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OOOPS! Looks Like I Have a "Co-Inventor"!

By Stephen Paul Gnass

Many people are not aware that under the U.S. Patent and Trademark Office rules, that anyone involved in the development of a product/invention is required to be named as the inventor or co-inventor.

Assignment of Patent Rights to Corporations

Corporations deal with this by having their employees sign a clause in their employment agreement where they grant the patent rights to the corporation for any inventions they develop as an employee. Then the corporation’s patent attorneys file the patent under the employee/inventor name, but "assign" all the patent rights to the corporation in the patent application.

Help with Product Development

With independent inventors, there are many times when the person with an idea doesn't have the experience or skills to develop a product, for example, if it's a complex electronic or mechanical item. So the person seeks out a designer, prototype maker, or manufacturer to assist them with the initial phase of developing the product.

But did you know that someone who works with you on the product development/design of your invention can automatically become your co-inventor? This is due to the U.S. PTO rule mentioned above. Is there a way that you can protect yourself against finding out that you have an unexpected surprise co-inventor? Luckily, there is. It’s a document called a "work for hire agreement" that can protect you in these types of situations.

Creative Works and the 1976 Copyright Act

Actually, creative people in a variety of fields utilize the skills of other people to help them with their projects. For example, someone may hire a graphic artist to design logos, or brochures, or artwork, etc. Also writers may be hired to help write a book, or article, or other literature. These types of projects are covered by the Copyright laws.

In these cases where an independent contractor or company is "hired" to perform work for a project, there must be a written agreement between the parties specifying that the work is a "work made for hire", otherwise the copyright would automatically be owned by the person that was hired, and not the original creator.

On the other hand, in cases where the work is created within the scope of a person's employment or job, the employer and not the employee would be considered the author. An example would be a musical arrangement written for XYZ Music Company by a salaried manager on its staff. The company XYZ Music Company would be considered the author, not the employee that wrote the music.

So the main thing to determine is, who’s the actual and original creator of the concept that’s being worked on. If you’re working on a project for another company or individual (even a friend) on a hired basis, and it’s their concept that you are "contributing" to, then it’s realistic for them to have you sign off on any rights to the work being developed. Likewise, if you’re having other people or companies work on your own concepts and ideas, then you’re justified in having them sign off on any rights to your project.

Having a Co-Inventor CAN Be a Good Thing

But I hope that the idea of having a co-inventor doesn‘t scare you, because it can actually be beneficial to have a co-inventor. For example, if your idea is complex, and a manufacturer or prototype maker is willing to pay for the initial design/development costs of molds, etc. in exchange for participating as a co-inventor and benefiting financially, then it could be a win-win situation. As long as the arrangement is intentional by both parties, these arrangements can be great. The main point of this article is to make sure that you are fully aware of what you are getting yourself into, and don’t end up with a co-inventor that you didn't know you had.

The Secret to Preventing Problems

Spelling out your agreement in writing "before" any work is started is perhaps the best preventative medicine against future lawsuits, legal problems, or complications.

I remember one exhibitor in the Invention Convention® trade show who had a good product and received a lot of media attention on his construction-related product. Several months later, the inventor’s manufacturer called me to get some advice [we’ll call him John]. I found out that the exhibitor/inventor had agreed to make John’s company the product’s official manufacturer in exchange for John’s help in designing/developing the product molds/samples [John was also a prototype maker]. John would financially benefit in the future by manufacturing the product for the inventor.

But after it was all done, the inventor backed out of the oral agreement, and hired another manufacturer from Asia. Since the inventor had not filed a patent yet, John went ahead and filed for the patent since he designed it, and ended up as the patent owner. Then he started manufacturing the product in competition with the inventor.

It's true that the original inventor could have challenged John's patent with a lawsuit, but both parties would have ended up in a very expensive, messy legal battle that could have lasted many years. The last news that I heard from John, was that the inventor was in negotiations to buy the patent through an intermediary.

