Creating an Employee Patent Policy (Including Invention Compensation)

Note: Links to our free templates are at the bottom of this long guide.
Also note: This is not legal advice

Introduction

Patent policy is a crucial factor for employers. It allows them to establish the terms and conditions of inventions that their employees create, safeguarding them from any potential legal disputes. It also provides employers with control over how their inventions are used and gives employees clear guidelines on what rights they are entitled to. In addition, patent policy offers employees financial compensation if their invention is used or sold by their employer – an incentive known as ‘invention compensation’.

At Genie AI, we understand the importance of having a legally binding patent policy in place. That’s why we provide free patent policy templates – so anyone can have easy access to high quality legal documents without needing a lawyer. Our open source legal template library stores millions of datapoints which teach our AI what a market-standard patent policy should look like. Of course, the consensus may vary depending on the issue at hand but our comprehensive guidance makes it easy for you to customize your own policies for any situation.

The advantages of creating an effective patent policy are numerous: it not only protects your intellectual property but also empowers both employer and employee in terms of rights and obligations around inventions, while offering guaranteed financial recompense when needed. So don’t be left vulnerable – read on below for step-by-step guidance on how to access our template library today!

Definitions

Employee inventions: Ideas, processes, or products created by an employee during the course of their employment.
Ownership: The right to use and benefit from an invention, as well as the right to license it to third parties.
Use or license: The ability for an employer to use or give permission for someone else to use an invention created by an employee during the course of their employment.
Retain rights: The right for an employee to keep ownership of any invention created during the course of their employment.
Compensation: Payment given to an employee for the use of their invention.
Confidentiality agreement: A contract between an employee and employer requiring the employee to protect the employer’s confidential information and the employee’s invention.
Patent application: A document submitted to the patent office describing an invention, with drawings and diagrams, so that a patent can be granted.
Patent attorney: A lawyer knowledgeable in the laws and regulations governing patent applications and experienced in the field of the invention.
Patent protection: Monitoring activities of competitors to make sure the patent rights of an employee’s invention are not infringed upon and defending patent rights in the event of any infringement.
Publication: Making a patent available to the public by registering it with the appropriate patent office and publishing it.
Contracts and agreements: Documents between an employee and employer regarding ownership of the invention, the rights of the employee and employer, and any confidentiality or non-disclosure requirements.

Contents

1. Definition of employee inventions
2. Ownership of inventions
3. Employee
4. Employer
5. Employer rights to inventions
6. Use or license
7. Employee rights to inventions
8. Retain rights to inventions
9. Secure compensation
10. Confidentiality agreements
11. Requirements
12. Signatures
13. Compensation for employee inventions
14. Agreement on amount
15. Project-basis
16. Royalty-basis
17. Patent application filing and costs
18. Preparation of documents
19. Obtaining a patent attorney
20. Filing fees
21. Patent protection and maintenance
22. Monitoring activities of competitors
23. Analysing infringement risks
24. Defending patent rights
25. Disclosing inventions to the public
26. Registration of patent
27. Publication of patent
28. Contracts and agreements related to inventions
29. Preparation of documents
30. Obtaining a lawyer
31. Execution of contracts

Get started

Definition of employee inventions

• Define the scope of employee inventions.
• Describe the process of submitting a patent application and the timeline for doing so.
• Outline the responsibilities of employees when submitting a patent application.
• Describe the process for determining compensation for employee inventions.
• Establish a policy for the assignment and ownership of employee inventions.

Once these points have been addressed, you can move on to the next step.

Ownership of inventions

• Create a policy that outlines which party will own the rights to any inventions created as part of the employee’s job duties.
• Ensure that the policy includes clear definitions of what constitutes an invention.
• Make sure the policy includes details about how the rights to any inventions will be transferred to the employer, such as the completion of any necessary paperwork.
• Outline the circumstances under which the employee may retain some rights to the invention.
• Include provisions for compensating the employee for any inventions they create while employed.
• Ensure that the policy is compliant with any applicable laws or regulations.

