Intellectual property provisions in physician employment agreements

An excerpt from The Physician Inventor: The Doctor’s Handbook to Patenting Medical Devices and Methods.

“I love my employees, even though I hit one of you with my car.”
– Michael Scott

When you are offered a position at a hospital or practice group, you will typically negotiate a salary, productivity bonus, call schedule, retirement contributions, and perhaps even a signing bonus. You may have noticed a non-compete clause in the employment contract and asked about it, but few ever look at the intellectual property provisions, and are later surprised when they see that they have signed away some or all of their rights in an invention.

A sample clause may say something like the following:

INTELLECTUAL PROPERTY

“Any work of authorship or invention created by an employee during the scope of his or her employment with the Hospital shall be considered the property of the Hospital, including any patent, trademark, copyright, trade secret, or other intellectual property right in such work of authorship or invention.”

Nip it in the bud

Ideally, you want to negotiate intellectual property provisions before they ever become an issue. This may be easier said than done, especially if you are a resident or a fellow. At those points in your career, you may have little to no negotiating power. Still, it is not necessarily a sticking point for most employers. Additionally, if you are bringing previous inventions or ongoing projects into a new employment relationship, have a conversation and be sure to define what you have already done, and what you are bringing with you. Seek express acknowledgment that these projects are excluded from, and unaffected by, your employment contract. Any cloud of ambiguity surrounding ownership will affect the value of your patent portfolio and may scare off potential partners. This is intuitive. You would not purchase a home from a seller if there were lingering questions about who actually owns the property, or whether the current tenants are ever going to leave.

Magic language

If you are employed, review your employment agreement carefully. Mere mention of intellectual property doesn’t necessarily mean bad news. Do not overreact until you have reviewed your agreement with an attorney.

A Law School professor said to a graduating class, “Three years ago, when asked a legal question, you could answer, in all honesty, ‘I don’t know.’ Now you can say with great authority, ‘It depends.'”

Does your employment agreement include anything related to patents, intellectual property or inventions? If so, is it valid? Does this bind an invention that was conceived prior to the agreement? What about those conceived after the agreement? The answer of course—it depends. We say “it depends” because the answer to the question of whether a patent assignment is valid may hinge on one or two words. Attorneys have been known to litigate over less—even a comma.

In Stanford University v. Roche Molecular Systems, Inc., the Supreme Court affirmed that, absent any separate agreement, rights to an invention belong to the inventor. You may want to read the Stanford v. Roche opinion, but that is not necessary for our purposes. Instead, we will use it to illustrate the parsing of contract language. Two agreements were reviewed. In a first agreement, a physician had “agreed to assign his right, title and interest in an invention” to Stanford. This was a promise to do something in the future, and not an actual conveyance. In a second agreement, he not only agreed that he “will assign,” but presently stated that he “does hereby assign his right, title, and interest.” This, the Court found, was an active conveyance, not a mere promise to do something in the future. Some attorneys call this the “magic language,” and it is something to look for in your employment agreement. This, of course, is not the end of the inquiry, but a way to illustrate how closely the language should be reviewed.

Federal law and state law

Patents are generally governed by federal law. While this is true, there are few exceptions where state laws become relevant. One of those exceptions is employment contracts, which are typically governed by state law. This means that the same provision in an employment contract may be valid in one state, and invalid in another. That provision may relate to whether an assignment of intellectual property is valid. When there is ambiguity, patent attorneys may seek input from a local employment attorney who knows the laws of a particular state.

Moving forward

If you have an employment agreement with a provision on intellectual property, have it reviewed by an attorney before you begin applying for patents. A good attorney should be able to give you some clarity. Suppose, however, that your employment agreement has muddied the waters a bit. In that case, you have a few different options, and all of them will come with some risk. First, you may speak with your employer vaguely about your plans and attempt to get a release, or work out some other agreement so that you can pursue your project alone. In some cases, collaboration may provide you with the resources to proceed, and ease a bit of the financial burden. Of course, this may bring undesired attention to you, and may require some diplomacy and care. Second, you may sit on your invention or change your employment. Here, time is working against you and may affect the patentability of your invention. Additionally, it’s possible that even after the termination of your employment, that your old employer will still claim a right to an invention that was conceived during your employment with them. Third, you can forge ahead without telling your employer. There are no easy answers, but this is the requisite analysis, and it is quite easy to make a mess.

If you do intend to pursue an invention while employed, a good rule of thumb is to work on your invention on your own time, in your own house, using your own resources and your own money. You don’t want to blur the lines. You want to clearly differentiate between your property and your employer’s.