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Shop Rights

You use your employer’s computer and development software to develop a great new software program after work. Who owns the software? To balance the rights of employers and employees, and to maximize the incentive to invent, courts have developed the “common law” (a court made law not passed by lawmakers) of “shop rights.”

Shop rights give the employee ownership of the invention, but give the employer the non-exclusive, non-transferable, royalty-free right to use the invention in the employer’s business. The employer cannot sell or transfer its shop rights, use the invention outside the business or prohibit the employee from exploiting the invention. If the employee leaves, the employee can take the invention, but must leave the shop rights with the employer.

In determining whether an employer is entitled to shop rights, a patent lawyer looks at each case individually. Among other things, courts look at:
1) what time (on the clock or off) and tools went into the development of the invention:
2) any contracts (written or unwritten) between the employer and employee;
3) whether the employee allowed the employer to use the invention; and
4) whether the employee helped the employer use the invention.

Shop rights are not an ownership interest in a patent. They are merely a defense to a charge of patent infringement by the employee or an assignee of the employee’s patent rights. The employee does not have to have been hired to invent or even have an employment agreement with the employer. There must merely be an employer/employee relationship.

As with other types of rights, the employer and employee can contract to increase or decrease these shop rights. Many companies have certain employees sign an agreement stating the company owns all inventions of the employee. Some jurisdictions however limit companies’ ability to capture by contract those unrelated inventions employees invent on their own time, using their own tools.

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