You’ll know this step is complete when you have written a policy that covers all of the above points.

Employee

• Develop an employee agreement that outlines the expectations and responsibilities of the employees when it comes to inventions.
• This should include information about disclosure of inventions, assignment of ownership, confidentiality, and any other relevant topics.
• Check with legal counsel to make sure that the agreement meets all legal requirements and complies with current laws.
• Once the agreement has been finalized, have all employees sign and date it.
• Once all employees have signed the agreement, you can check this step off your list and move on to the next step.

Employer

• Create a formal, written patent policy outlining the employer’s rights to any inventions made by employees, contractors, and consultants.
• Outline the employer’s expectations regarding ownership of intellectual property, inventions, and patents.
• Specify whether the employer will allow employees to pursue patents on their own or require them to assign their patent rights to the company.
• Include a section on how the employer will compensate employees for inventions.
• Specify who will be responsible for filing and maintaining patents.
• Include a section on the confidential nature of inventions and patents.
• State what the employer considers as prior art, and how the employer will protect employee inventions from being used by competitors.
• Sign and date the policy and make sure that all employees, contractors, and consultants have read and signed it.

Once you have created a formal, written patent policy outlining the employer’s rights to any inventions made by employees, contractors, and consultants, you can check this off your list and move on to the next step.

Employer rights to inventions

• Draft a policy that clearly outlines the employer’s rights to inventions created by the employee
• Include provisions to assign ownership of the invention to the employer
• Ensure that the policy allows the employer to use, license, or sell the invention as they see fit
• Clearly state what the employer expects of the employee when it comes to ownership of the invention
• Confirm that the employee understands that any inventions created while employed are the employer’s property
• Once the policy is drafted, review it with the employee and have them sign it
• Once the employee has signed the policy, you can move on to the next step.

Use or license

• Develop a policy that outlines employer rights to use employee inventions.
• Decide whether the employer will purchase rights to employee inventions, or only license them.
• Determine the terms of use or license, such as a timeline, royalties, and/or other compensation.
• Incorporate the policy into a comprehensive patent policy for employees.

Once you have decided upon and determined the terms of use or license for employee inventions, you can check this step off your list and move on to the next one.

Employee rights to inventions

• Outline the employee’s right to own inventions they create, either during or outside of work hours
• Clarify that employee inventions related to the company’s business are considered works-made-for-hire and are therefore owned by the company
• Specify that employees have no right to any compensation related to the patents they create while working for the company
• Make clear that employees will keep any rights to their inventions created outside of working hours
• When employees leave the company, clarify that the employee’s rights to their inventions will remain unless otherwise specified in another agreement

When you can check this off your list and move on to the next step:

• You will know you can move on to the next step when you have outlined and clarified the employee’s rights to own inventions in the policy.

Retain rights to inventions

• Determine who will own the rights to any inventions created by employees
• This should be addressed in the employee patent policy
• Develop language that is clear and unambiguous
• Make sure to include in the policy that the employer will own the rights to any employee inventions that are created during the time of employment
• Have employees sign a document to acknowledge that they understand the rights to inventions
• Once all employees have signed the document, you have completed this step and can move on to the next step, which is securing compensation for inventions.

Secure compensation

• Define the compensation plan for employees who invent something that the company decides to patent, and make sure it is in compliance with local labor laws.
• Decide if the company will cover any patent application fees, and if so, to what extent.
• Establish whether patents will be assigned to the company or to the employee.
• Designate a budget for patent-related costs, such as legal fees.
• Once all relevant details have been outlined, document the policy in the employee handbook.
• When the policy is ready, have the patent attorney review it for accuracy.

You will know you can move on to the next step once you have documented the policy in the employee handbook, and had it reviewed by the patent attorney.