Although I don't believe that the inventor had initially planned to use a different manufacturer, the end result was that the inventor left John, the original manufacturer, stuck with all the development costs and a broken agreement. He used John’s experience, knowledge, equipment, supplies, time and labor, etc. to have his product developed, and then shafted him.

You usually hear stories about the inventor being ripped off, which is why most people tend to be sympathetic with inventors. But in several similar "co-inventor" cases like this that I came across, it was the inventor who did not live up to his end of the deal which caused the problem.

Honesty Makes the Best Policy

So as an inventor, you may find people and companies that are willing to work with you, but you need to be honest and clear in spelling out the arrangements upfront. You need to spell out what the company is doing, what the company’s position will be, what compensation the company will receive, your role, etc.

By the way, like John, many prototype makers/designers, and manufacturers are aware of the co-inventor rule, and don’t say anything to the inventor about it in order to protect themselves in case the inventor defaults on the agreement.

A written agreement spelling out all the details would have protected John in terms of remaining the product’s manufacturer, and would have protected the inventor in terms of the patent ownership rights. Problems can always still arise, but the more detailed the agreement is, the better it will help prevent future problems.

So if you hire someone or a company to do a specific job function that involves design/development that you‘re paying for, make sure that you have them sign a "work for hire" agreement.

If you work with someone or a company that has agreed to provide certain services that involve design/development, in exchange for participating in the invention’s success in some way, then be sure to spell out the exact arrangement. Make sure that you put an agreement in writing whether they will be a co-inventor on the patent application, what percentage they will receive as royalties, how long they will receive royalties, etc.

Work for Hire or Participation Agreement

Some key points of a work for hire agreement are:

1) The main point of a "work for hire" agreement [also known as a "work 'made' for hire"] is that the person/company doing the work, agrees that he doesn't claim, and won't ever claim, that he/she owns any rights to your creative work. This is extremely important to you, the inventor, because it gives you the owner's right to sell, or license the rights, to your product, as well as to file lawsuits related to your product.

2) Another important aspect is that the work must be initiated and requested by you, the person/company that's hiring the worker. This is important to show who's idea the project is [ownership], as well as to show that the project work wasn't already created and just bought from the original creator [which would mean he/she is the owner of the work].

3) Many inventors are excited and anxious to get started as soon as a verbal agreement has been made, but many problems can be prevented by clarifying the agreement in writing before the work starts. Because it's so difficult to prove a verbal agreement in court, it is vital that the agreement be put in writing "before" the actual work starts.

4) The agreement should spell out the following, the more details, the better:
---> who is the owner of the project and who is being paid to work on the project,
---> the exact work being performed,
---> any start and end date,
---> the compensation being paid including any royalties or other forms of compensation

Bottom line, if you don't work out these types of arrangements in advance, and put them in writing, someday you could very easily find yourself saying, "Oh my God, I've got a co-inventor!".

TIP: These types of agreements can be critical to the success of your invention. Sometimes leaving something out of an agreement can make it ineffective. So it's recommended that you draft an agreement with as many of these tips as possible, and then run them by an experienced attorney to make sure that all the necessary legal clauses and phrases are included to protect you. By doing your homework, it should help reduce the legal bill.

Stephen Paul Gnass is founder of InventionConvention.com, Executive Director of the National Congress of Inventor Organizations [NCIO] and an inventors advocate. Mr. Gnass speaks on the subject of the "Business of Inventing" and has had his articles reprinted in various magazines. As Senior Consultant with the Gnass Group, he consults independent inventors and small businesses. He can be emailed at gnass@businessofinventing.com

Disclaimer:

This article is for general information purposes only and is not a substitute for legal counsel or financial services. The information provided is accurate to the best of our knowledge, and we are not liable for any omissions or incorrect information. It is the responsibility of the reader to verify any legal information with appropriate professionals. If you need specific legal assistance, we recommend that you contact an attorney or accountant.

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