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Stephen Paul Gnass, Editor Issue 001



Stephen Paul Gnass

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 corporationís 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 doesnít have the experience or skills to develop a product, for example, if itís 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. Itís a document called a "work for hire agreement" that can protect you in these types of situations.

Works made for hire under 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 is the actual and original creator of the concept thatís being worked on. If youíre working on a project for another company or individual (even a friend) on a hired basis, and itís their concept that you are "contributing" to, then itís realistic for them to have you sign off on any rights to the work being developed. Likewise, if youíre having other people or companies work on your own concepts and ideas, then youíre 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 doesnĎt 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 donít end up with a co-inventor that you didnĎt 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 inventorís manufacturer called me to get some advice [weíll call him John]. I found out that the exhibitor/inventor had agreed to make Johnís company the productís official manufacturer in exchange for Johnís 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.

Itís true that the original inventor could have challenged Johnís 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.

In this case, the inventor left John, the original manufacturer, stuck with all the development costs and a broken agreement. He used Johnís 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.

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 companyís position will be, what compensation the company will receive, etc.

By the way, like John, many prototype makers/designers, and manufacturers are aware of the co-inventor rule, and donít 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 productís 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 youĎre 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 inventionís 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 essence of a "work for hire" [also known as a "work made for hire"] agreement is that the party doing the paid work, agrees that he does not, and will not, ever own any rights to the work being created. This is extremely important to the inventor, because it gives him the right to sell or license the rights to the product, as well as to file lawsuits related to the product.

2) An important point is that the work being created is "commissioned and requested" by the party doing the hiring. In other words, the work did not already exist prior to the hiring.

3) The agreement must exist either verbally or in writing before the work starts. Because it is 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 exact work being performed,
---> any start and end date,
---> the compensation being paid. If any royalties will be paid for the work, this should also be included in the agreement.
---> who is doing the hiring and who is being hired,

Bottom line, if you donít work out these types of arrangements in advance, and put them in writing, someday you could very easily find yourself saying, "Oh my God, Iíve got a co-inventor!".

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.

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.

Contents, Layout, Style and Source Code Copyright ©2003-2006. Stephen Paul Gnass. All rights reserved. Please contact us to request advance written permission to reprint or host this article on your website.


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