Confidentiality agreements

• Draft a confidentiality agreement that all employees must sign before they can access any intellectual property related information.
• This agreement should be broad enough to cover any type of intellectual property, including patentable inventions.
• Make sure that the agreement clearly states that any inventions created by the employee are the property of the employer.
• The agreement should also state that the employee is prohibited from disclosing any information related to the employer’s intellectual property.
• Once the agreement is drafted, have it reviewed by legal counsel to make sure it meets all applicable regulations.
• Once it is approved, have each employee sign the agreement before they can access any intellectual property related information.

You’ll know that you can check this off your list and move on to the next step when all employees have signed the confidentiality agreement.

Requirements

• Create a list of requirements for the employee patent policy
• Make sure the requirements are clear, concise, and relevant to the policy
• Consider the scope of the policy and the types of inventions that need to be covered
• Determine if a specific invention compensation formula should be included in the policy
• Make sure the requirements are easy to understand and comply with
• Once the list of requirements has been created, it is time to move on to the next step, signing the policy.

Signatures

• Gather signatures of the relevant people, such as the employee and their manager
• Have the employee sign the document to signify agreement and understanding of the patent policy
• Have the manager or supervisor sign the document to signify agreement and understanding of the patent policy
• Have the director or head of the department sign the document to signify agreement and understanding of the patent policy
• Have the VP of R&D or the CEO sign the document to signify agreement and understanding of the patent policy
• Have the legal department review the document for accuracy and completeness
• Once all the signatures are collected, the patent policy is complete and ready to be executed
• You will know when the step is complete when you have collected all the required signatures for the patent policy.

Compensation for employee inventions

• Set up a system of compensation for employee inventions that is fair and reasonable
• Determine a reasonable amount of compensation for employee inventions based on company policy, the effort and time put into the invention, and the potential commercial value of the invention
• Consider adding a clause in the patent policy that provides the company the right of first refusal for any employee invention
• Include the details of the compensation system in the patent policy
• Create an agreement form that states the amount of compensation for invention and must be signed by both the employee and the company
• Determine a timeline for payment of the compensation
• Make sure to keep records of the agreement form and timeline for payment

You will know you can check this step off your list and move on to the next step when you have completed all of the above bullet points.

Agreement on amount

• Identify which inventions are eligible for monetary compensation.
• Determine the amount of compensation.
• Have the employee sign the agreement of amount for the compensation.
• Ensure that the agreement is properly documented and filed.

When you have identified which inventions are eligible for monetary compensation, determined the amount of compensation and have the employee sign the agreement of amount for the compensation, you can be sure that this step of creating an employee patent policy is complete.

Project-basis

• Identify all employees who will be working on the project, and all of the project’s related patents
• Establish a clear policy for the project that outlines the ownership rights for the patents
• Specify the project-based compensation for each employee who contributed to the project’s patents
• Outline the conditions of the project-based compensation, including any limitations
• Agree upon the amount of the project-based compensation

Once the project-based compensation and the conditions of the project have been established, you can move on to the next step: ### Royalty-basis.

Royalty-basis

• Determine the fair market value of the invention or patent that the employee is contributing
• Decide the percentage of royalties that will be paid to the employee for their contributions
• Outline the specific conditions for payment and the duration of the royalty-based compensation
• Specify the details of how the employee will receive payments, such as by check or direct deposit
• Identify what actions the employee must take to receive royalties, such as reporting any income to the IRS
• Check off this step on your list and move on to the next step: Patent application filing and costs

Patent application filing and costs

• Consult with an attorney experienced in patent law to understand the complexities of filing a patent application
• Determine the filing fees and other costs associated with the application and include them in your patent policy
• Make sure to specify who is responsible for the filing fees and other costs in the patent policy
• Once you have determined the filing fees and other costs, you can include them in your patent policy and move on to the next step - preparing documents.

Preparation of documents

• Prepare a draft of the Employee Patent Policy document and make sure it includes a section on invention compensation
• Review the document with the appropriate stakeholders and make any necessary changes
• Finalize the document and make sure it is approved by the appropriate personnel
• When the document is approved, it is ready to be distributed to employees
• You will know this step is complete when the Employee Patent Policy document has been approved and is ready to be distributed.

