You Are Hired….Coolie!

– Part II
Pre-Invention Assignment Agreements - PIAA
 Employers require the employees to sign a pre-invention
assignment agreement, as part of their employment contract, to
assign any invention the employee may invent during his/her
tenure in the organization.
 A pre-invention assignment may also be part of employee manual
or in other employee guidelines
Understanding PIAA

PIAC

APIC IDC

PIAA
IPFC PoAC

HoC
Understanding PIAA
 It essentially has six different clauses
1. Pre-Invention Assignment Clause (PIAC)
2. Invention Disclosure Clause (IDC)
3. Power of Attorney Clause (PoAC)
4. Holdover Clause (HoC)
5. IP Forfeiture or Waiver Clause (IPFC)
6. Assignment of Prior Inventions (APIC)
Excerpts from a Pre-Invention Assignment Agreement
“I acknowledge and agree that in consideration of employment by the
Organization, all inventions that
(a) I develop using the Organization’s resources and capabilities such
as labs, machines, supplies, facilities, time, people or trade secrets,
or
(b) result from work I perform for the Organization, or
(c) relate to the Organization’s current or expected future research
and development,
are the sole and exclusive property of the Organization. I agree to
assign, and hereby does assign, all such Inventions to the
Organization.”
Invention Disclosure Clause
 It is not uncommon to include “invention disclosure clause” in the
pre-invention assignment agreement as an employer may not be
able to own an invention by the employee unless the existence of
the same is disclosed by the employee.

 Sample Invention Disclosure Clause

 During the term of my employment at XYZ organization, I will promptly inform the
Organization of the full details of all inventions that I conceive, individually or
collectively with others), and which (a) are developed using Organization’s resources
and capabilities or (b) result from work I perform for the organization or (c) relate to
the Organization’s current or expected future research and development.

 The scope of the invention disclosure clause could be limited, as

indicated above, or it could broadly cover anything that the
employee invent during the term of employment, including “an
idea”.
Power of Attorney Clause
 PoA Clause enables the employer to file for a patent and enjoy the
administration of patent rights without the need for obtaining the
signature of employees in relevant documents.

 Sample PoA Clause

“I hereby appoint the organization, its authorized officers and agents as my
agents and attorneys to execute and file such documents to further the
prosecution, issuance and enforcement of patents, as if executed by me,
especially if the organization is unable to obtain my signature on any
relevant document due to my mental or physical capacity or any other
cause.”
Post-Employment Invention Assignment Clause
 The objective of post-employment invention assignment is to prevent
employees from leaving the organization without disclosing the
invention and trying to patent the same after exiting the organization
within a reasonable time. Post-employment invention assignment is also
known as “Holdover Clause.”

 Sample HO Clause
 I hereby assign to the Organization my entire right, title and interest in such inventions
developed after 6 months of termination of my employment which relate to the subject
matter of my employment with the Company during the 12 month period immediately
preceding the termination of my employment.

 Limitations of HO Clause
 It should be reasonable in terms of time, say 6 months to 1 year post-
employment period
 Should be related to the past responsibilities of the employee and scope of
business (and / or)
 Should have been developed using the trade secrets of previous employer
IP Forfeiture clause
 It is possible that employees may have conceived an invention,
patented or yet to be patented, before joining the organization.
Therefore, organizations may use IP Forfeiture clause (or Waiver
Clause) in order to prevent the claim by the employees that an
invention was conceived before joining the organization.

 Sample IPF Clause

 I have listed all inventions in the Exhibit, prior to my employment at XYZ
Organization, that I conceived and patented or conceived and have an interest to
patent. Apart from the above, any other inventions, not so listed in the Exhibit, shall
be deemed to have been conceived during my employment at XYZ.
IP Forfeiture Agreement
 “At my current job I had to sign an IP forfeiture agreement, and in
the blank area where I could name code that the company could
not own, I of course listed things as my graduate projects, a few
pet projects by name, and the clause "and miscellaneous current
and future open source projects".

