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Imagine spending hundreds of hours and thousands of dollars to create and develop an invention that improves the practice of medicine. Now imagine having to sign an employment agreement turning over full rights for that invention to a contract management group just because you wanted to do some part time work at a local hospital. So goes the latest contract swindle being aimed at unsuspecting physicians – assignment of intellectual property rights.
What does assignment of intellectual property rights mean?
An assignment of intellectual property is a legal document applying to trade secrets, copyrights, trademarks, patents, or other ideas or creations of value. A physician or contractor who enters into an intellectual property assignment agrees to transfer to the hiring entity all ownership and rights to all intellectual property the physician or contractor has created or developed.
For example, a contractual agreement for assignment of IP rights to a university where a physician was hired to perform research contained the following language:
All intellectual property either developed within the course and scope of university employment or resulting from activities performed on university time or with support of university funds, or from using facilities or other resources owned by [the University] belongs to [the University]. The course and scope of employment includes outside activities related to the employee’s area of expertise. Any individuals subject to this policy automatically assign their rights in intellectual property included under this policy to [the University]. Individuals who create such intellectual property must promptly execute and deliver all documents and other instruments as are reasonably necessary in [the University’s] discretion to reflect the [the University’s] ownership of such intellectual property, Including for purposes of satisfying requirements of the United States Patent and Trademark Office or other patent registrars. A creator of intellectual property owned by [the University] has no independent right or authority to convey, assign, encumber, or license such intellectual property to any entity other than [the University].
Because the physician was being paid to perform research, the University became the beneficiary of the physician’s research activities.
Just because a physician enters into an employment relationship with a university system does not mean that the physician should have a contractual obligation to also enter into an IP assignment agreement. I have reviewed many university hospital employment contracts and related legal documents that do not contain intellectual property assignment of rights agreements.
IP Assignment Pros and Cons
A contract that requires the assignment of intellectual property rights helps ensure that owners retain exclusive rights to use and develop their own creation, invention, or work. Some hospitals or contract management groups may claim that intellectual property assignment agreements protect their intellectual property, but that claim is insincere at best. Intellectual property is traditionally comprised of four general categories: trade secrets, copyrights, trademarks, and patents. Hospitals and contract management groups are highly unlikely to have copyrights, trademarks, or patents applicable to routine patient care. With regard to trade secrets, consider general medical practice. Aside from patient lists and billing documents (neither of which is provided to physicians) there likely no other trade secrets or intellectual property relevant to a physician’s medical practice. Even if a company/hospital does own intellectual property, employment contracts routinely contain confidentiality clauses and restrictive covenants that protect the use and dissemination of such confidential information and trade secrets. Intellectual property assignments provide hospitals and contract management groups with no added protection of their alleged intellectual property.
Intellectual property assignments do, however, add the potential for a substantial windfall to hospitals and contract management groups that inappropriately demand them. Intellectual property requires significant investment of time, effort, costs, and resources from the creator/owner. Assigning IP rights to another entity also gives that entity the uncompensated benefit of the owner’s time, effort, costs, and resources.
Not only does an intellectual property assignment provide an uncompensated benefit to the entity demanding assignment of rights, but it also deprives the owner and creator of the intellectual property from realizing any benefit from the work involved in creating the intellectual property. Additionally, the IP owner would be prohibited from conducting business or entering into joint ventures with others who might use the intellectual property as those ventures may also be subject to the same assignment of rights.
Sample Contract Clauses for Assignment of Intellectual Property Rights
Here are two examples of intellectual property rights agreements I pulled from medical employment contracts I have reviewed.