Obtaining a patent attorney

• Research and select a patent attorney who is experienced in employee patent policies
• Make sure the attorney is experienced in the patent laws of the country or countries involved
• Check references from the attorney’s past clients and research any disciplinary actions taken against the attorney
• Have the attorney review the documents and make any necessary changes
• Sign the contract with the patent attorney
• You can check this step off your list and move on to the next step when you have signed the contract with the patent attorney.

Filing fees

• Determine whether you need an attorney to file the patent application in each jurisdiction.
• If needed, research the cost of filing an application for a patent in the relevant jurisdictions.
• Calculate the total cost of filing fees for the patent application.
• Make sure you have the necessary funds for the filing fees.

Once you have calculated the total filing fees and made sure you have the necessary funds for the filing fees, you can check this off your list and move on to the next step: Patent protection and maintenance.

Patent protection and maintenance

• Research the patent laws in your state and country to determine the best type of protection for your company
• Draft a patent protection policy that outlines the types of protection available and the specific requirements for earning patent protection
• Have a lawyer review the policy to make sure it meets the legal requirements
• Update the policy regularly as patent laws change
• Ensure that all employees understand the patent protection policy and that they are aware of their rights and obligations under the policy

Once the patent protection policy has been drafted, reviewed by a lawyer, and understood by all employees, this step can be checked off your list and you can move on to the next step.

Monitoring activities of competitors

• Create a process for monitoring the patent activities of competitors.
• Set up a team or assign an individual to be responsible for tracking competitor patent applications and patent grants.
• Monitor patent activities of competitors on a regular basis (monthly, quarterly, etc.)
• Check for any patents that could be infringed by your company’s products or services.
• Investigate the scope of any competitor patents that appear to be relevant.
• Make sure to note the expiration date of any patents found.

Once you have created a process and assigned a team or individual to monitor the patent activities of competitors, you can check this off your list and move on to the next step.

Analysing infringement risks

• Research competitors’ patent portfolios to identify any potential risks of infringement.
• Analyse any patent filings made by competitors that could put your company at risk of infringement.
• Identify any areas of overlap in the patent portfolios of your competitors and your own, and take steps to reduce the risk of patent infringement.
• Research any existing laws and regulations that could impact your own patent activities and/or the ability to enforce patent rights.
• Once these steps have been completed, create a document detailing the analysis and the steps to be taken to mitigate any risk of patent infringement.
• You will know you can check off this step when the analysis of infringement risks has been completed and all steps to reduce the risk have been identified.

Defending patent rights

• Draft a policy that outlines the company’s approach to defending its patent rights.
• Include a discussion of the company’s rights to inventions created by employees, and how the company will enforce those rights.
• Include a clause that states the company will take appropriate legal action to protect its patent rights.
• Make sure to include a provision for notifying employees of any infringement claims.
• Once the policy is completed, review it with the legal department to ensure compliance with applicable laws and regulations.

You’ll know you’re done with this step when the policy is completed and reviewed with the legal department.

Disclosing inventions to the public

• Have a clear directive in the patent policy that requires all employees to disclose all inventions that they create while employed by the company.
• This should include the type of inventions, how they were created, and who owns the patent rights.
• Make sure to keep the patent policy updated and ensure that all employees are aware of their responsibilities when it comes to disclosing inventions to the public.
• Have an internal process to review and approve the disclosure of all inventions created by employees.
• When the disclosure process has been properly completed, it should be noted in the patent policy.
• You can check this off your list and move to the next step once the internal review and approval process has been completed and the disclosure of the invention has been noted in the patent policy.

Registration of patent

• Determine who is responsible for registering patents and/or trademarks
• Establish a procedure for registering patents and/or trademarks with the US Patent and Trademark Office and/or other relevant patent offices
• Develop a standardized format for the patent registration paperwork
• Ensure that the proper paperwork is filled out and filed properly to register the patent
• Keep records of the patent registration process and any related paperwork
• Determine how employee-inventors will be compensated for patent registrations

You will know when you can check this off your list and move on to the next step when your patent has been successfully registered with the US Patent and Trademark Office and/or other relevant patent offices.

