Contract Agreements Should Identify IP Owners: Linda Hutchison

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Prime contractors (primes) and subcontractors (subs) will benefit from understanding the idiosyncrasies of how patent rights and copyrights originally vest. Ownership issues may hinder intellectual property protection as vendors seek to perform government work.

A contracting agreement defines the relationship between the government and the prime and between the prime and the sub. The agreement identifies whether the parties to the contracts are working together to develop something new, such as an invention, or an original authored work.

Most parties assume ownership of any resulting intellectual property vests with the hiring party, such as the government—or in the case of the prime and the sub, the prime. Attorneys representing the parties draft the agreement terms, such as inventor or author assignment terms, to memorialize this assumption. The assignments are helpful when seeking intellectual property protection.

The issues of intellectual property ownership for the prime and sub are best understood within an Intellectual Property Protection Needs Assessment (IP PNA) in the contracting agreement. An IP PNA, like other needs assessments, examines the current state of IP protections for value-adding IP.

IP can be an invention, such as a machine or item of manufacture. A patent provides a set of rights to stop others from making, using, or selling the invention without the owner’s authorization.

IP also includes original, fixed works of authorship, such as songs, sculpture, or code. A copyright owner has the exclusive right to copy, distribute, publish, display, or make derivatives works of the original, fixed work of authorship without authorization.

An IP PNA does several things.

  • It asks an IP owner to assess the value of the IP relative to the costs of the IP protections. Assessing IP value informs the prime or the sub on the risks of agreeing to contract terms.
  • It considers the originality of value-adding IP. Through a patent search, IP owners may learn whether an invention is novel and not an obvious variation of other inventions. Through research, IP owners may identify whether their creative work is truly original or whether the IP owner had access to substantially similar creative works. IP owners use this research to deter imitation.

Protecting value-adding IP makes sense. Imitation can hurt a competitive advantage and impede a contract bid. The IP PNA identifies the extent of the prime‘s or sub’s protectable, value-adding IP.

Who’s the Owner?

A key element of all IP protection processes—identifying the owner—can stop a protection process in its tracks. IP ownership isn’t intuitive. IP ownership is further complicated by the intricacies of government contracting regulations around IP.

An inventor acquires patent rights through a patent prosecution process. The process begins with claiming an invention and identifying inventors in a patent application. Valid inventorship is nonnegotiable: Failure to properly identify inventors may invalidate an issued patent for the claimed invention.

Should the United States Patent and Trademark Office grant a patent for claimed invention, the patent rights initially vest with the identified inventors. A prime may jointly develop an invention with the government. The agreement between the prime and the government likely obligates the prime to assign any resulting inventorship-based patent rights to the government.

Knowing whether all inventors are assigned rights in an invention can become complicated very quickly. An IP PNA can spell it out.

For example, a sub may jointly develop an invention with a prime. The sub retains patent rights in a resulting patented invention unless it’s contractually obligated to assign the rights directly or indirectly to the government. If the government files the patent application, it shares patent rights with the sub. The sub’s patent rights, which the sub didn’t pay to pursue, can impede the government’s efforts to license or sell the patented invention.

Who’s the Author?

Copyright ownership has similar issues. Most software developers are familiar with open-source code. Developers who use open-source code are by definition not creating something original and their code isn’t protected as copyrightable subject matter.

But this also gets complicated quickly. For example, code used to combine code otherwise in the public domain may be original and protected by copyright. This is why an IP PNA must clearly identify an author.

Copyrights originally vest with the author, and the author of a sub’s code is likely the sub’s firm. However, if the government or prime hires contractors, the government or prime may not have the requisite authorship. Copyright ownership stays with the sub-author.

There’s an exemption to that—if the sub-author’s work is subject to a written Work Made for Hire agreement and the subject matter qualifies under the Work Made For Hire doctrine.

An agreement also may obligate the sub-author to assign ownership of the author’s copyrights, but the sub retains the status as the author for any copyright registration efforts.

An IP PNA can show that the IP derived from a contract between the government, a prime, and a sub is value adding, original, and protectable. These value-adding IP may provide a competitive advantage. Government and contractor processes that identify and leverage these value-adding IP can provide a sustainable competitive advantage.

The sustainable competitive advantage is lost if the IP is imitated. And the IP isn’t protected against imitation without clearly identifying the owner of the IP rights.

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Author Information

Linda Hutchison owns her patent law firm Hutchison Law LLC. With a background in engineering in manufacturing and experience as a business consultant, she brings a unique perspective to patent and trademark law. She helps inventors capitalize on their ideas by preparing and filing patent and trademark applications.

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