Contract 1
“Unless otherwise excepted under [group] policies and procedures, to the fullest extent permitted by law, all of Physician’s rights, title, and interest in any inventions, discoveries, concepts, developments, creative works (including copyrighted materials), trade secrets, notes, data, reports, laboratory notebooks, and useful ideas of any description whatsoever, whether or not patentable, copyrightable or otherwise developed by Physician, in whole or in part, either alone or jointly with others, during the term of this Agreement that result from the work performed by Physician for [group] or from the use of Confidential Information (as defined above), premises, or property (“Intellectual Property”), are hereby assigned to and are the sole and exclusive property of [group]. Physician hereby transfers and assigns to [group] or its designee any proprietary rights that Physician may have or acquire in this Intellectual Property, and waives any rights that Physician may have or accrue therein. Physician agrees to promptly disclose to [group] all Intellectual Property that is or may be subject to this Section. Physician will under all circumstances assist [group], at [group] expense, in every proper way to secure and enforce [group’s] rights in the Intellectual Property in any and all countries. The terms of this Section will survive the termination of this Agreement, are binding upon Physician and Physician’s heirs, executors, administrators, and legal representatives, and will inure to the benefit of [group] and its respective successors and assigns.”
Contract 2
“Each Partner will disclose promptly and in writing to the PARTNERSHIP all inventions, original works of authorship, discoveries, technology, computer programs, designs, formulas, instructions, manuals, and know how (“Intellectual Property”) which the Partner, alone or with others, conceives or makes, whether or not commissioned specifically to do so by the PARTNERSHIP which relate directly or indirectly to the business of the PARTNERSHIP. Partner agrees at the PARTNERSHIP’s request to assign to the PARTNERSHIP, or its designee, all of the Partner’s right, title and interest in and to such Intellectual Property which Partner may solely, or jointly conceive or develop during the time that the Partner is a Partner, and to sign any instruments such as copyright applications in the name of the PARTNERSHIP as may be necessary to perfect the PARTNERSHIP’s rights to the Intellectual Property.”
Sample Assignment of Intellectual Property Rights Analysis
In both clauses above, the definition of “intellectual property” is broad, including inventions, original works of authorship, discoveries, technology, computer programs, designs, formulas, instructions, manuals, know-how, notes, data, reports, laboratory notebooks, and useful ideas of any description whatsoever. This means that the group or partnership would likely try to assert entire ownership rights over all of an IP owner’s ideas, concepts, or creations, even if only tangentially related to the group or partnership’s relevant market.
Both agreements require that the physician assign entire ownership rights in intellectual property to the group or partnership, which means that the physician will lose all control and any potential commercial value over the intellectual property.
Both agreements create ongoing intellectual property assignments. One agreement states that the terms of the section will survive the termination of the agreement while the other requires that the physician take necessary steps to “perfect the Partnership’s rights to the Intellectual Property.” The terms do not just apply to the term of the employment agreement but also apply to circumstances after the agreements have terminated if those circumstances relate to the business or work of the employers.
Most importantly, neither clause provides physicians with any compensation or benefit for their creations. While groups or hospitals may argue that a physician’s contractual compensation includes compensation for any creations, the contracts contain the same payments for inventors and non-inventors alike. There is no added benefit for inventors who may be giving up their rights without receiving any value in return – even if it leads to significant profits for the groups or hospitals.
Assignment of Intellectual Property Rights Takeaway Points
- The legal issue with assigning IP rights to another entity is that you lose all benefits to the product you developed. In return, you receive nothing for your project.
- An IP assignment agreement with an employer can have a significant negative impact on your ability to develop future IP and to work with other companies that may rely on similar IP.
- In most cases, an employer’s demand for an intellectual property rights agreement has more to do with receiving an unpaid windfall than it has to do with the employer’s intellectual property protection.
- Should an employer attempt to assert a contractual claim for a contractor’s intellectual property, a valid defense to such claim may involve a lack of consideration. However, litigating such allegations may prove costly. Intellectual property law is a complex field.
- If you must agree to an assignment of intellectual property rights, try to limit the assignment to exclude any IP that was developed during your free time without use of employer/contractee business resources. Whether IP relates to an employer’s line of business should be irrelevant.
Looking for more articles about medical contract terms? The “Contracts” page has a lot of them.
Need help negotiating a contract or figuring out the contract terms? Contact me. I’d be happy to try to help.