Publication of patent

• Ensure that the patent is published in the appropriate jurisdiction and legal registry
• Prepare a press release to announce the patent publication, if applicable
• Update the company’s website to include the patent information
• Follow up with the patent office to ensure the patent publication is complete
• When the patent has been published and all necessary steps in the process have been completed, you can move on to the next step.

Contracts and agreements related to inventions

• Draft and review contracts and agreements related to inventions, such as confidentiality agreements and assignment agreements
• Ensure that the contracts and agreements include guidelines regarding patentable materials and processes, as well as compensation for inventors
• Ensure that the contracts and agreements are compliant with applicable laws, regulations and industry standards
• Ensure that all inventors sign the contracts and agreements before any patent applications can be filed

When you have drafted and reviewed the contracts and agreements, and ensured that all inventors have signed them, you can move on to the next step.

Preparation of documents

• Draft a Patent Policy document to establish in writing the organization’s policies regarding patents and inventions
• Ensure that the Patent Policy document outlines the procedures for obtaining, protecting, and managing patents
• Consider including a section on how the organization will compensate employees for invention or patent filing
• Consult with a lawyer to ensure that the document is legally compliant
• Once the document is finalized and approved, it can be shared with employees and stakeholders
• This step can be considered complete once the Patent Policy document is finalized and approved by a lawyer

Obtaining a lawyer

• Research and contact potential lawyers who specialize in patent law
• Ask questions to ensure the lawyer is knowledgeable and experienced in patent law
• Negotiate costs, terms, and services
• Sign a contract with the lawyer
• When you have signed the contract, you have completed this step and can move on to the next step of execution of contracts.

Execution of contracts

• Finalize contracts with all employees that will be covered by the policy
• Draft a copy of the patent policy and get it approved by the lawyer
• Have the employees sign the policy and return it
• Make sure all copies of the policy are securely stored
• Once the contracts are finalized, the step is complete and you can move on to the next step.

FAQ

Q: What is the difference between UK, USA and EU employee patent policies?

Asked by Peter on 27th April 2022.
A: Generally speaking, the employee patent policies of the UK, USA and EU are quite similar. The primary difference is that in the UK, any invention created by an employee during their employment must be assigned to their employer; whereas in the US, an employee can retain rights to their inventions unless there is an agreement specifying otherwise. The EU has legislation in place which allows for employee inventions to be assigned to employers if certain criteria are met.

Q: Is there a minimum period of employment before an employee patent policy applies?

Asked by Sarah on 20th August 2022.
A: Yes, there is usually a minimum period of employment required before an employee patent policy applies. This period varies from country to country and even from company to company; however, it typically ranges from six months to one year. Furthermore, this period may be extended if the employee has access to confidential information or intellectual property which would give them an unfair advantage over other inventors.

Q: Do employees need to sign an agreement before their inventions can be protected?

Asked by George on 6th November 2022.
A: Yes, employees are typically required to sign an agreement before any of their inventions can be protected under an employee patent policy. This agreement will generally outline the terms of the policy and how the employer will compensate the employee for their inventions. It is important for both parties to understand the terms of this agreement in order to ensure that the invention rights are properly protected and that any compensation due is provided in a timely manner.

Q: Is there a specific form that needs to be used when creating an employee patent policy?

Asked by Jessica on 12th December 2022.
A: Generally speaking, there is no specific form that needs to be used when creating an employee patent policy. However, it’s important for employers to draft a comprehensive policy that outlines all of their obligations and rights with regards to employee inventions and compensation for such inventions. It is also important for employers to ensure that any agreements they enter into with employees are legally binding and enforceable in court.

Q: What kind of compensation should be considered when creating an employee patent policy?

