People paid to be creative often face limits on their rights of ownership to their creative works. For instance, many employers require their employees to abide by confidentiality policies, sign any number of related agreements or both. The foregoing requirements generally seek to attribute the legal ownership of an employee's creative work to the company that employs the creator.
Employer restraint on employee ownership of employee-created works raises a variety of questions about the scope of company protections, the rights of employees to their creations and, in worst-case scenarios, litigation, which frequently concerns the breach of confidentiality agreements or trade secret violations associated with employee-created works.
Work Made For Hire
Although assignment of employee creative rights typically is achieved through contract or employer policy, the concept underlying many assignments is what is termed "work made for hire." This is a creature of copyright law. Under the 1976 Copyright Act, a work is protected by copyright from the time it is created in a fixed form and immediately becomes the property of the author who created it.1 This generally is true except for those works "made for hire," where the employer is considered the author, even though the true author otherwise would have legal rights to the work.2
Whether a particular work is made for hire depends on whether it was prepared by an employee or an independent contractor.3 Under the definition of "work made for hire," any work prepared by an employee will be a work made for hire unless otherwise excepted by contractual arrangement.
The same is not true for works prepared by independent contractors, unless the company and the independent contractor agree in writing that the work is to be one "made for hire" and the subject matter of the work relates to "work specially ordered or commissioned for use as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas."4
State Law
Although "work made for hire" originally was a copyright concept, Washington has added a related layer of regulation that applies to employee "inventions" through RCW ¤ 49.44.140. That statute provides that any provision in an employment agreement that requires an employee to assign or offer to assign any employee rights in an "invention" to the employer "does not apply to an invention for which no equipment, supplies, facilities or trade secret of the employer was used and the employee developed the invention entirely on the employee's own time."5
However, the statute also provides that the foregoing rule will not apply (and an assignment by an employee will be enforceable) where the invention relates to the business of the employer, the employer's actual or demonstrably anticipated research or development, or (echoing copyright law) the invention results from any work performed by the employee for the employer.6 In other words, the employee who happens to develop the newest and greatest widget on the employee's own time away from work may not be able to claim ownership of any rights to that widget if the employer can show a direct relationship of the invention to its business or anti-cipated research.
Employers seeking to have their employees assign inventions under RCW ¤ 49.44.140 must comply with RCW ¤ 49.44.140(3), which requires employers to provide "written notice" of the employee's statutory rights under RCW ¤ 49.44.140(1) at the time any employment agreement is made.7 Where employers do not provide notice or the notice is deemed inadequate, courts have the power to void employee invention assignment clauses as contrary to public policy. The only two reported cases addressing avoidance of contractual provisions are Machen, Inc. v. Aircraft Design, Inc.8 and Waterjet Tech, Inc. v. Flow International Corp.9
Case Law
In Machen, a company sued its former employee for breach of an employment agreement that assigned to the company "all ideas, inventions or other developments ... conceived by Employee ... during the term of his or her employment ... that are within the scope of business operations ... ." The Court of Appeals held that the agreement did not sufficiently provide the employee "written notice" of his statutory rights to his own inventions. Unfortunately, the court did not analyze what constituted sufficient "written notice" under RCW ¤ 49.44.140. And rather than excising the offending portions of the agreement, the Court of Appeals held the entire agreement unenforceable because of the lack of notice.10
Waterjet involved a determination of the rights of a former employee to a patent that Waterjet alleged had been assigned to it by the employee. The employee's agreement with Waterjet provided that the employee would assign to Waterjet any patents, "inventions and discoveries conceived or developed in whole or in part during ... [his] employment with Waterjet, related to any of Waterjet's business whether or not conceived or developed during working hours or on the property of Waterjet."11 Relying on Machen, the employee argued that the agreement contained insufficient written notice and urged the court to void the entire agreement.
Answering a certified question from federal court, the Washington Supreme Court first held that the agreement provided adequate "written notice."12 The Court then rejected the employee's contention that the entire agreement should be voided on the basis that employee agreements often contain multiple terms that have nothing to do with invention assignments. Overruling Machen, the Court determined that in cases where notice was inadequate, the overreaching portions of the agreement should simply be stricken rather than voiding an entire agreement.13
The Limits of State Law
Although RCW ¤ 49.44.140 speaks of "inventions" and Waterjet analyzed a patent assignment, many employment agreements define "inventions" for purposes of RCW ¤ 49.44.140 to include all intellectual property, including patent rights, copyrights, trade secret rights, mask work rights, sui generis database rights and, in some contracts, "all other intellectual rights of any sort throughout the world relating to any and all inventions (whether or not patentable), works of authorship, mask works, designs, know-how, ideas and information made or conceived or reduced to practice, in whole or in part." Whether these sweeping types of clauses are enforceable under RCW ¤ 49.44.140 as "inventions" has yet to be decided by a Washington appellate court. Neverthe-less, the term "invention" has been used very broadly in agreements seeking to comply with RCW ¤ 49.44.140.
The statute does have limitations. For example, the statute by its plain language applies only to employment agreements. Thus, some employers seek to avoid the notice provisions of RCW ¤ 49.44.140(3) by putting intellectual property assignment provisions in a personnel handbook or policy. This can work so long as that handbook or policy contains disclaimers to avoid a finding of an implied contract, like that in Thompson v. St. Regis Paper Co.14
RCW ¤ 49.44.140's provisions also can create confusion, frustration and, sometimes, litigation where an employer has a wide variety of enterprises such that almost any idea arguably might "relate to the business of the employer." Moreover, since an employee's employment often promotes ideas on how to improve business, it often is difficult for employers and employees to determine just what work is performed by the employee for the employer.
To avoid confusion, many employers require employees to identify those "inventions" employees bring with them at the time of hire. Some companies also provide for the notice in a separate addendum to their contracts to ensure that it is apparent and independent from the often lengthy "fine print" of employee contracts.
Practitioners should be aware that the work-made-for-hire doctrine and RCW ¤ 49.44.140 are but two limitations on an employee's right to creative works produced by the employee. Other areas that may affect employee rights include: Washington's version of the Uniform Trade Secrets Act, RCW ch. 19.108; confidentiality agreements; non-disclosure agreements; and other agreements that limit employee rights or ownership of employee creativity. A properly constructed agreement can help define employee rights and avoid much of the confusion associated with ownership of employee creativity. n
Nick Beermann is an associate at the Seattle office of Jackson Lewis LLP, where he practices employment and labor law. Beermann can be reached for questions at 206-626-6435.
1 See 17 U.S.C. ¤ 101 (defining "work made for hire").
2 Id.
3 See generally, Community for Creative Non-Violence v. Reid, 490 U.S. 730 (1989).
4 17 U.S.C. ¤ 101; see also http://www.copyright.gov/circs/circ09.pdf.
5 See RCW ¤ 49.44.140(1) (emphasis added).
6 See id.
7 RCW ¤ 49.44.140(3).
8 65 Wn. App. 319, 828 P.2d 73 (1992).
9 140 Wn.2d 313, 996 P.2d 598 (2000).
10 65 Wn. App. at 333.
11 Waterjet, 140 Wn.2d at 318.
12 Id. at 320-21.
13 Id. at 322.
14 102 Wn.2d 219, 695 P.2d 1080 (1984) (determining that promises of specific treatment in specific situations in an employee manual can constitute a legally binding contract).