 HR reviewed all my stuff and this was not even contested, so I am

covered. Folks, we have to stand up and push back. There are
times to compromise, but this is one area that is entirely
abused. (www.slashdot.org, 2003).”
Failure to sign a IP Forfeiture Clause
 Employees may not be able to claim ownership of the inventions
conceived before employment if they fail to list out any such
invention and provide necessary document support.
 If the employee provides no such list, it would be deemed that the
employee has no such prior invention or they have been assigned
to previous employer or some other third party.
Using Prior Inventions in the Course of Employment
“What if the employee provides the list of inventions but later
makes use of such inventions in the products or service of the
employer?”

 In such scenarios, the employer may mention in the pre-invention

assignment that the employee agrees and assigns a perpetual,
irrevocable, worldwide, royalty free license to the employer to
exploit such prior inventions used in the course of employment to
further the interest of the organization.

 It includes license to use, copy, modify, create and distribute

works based on such prior inventions and even to give such
rights to other entities.
Ownership of Inventions without and with PIAA
 Although many employers enter into PIAA with their employees as they
do not want to leave the ownership matters to “chance”, it is possible
that disputes related to ownership of inventions may arise between
employers and employees with or without PIAA.

 Even when there is a PIAA between an employer and an employee, the

pre-invention assignment agreement does not necessarily guarantee
ownership of an invention to an employer as the validity of such an
agreement on the grounds of unconscionability or ambiguity may by
challenged by employees.

 Determining ownership of inventions without a formal PIAA would be

guided by certain rules evolved by courts over a century based on many
disputes.

 In either case, courts largely use the typology of inventions and

employees to determine the ownership of inventions
 Typology of Inventions and Employees

Non- Free
Inventive Invention

General Service
Inventive Invention

Specific Employee
Inventive Invention

Type of Employees Type of Inventions

Classification of Inventions
 Employee’s Invention
 An invention falling within the scope of employment and resulting from the
present or past duties and responsibilities of an employee

 Service Invention
 An invention falling within the scope of the business of an organization but
not necessarily within the scope of employment of an employee

 Free Invention
 An Invention not falling within the scope of employment of an employee and
the scope of business of the organization
Classification of Employees
 Specific Inventive
 Employees who are hired to invent a specific product or device or process
or hired to solve a specific problem (e.g. Design Engineers and Scientists)

 General Inventive
 Employees who are hired to perform general research or design work but
encouraged by the employers to pursue their creative instincts beyond their
roles and responsibility (e.g., Google or 3M motivating their employees to
spend 10% to 20 % of their paid time to work on their pet projects)

 Non-Inventive
 Employees who are not hired to invent (e.g., A Shop Floor Worker or a Non-
Technical Employee)
Determining Ownership of Inventions
 Notwithstanding the type of employees, Service Inventions and Free
inventions which are conceived

 Using organization’s time and resources may provide the ownership to

the employees but employer is most likely to have a Shop Right.

 Not using organization’s time and resources are most likely to result in
legal disputes when the employer makes claims for ownership or Shop Right.
Shop Right
 Shop right entitles an employer to use employee’s patented invention
and protects the employer from patent infringement lawsuit by the
employee

 It is an Irrevocable, Royalty Free, Non-Exclusive, Non-

Transferable Right to use the employee patent.

 Non-Exclusive: Employee is the owner of the patent and s/he can

freely license the patent to any third party even to the competitors of
the company

 Non-Transferable:
 Employer may not be able to use the employee’s patented invention when the use is
restricted in one or two locations as it would be deemed to be a patent infringement
 Employer cannot sell the license to a third party except in sale of business as a
whole.
Defining “Patent”
 A Patent is a set of exclusive rights conferred by a government
authority for an invention, which could be product or process or
technical solution to a problem.

 It provides protection for the invention to the owner of a patent

for a limited period so as to ensure that the invention cannot be
exploited by others without the consent of the patent owner.
- World Intellectual Property Organization
Assignment of Patent Rights
 Patents Acts of many countries provide for “reasonable” or “equitable”
remuneration for employee invention. However, Indian Patents Act 1970 does
not have provisions for either determining the ownership of employee
inventions during the course of work or remuneration.

 However, an employer in India cannot automatically apply for a patent for in

invention made by an employee during the course of work under the contract
of service (Unlike the Indian Copyright Act, 1957 which confers the right of
first owner to the employer by default, unless there is an agreement to the
contrary.)

 It implies that the employer must obtain from the employee both the
assignment of ownership to the invention as well as the right to apply for the
patent since Section 7 (2) of Patents Act 1970 demands that the assignee
should provide the proof of “right to apply” for the patent.

