Generally, when employees conceive of or create inventions that are subsequently used by their employers, such employees should be compensated for the use of that idea. The use of the idea without compensation may be considered unjust enrichment (for benefits derived from the use of the employee’s idea). This is true especially in cases where an invention is used by fraud or misappropriation. However, if the employee was hired specifically to conceive of and create an invention, the employer may have full property rights to the invention.
Reasons for Seeking Compensation
An employee usually seeks compensation because one of the following was created:
A quasi-contract (an obligation made by law to prevent unjust enrichment)
An employee may also seek compensation because he/she was compensated to some extent, but not to the capacity he/she believes is owed.
The “Shop Right” Rule
This rule permits an employer to use his/her employee’s idea without having to pay any royalties or compensation if he/she has contributed to the conception and creation of the invention. However, an employer may not automatically be granted property rights to an employee’s idea simply because it was conceived while the employee was employed by the employer.
There are some rules that negate the “shop right” rule, such as:
Prior filing of a patent application by an employee
Contract stating provisions for employee compensation
Conception and/or creation did not take place during employment
Additionally, the employee’s actions may negate the “shop right” rule. These actions may include:
Refusal to accept offer to contribute an idea
Accepting reimbursement for an idea
Refusal to give property rights to the employer
Claiming ownership of the invention
Damages recoverable are usually based on the provisions of a contract, or where a quasi-contract exists, on the value of the invention. Punitive damages may be recovered in cases of fraud.