IP at Work: Do You Own the Internal Tools You Build for Your Job?

Copyrightable work created by an employee within the scope of employment is generally owned by the employer as “work made for hire.” For independent contractors, the contractor usually owns the copyright unless there is a valid written work made for hire agreement for certain types of works or a written assignment.

As more employees and contractors build custom software tools to support their employers, IP ownership issues are becoming increasingly common. If you need assistance protecting your rights relating to intellectual property for tools, software, or code developed while on the job, contact an experienced intellectual property attorney in your area. They can explain your legal options.

Who Owns an Internal Tool, the Employee or the Company?

Intellectual property (IP) refers to legal rights that protect intangible assets, such as creative works, inventions, designs, symbols, or names, once they’re put in a tangible form. For example, the idea for a short story isn’t copyrightable; the short story, when written, is. Patents, trademarks, copyrights, and trade secrets are types of IP.

Generally, the creator of a copyrightable work owns the IP rights. Work made for hire is an exception to this, whereby the employer owns the IP. A copyrightable work made for hire includes works in two categories:

1. When an employee creates the work as part of their regular duties
2. When the work is created under an express written agreement between the creator and a party ordering or commissioning it

For employees, “work made for hire” generally means work created within the scope of employment. For our example, internal tools, software, or code developed as part of the employee’s job duties — and often work created during work hours, using company resources — can fall within the scope of employment.

Protect Your Intellectual Property

Protect your creations with intellectual property rights. Visit the Super Lawyers directory to find an intellectual property lawyer in your area today.

Find a lawyer today

Intellectual Property and Employment Agreements

Employment contracts and IP assignment clauses often extend employer ownership to work-related creations built off the clock.

Some states, such as California, Delaware, and Minnesota, limit how far an employer can reach with an IP assignment clause. They also protect employees and, in some situations, contractors, by requiring carve-outs for certain inventions or developments created on the individual’s own time without using the employer’s resources.

Issues of whether an agreement is overbroad come into play in cases where intellectual property is created on personal time, using a personal device, and without company resources. On the other hand, where the developer builds an IP tool, software, or code during work hours, using company property and resources, it’s almost certainly company property.

Employee policies can determine who owns the IP. For example, a company can include provisions in its policies specifying that all IP created on the job belongs to the business.

How Does IP Ownership Change for Contractors?

The legal analysis for IP ownership of employee inventions built for a company can turn on the employment relationship between the employer and the creator.

In general, independent contractors are not automatically subject to work-made-for-hire rules unless the contract explicitly states otherwise. Contractors may sign agreements containing work-for-hire clauses that make it clear that the IP created for the company will belong to the company.

Under U.S. copyright law, a work by an independent contractor qualifies as “work made for hire” only if it falls into specific categories and a written agreement is in place. Without clear IP assignment clauses in an agreement, the contractor may retain ownership of the tool they built. Contractors should be aware of any intellectual property rights they are giving up before signing an agreement.

What Happens If an Employee Reuses the Idea Elsewhere?

It is not uncommon for an employee to develop an idea for one company but then leave. Once gone, the employee builds something similar at another company or for a personal venture.

How the law treats this scenario depends on the situation. If the original intellectual property was company-owned, recreating a substantially similar tool could constitute copyright infringement or trade secret misappropriation.

If the employee has a non-compete agreement and/or a non-disclosure agreement (NDA), then there are risks for an employee who ignores obligations under such employment agreements. The enforceability varies significantly by jurisdiction.

Does the Creator Retain Any Rights in Works Made for Hire?

Absent an agreement to the contrary, copyrightable work created by an employee within the scope of employment typically belongs to the company, but patent rights generally start with the inventor unless they are assigned in writing. However, the IP creator isn’t without any rights for their innovation.

An employee may be able to reference the creation in their personal portfolio if the company allows it, and they can also seek a written agreement addressing what can be shown, whether attribution will be given, and how it will be given. Employees should get the employer’s written permission before including company-related work in a portfolio or seeking attribution.

For pre-existing IP owned by an employee who incorporates it into a company project, the employee may retain ownership rights of those original elements. To avoid any IP disputes, ownership rights should be clearly documented and discussed with the employer before incorporating the pre-existing work into the company-owned tool.

Working with a patent attorney to explore patent rights ensures that the intellectual property is protected to the greatest extent possible. Getting educated about your IP rights will go a long way in navigating the relevant issues.

What Can Employers Do To Enforce Their IP Rights?

If an employee ignores their obligations under their employer agreements or IP law, employers have several tools that they can use to enforce their IP rights. They can employ the following:

• Cease-and-desist letters
• Civil litigation for copyright infringement
• Trade secret misappropriation claims under the Defend Trade Secrets Act (DTSA)
• Breach of contract claims

Proactive protection can help both parties avoid expensive, protracted IP disputes. Employers can use clear employment contracts and enforceable NDAs as the first line of defense.

Get Legal Help

If you need assistance understanding and protecting your rights relating to intellectual property, contact an experienced intellectual property attorney in your area. They can add tremendous value by explaining your legal options as they relate to your IP.