Asked by Matthew on 20th January 2023.
A: When creating an employee patent policy, employers should consider a variety of forms of compensation for employees’ inventions. This could include financial rewards such as bonuses or stock options; recognition such as promotions or awards; or other forms such as increased responsibility or job security. It is important for employers to consider all forms of compensation when drafting a comprehensive policy so that all inventors are fairly rewarded for their hard work and contributions.

Q: Does an employee have to disclose their invention before it can be protected under a patent policy?

Asked by John on 2nd February 2023.
A: Yes, typically employees must disclose their invention before it can be protected under a patent policy. This disclosure could take many forms, including written documentation or verbal disclosure depending on the type of invention and the employer’s particular requirements. It is important for employers to ensure that all relevant inventors have disclosed their inventions so that they can be properly protected under the employer’s policy.

Q: How should employers go about enforcing their patent policies?

Asked by William on 25th March 2023.
A: Employers should take a proactive approach when it comes to enforcing their patent policies. They should ensure that all relevant inventors have disclosed their inventions; review any agreements with employees regarding invention rights; and monitor developments in both domestic and international patent laws so that they can ensure their policies remain up-to-date and compliant with applicable laws and regulations. Furthermore, employers should be open to negotiation with employees when it comes to assigning rights or compensating them for their inventions so as not to discourage innovation within the company.

Q: What happens if one country has different legislation than another regarding employee patents?

Asked by David on 18th April 2023.
A: If different countries have different legislation regarding employee patents then employers need to ensure they are aware of both countries’ laws and regulations so as not to inadvertently breach either one’s laws or risk infringing upon another country’s intellectual property rights. Employers should also take into account any international treaties which may affect how they must treat certain inventions or how they must assign rights between countries in order to remain compliant with international law.

Q: How can employers protect themselves against potential legal challenges regarding employee patents?

Asked by Elizabeth on 8th May 2023.
A: Employers can protect themselves against potential legal challenges regarding employee patents by ensuring that all relevant employees have signed agreements outlining the terms of the policy; regularly reviewing any agreements with employees; monitoring developments in both domestic and international laws; and ensuring that any compensation awarded is fair and equitable according to industry standards. Furthermore, employers should consider taking out liability insurance which covers potential legal claims related to intellectual property as this could provide additional protection against potential litigation costs in the event of a dispute over patents or other forms of intellectual property rights between employees and employers.

Q: Is it necessary for employers create separate policies for different types of inventions?

Asked by Michael on 26th June 2023.
A: Depending on the types of inventions being created within a company, it may be beneficial for employers to create separate policies covering different types of inventions such as software development versus hardware design or mechanical engineering versus biomedical engineering etc., as each will likely require different levels of protection or forms of compensation due to differing levels of complexity or risk associated with each type of invention. Furthermore, creating separate policies will help ensure that inventors are fairly compensated according to industry standards as well as help protect employers against potential legal action related to intellectual property disputes between inventors and employers.

Q: Are there any best practices which should be followed when creating an employer patent policy?

Asked by Joseph on 8th August 2023.
A: Yes, there are several best practices which should be followed when creating an employer patent policy including but not limited to drafting comprehensive agreements outlining all obligations and rights between employer and invents; regularly reviewing any existing agreements; monitoring developments in both domestic and international laws; ensuring all relevant inventors have signed agreements protecting their invention rights; taking out liability insurance covering potential legal claims related to intellectual property disputes; providing fair compensation according to industry standards; and encouraging open communication between employer and inventors throughout the process so everyone understands what is expected of them when it comes to protecting invention rights within the company’s respective industry sector(s).

Example dispute

Suing a Company for Patent Infringement

• Understand the patent policy of the company being sued and research relevant legal documents, regulations and applicable civil law.
• Identify the information or actions which resulted in the suit being raised and explain why the company is legally responsible for said actions.
• Consult with a lawyer to understand potential settlement options and any damages that may be incurred.
• Calculate potential damages and argue the case in court, if necessary.

Templates available (free to use)

Corporate Patent Policy

‍