties belongs to the employer. Federal copyright law includes the concept of “works made for hire,” which means that copyrights in works created by the employee in the scope of their employment usually belong to the employer and not the employee.
However, employers should not assume that they own everything an employee creates. The issue becomes more complicated when:
- The employee creates something outside of their normal job duties
- The employee created something at home using their personal equipment
- There is no written intellectual property agreement
Therefore, it’s essential to have clear employment agreements in place that specifically address intellectual property ownership, which include provisions covering:
- Ownership of inventions
- Copyright assignments
- Confidentiality obligations
- Protection of trade secrets
- Use of company technology and equipment
- Return of confidential materials upon termination
Independent contractors, such as freelancers and consultants, present different challenges.
Many business owners assume that paying an independent contractor for creative work automatically gives them full ownership. However, independent contractors generally retain ownership of any IP they create unless a written agreement transfers ownership to the business that hired them.
Intellectual property is often among a company’s most valuable assets. A legal professional can help draft employment agreements, review contractor contracts, protect trade secrets and develop strategies to safeguard the company’s investment in innovation and growth.