Meaning
Contractual language in an employment or consulting agreement uses current transfer wording to automatically vest ownership of future inventions in the hiring entity as they are created. This specific phrasing, such as I hereby assign, creates an immediate transfer of rights rather than a mere promise to assign those rights at a later date. It governs the ownership of patents, copyrights and trade secrets developed during the term of the engagement.
The effect of the language stops applying to inventions created before the start of the contract or those developed entirely on the individual’s own time without company resources. This distinction is a critical point of law in intellectual property disputes in the United States and other common law jurisdictions.
Automatic Transfer
Operation of the law allows the ownership to pass from the individual to the company the moment the invention is conceived or reduced to practice. When a present tense ip assignment clause is used, no further action is required by the employee to give the company the legal title. This is superior to an agreement to assign in the future, which only gives the company an equitable right to demand a transfer later.
If the employee later refuses to sign a specific assignment for a patent application, the company can still prove ownership through the original contract. This prevents a situation where a disgruntled former employee could hold a company’s technology hostage. The automatic nature of the transfer is what provides the company with the highest level of legal certainty.
Legal Distinction
Court rulings have emphasized the difference between words that indicate a present act and those that indicate a future obligation. A contract that says the employee will assign or shall assign is not a present tense ip assignment clause and does not effect an immediate transfer. In several landmark cases, companies have lost their right to sue for infringement because their employment contracts used the future tense.
This allowed the inventor to assign the same rights to a different company later, and that second assignment was the one that legally took effect. By using the words hereby assigns, the company ensures that there is never a moment when the inventor holds the legal title to the work produced for the company. This small change in grammar has massive implications for the strength of a company’s patent portfolio.
Ownership Certainty
Investors and acquirers look for this specific wording during the due diligence process to confirm that the company actually owns its core technology. The presence of a present tense ip assignment clause in every staff and contractor agreement is often a condition for closing a venture capital round. It eliminates the risk of missing assignments or chains of title that are broken by employees who have left the company.
If the clause is missing, the company may be forced to track down former workers to have them sign confirmatory assignments, which can be expensive or impossible. The clause also protects the company from claims by university research offices or previous employers if the individual was under a conflicting obligation. Clear ownership is the foundation of any technology based business and is best secured through this immediate transfer mechanism.
