Understanding who owns intellectual property at the moment it is created is essential for any business. Ownership of IP does not always automatically vest to a company, and in many cases it initially vests in the individual creator and does not revert to the company unless proper agreements or assignment structures are in place. By examining how ownership arises across patents, copyrights, trademarks, and trade secrets, businesses can ensure they secure ownership of IP that they rely on when making business decisions.
Origins of Ownership
Ownership rights for IP do not always automatically vest to the company who develops the intellectual property. Instead, it can vest originally in the individual who develops the IP; which is the case for patents and copyrights.
A patent is originally owned by the inventor of the invention itself and if there are multiple inventors, then each are entitled to an ownership share of the patent. However, patents, as intellectual property, are freely assignable, so a patent can be assigned to a company. So, it is prudent for companies to have policies in place that not only trace the development of any new inventions, but also have a process in place to ensure that those new inventions are properly assigned by the inventor to the company.
Similarly, a copyright is also initially owned by the person who creates the copyrighted work. However, there a few scenarios worth discussing for businesses. A “work for hire” is a copyrighted work that is owned by the company who originally commissioned the work despite it being created by an employee. To qualify, it is typically required that the employee create the work during the scope of their employment. If an employee creates a work that is completely separate from their employment, then the ownership of that work will remain with the employee. Independent contractors retain ownership of any copyrighted work created for a company absent an agreement to the contrary. So, if any company is working with an independent contractor to create a copyrighted work, then it is crucial that an assignment agreement is in place.
The ownership for all other forms of intellectual property, trademarks and trade secrets, typically vest in the company who developed those IP. Trademark ownership arises from actual use and typically belongs to the business, not an individual employee, who markets and sells the goods or services protected under the trademark. A trade secret is typically owned by a the entity who develops the information and maintains its secrecy through reasonable measures.
Auditing of Ownership
It is important for companies to occasionally audit their intellectual property portfolios to ensure that ownership of any intellectual property is in fact owned by the company. The auditing process for IP ownership involves a systemic review of the company’s intellectual property assets to confirm that the business actually owns each asset it purports to own. This typically includes verifying patent assignments from inventors, confirming trademark ownership and proper use in commerce, reviewing copyright ownership and work-for-hire agreements, and ensuring trade secrets are protected by NDAs and internal security measures. Audits will also identify any gaps in ownership such as missing assignments, so that the company can take steps to correct the ownership. Ensuring proper ownership through an audit strengthens a company’s overall IP portfolio for transactions, enforcement, and long-term business strategy.
Issues Caused By Improper Ownership
There can be a number of consequences for companies who do not have proper chain of title in place for their IP portfolio. One significant problem is that companies cannot enforce IP that they do not own. If a third party is potentially infringing on any IP that is owned by a company, but that company does not have proper ownership of the IP, then they cannot bring a lawsuit to enforce their rights. Another significant problem is the negative impact improper chain of title for IP may have on various transactions that a company wants to enter into. A company cannot freely licenses, buy, or sell, an IP asset that they do not have legal title too, so they will need to track down the original owner of the IP and have the assignment documents executed.
Understanding Proprietary Information and Inventions Agreements
A Proprietary Information and Inventions Agreement (“PIIA”) is a contract used by companies to safeguard their intellectual property and confidential business information. It establishes clear rules about ownership of inventions, outlines an employee’s duty to protect trade secrets, and ensures that any IP created using company resources or developed within the scope of employment automatically vests to the company. A PIIA helps prevent ownership disputes and provides a critical layer of protection for a wide variety of different businesses.
A PIIA is designed to ensure that companies, not individual employees, own the intellectual property created by employees. These agreements typically require employees to assign, or agree to automatically assign, any inventions, patents, copyrights, trademarks, or any other IP that is developed using company time, resources, or confidential information. PIIAs also include obligations to disclose new inventions promptly, maintain the confidentiality of trade secrets, and execute any follow-up paperwork needed to confirm the company’s ownership. By securing these rights up front, businesses reduce the risk of gaps in ownership that could complicate future transactions.
A PIIA differs from an ordinary assignment agreement in both scope and timing. Traditional assignment agreements transfer ownership of a specific and identifiable IP asset through a one-time transfer of rights. In contrast, a PIIA is forward-looking and tied to the entire employment relationship, automatically capturing future inventions and IP created during employment. While a standard assignment focuses on a single transaction, a PIIA creates an ongoing obligation that ensures the company consistently retains ownership of innovations developed by its workforce.
Conclusion
Ownership may seem like a straightforward aspect of intellectual property, but overlooking it can create avoidable problems for a company. It is essential for businesses to implement procedures that ensure IP is properly assigned and to conduct periodic audits to verify clear ownership. Taking these steps helps protect valuable assets and supports smoother transactions, enforcement, and long-term strategic planning.