Thursday, August 8, 2019

Who owns intellectual property created for a company?

Growing up in Philadelphia, there are few things more beloved than the Phillie Phanatic. Which is why I’m so intrigued by the lawsuit the Phillies recently filed against the people who claim to own the rights to the mascot the team contracted them to create in 1978.

Which got me thinking … what rights does a company have to intellectual property created by an employee or an independent contractor?

The answer depends on whether the creator is an employee or a contractor.

Generally speaking, an employee has few, if any, rights to work they create on their employer’s time or dime. All of the work an employee does on the job or using an employer’s time, tools, and facilities, including the legal rights to that work (copyright, the right to license or sell, etc.) belong to the employer. The employee’s paycheck covers all work the employee is paid to do, including creative work, inventions, and innovations. There is no exception for how successful the invention or innovation is, or how much money it makes the employer.

It’s more nuanced, however, if the worker is an independent contractor and not an employee. Unlike employees, independent contractors do not automatically give away their rights to the intellectual property they create. Because they are independent from the company, and work for themselves, they own the intellectual property unless an written agreement between the contractor and the company provides otherwise. These written agreements can assign the property rights outright to the company, or they can provide a license to the company to use the property while the contractor retains ownership. In the latter example, that license can be exclusive (only the company can use it), or nonexclusive (the contractor is free to license it to others), and can be for a limited duration (after which the license expires), or in perpetuity (forever, like the license at issue in the Phanatic case). The point is that the written agreement controls, and absent a written agreement, the contractor keeps the property rights.

For what it’s worth, here’s the “Work for Hire” clause I recommend for agreements I draft.

Contractor agrees that all copyrights, works, inventions, trademarks, trade secrets, innovations, improvements, developments, methods, know-how, designs, analyses, drawings, reports, and all similar or related information that relate to the actual or anticipated business, research and development or existing or anticipated future products, processes, or services of Company, and which are conceived, developed, or made by Contractor in the course of his/her engagement with Company or on Company’s time or property, whether acting alone or in conjunction with others (“Work Product”), are works “made-for-hire” and belong to Company. Contractor will promptly disclose all such Work Product to Company’s Board or appointed designee, and perform all actions reasonably requested by Company (whether during the term of the Agreement or thereafter) to establish and confirm such ownership at Company’s expense (including, without limitation, assignments, consents, powers of attorney, and other instruments). Notwithstanding the foregoing, this paragraph will not apply to any invention that Contractor develops entirely on his/her own time without using Company’s equipment, supplies, facilities, trade secrets, or confidential or proprietary information, except for those inventions that either (i) relate at the time of conception or reduction to practice of the invention to Company’s business or actual or demonstrably anticipated research or development of Company; or (ii) result from any services performed by Contractor for Company.

I’m always game for improvements. Feel free to share yours.

As for the Phanatic lawsuit, I think the defendants have an uphill battle, for two reasons.
  1. In 1979, the puppet and costume designers the Phillies contracted to create the Phanatic, Bonnie Erickson and Wayde Harrison (who also created Miss Piggy for Jim Henson!), sued the Phillies for copyright infringement over ownership of the Phanatic. While that case settled, you only get one bite at the apple in litigation. It’s called res judicata (or claim preclusion), and means that when you file a lawsuit you must bring all claims that arise out of the came common nucleus of facts, and you cannot omit claims to later bring them in subsequent litigation. Thus, any claim that Harrison/Erickson have over ownership of the Phanatic should have been brought 1979, this precluding any claim they have today over ownership.

  2. The 1979 settlement lead to a 1984 “forever” assignment by Harrison/Erickson to the Phillies of all rights in the Phanatic in exchange for a payment of $215,000. Thus, it seems to me Harrison/Erickson got the benefit of what they bargained for, no matter how valuable the Phanatic is, or how much the Phillies have earned from the Phanatic in the years since.

Don’t make the same mistake, however, that the Phillies appear to have made when they commissioned the Phanatic’s creation in 1978. Get your work-for-hire arrangement in writing.

* Image by Anne & Saturnino Miranda from Pixabay