 It essentially means that the employer Must persuade the employee to assign
the right to invention as well as right to patent for a consideration. If there is a
dispute in defining the ownership or otherwise, it would depend more on the
employment contract, nature of invention and associated circumstances.
Unity of Ownership in Patent
 Typically, all employees are expected to assign the ownership of
patents to the employer.
 However, if the co-inventor is not an employee but an another
firm, like the Satyam Vs Upaid story, the organization is required
to buy the co-inventor’s ownership rights in order to have full
ownership on the invention.
 The organization also has an option to sell its ownership rights to
the co-inventor for a consideration.
 In the absence of cooperation between the organization and the
co-inventor, neither party would be able to establish “unity of
ownership” so as to enjoy the valuable patent rights protected
under the patent act.
Top US Patents from India – 2006 to 2010
 Multinationals
 IBM = 250
 Texas Instruments = 211
 GE = 193
 ST Microsystems = 135
 Honeywell = 132

 Indian Companies
 DRL = 34
 Ittiam Systems = 27
 Ranbaxy = 24
 Cipla = 21
 Lupin = 21

 Source: Sunil Mani, Centre for Development Studies, and ET Research,

Sep 2011.
 Ownership of Corporate Assets and
Community of Practices

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 Financial Ownership
 “Microsoft alumni hate Microsoft. Precisely because they feel
the one thing it offered them was money and nothing else,
they resent that all the publicity goes to the top people, to one top
man, and they don’t get recognition. Also they feel the value
system is entirely financial, and they see themselves as
professionals. May be not scientists, but applied scientists. So their
value system is different (Drucker, 2002)”.

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 Qualifications as the Central Dimension of Employment
Relationship

 Employees must have an operational knowledge of not just one,

but multiple specialist areas.

 Cognitive-abstract qualifications are becoming more significant.

 Socio-normative qualifications are becoming more important.

 Shift from classical social norms like accuracy, punctuality and loyalty to
modern social norms creativity, customer orientation, responsibility
and cooperation.

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 Ownership Vs. Market Capacity - Decoding the Power
Relationship
 The basis for power relationship

 Marx
 Ownership i.e., employer owning the means of production
and employee owning the manpower.

 Giddens
 Market Capacity i.e., employer’s ability to replace an
employee than employer’s ability to secure a new job and a
new employer at the same or higher wage level.
 The conditions of labour market will restrict or extend the
behavior alternatives available to both parties.

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 Ownership and CoP

“…a corporate asset should be social in origin…. Swiping

secrets is odious to both law and etiquette, and that’s a legally
enforceable …. First you swap proprietary information all the
time; in fact, the company probably wouldn’t prosper unless you
did.

Second, the real genesis and true ownership of ideas and know-
how aren’t corporate. Nor personal, for that matter. They
belong to something that is coming to be known as
“community of practice” (Stewart, 1997, p. 95)”.

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 Community of Practice (CoP)
 Lave and Wenger (1991) developed and articulated the concept
"Community of Practices“

 Members of a community are informally bound by what they do

together. from engaging in lunchtime discussions to solving
difficult problems. And by what they have learned together by
mutual engagement in these activities.

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 Example of Community of Practices

 "You are an engineer working on two projects within your

business unit. These are demanding projects and you give your
best. You respect your teammates and are accountable to your
project managers. But when you face a problem that stretches
your knowledge, you turn to your people like Jake, Sylvia and
Robert. Even though they work on their own projects in other
business units, they are your real colleagues. You all go back many
years. They understand the issues you face and will explore new
ideas with you. And even Julie who now works for one of your
suppliers, is a phone call away. These are the people with whom
you can discuss your latest developments in the field and
troubleshoot each other’s most difficult design challenges". -
Wenger (1998)

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 CoP Vs Community of Interests

 Community of Practices are different from Community of Interests (CoI)

 “A community of practice is different from a community of interest. or

geographical community, neither of which implies a shared practice.

 A community of practice is different from a team in that shared learning

and interest of its community members are what keep it together. It is
defined by knowledge and rather than by task, and exists because
participation has value to members.

 A community of practice’s lifecycle is determined by the value it provides to

members, not by an institutional schedule." Wenger (1998)

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