July 20, 2011Blog

Does Your Renewable Energy Company Really Own Their Intellectual Property?

Renewable Energy World

In the emerging business of renewal energy and clean technology companies, a new company’s most valuable assets are usually its intangible ones, namely, its intellectual property.  It is in leveraging this intellectual property, whether to gain market share, attract investment, etc., that often times can make or break a new renewable energy venture.  As new renewable energy companies grow they generally start adding more employees and working more with collaborative partners and contractors.  An often critical error in these situations is that the intellectual property which the company often believes it still owns can actually start to “drift” from the company with ownership rights starting to vest with such new employees, partners and contractors if proper legal protections are not put in place.


Common assumptions that companies often have is that “My company paid for the work and so it owns the IP rights” or “I have an NDA with my contractor and so my company owns the rights” or “anything my employee creates for me is owned by the company”.  All of these assumptions can be fatally incorrect, and can lead to a loss of ownership interest in intellectual property that is created for the company.  What adds to this confusion is that different laws and rules apply for different forms of intellectual property.


For instance, under copyright law, if an employee creates an original work of authorship within their duties and scope of employment, the ownership of the copyright automatically vests in the company.  However, if an independent contractor creates an original work of authorship for a company, such as a logo, software application, etc., the copyright would automatically vest in the author of the work, namely, the independent contractor.  Thus, any independent contractor that does work for a company would own any copyrights that they created for the company, apart from any physical deliverable work they may provide to the company, absent a specific agreement that the work be assigned to the company or be a work “made for hire” (applicable only under limited circumstances).


An example of a copyright ownership situation that I have seen come up for a renewable fuel processing company, is one where the renewable fuel company paid a construction contractor to build a fuel processing plant with various customized equipment connections and the like, but forgot to secure copyright ownership to the blueprints, operating manuals, etc that the contractor created for the project.  When it came time to build modifications and expansions to the plant they could not get access to, or copy, the engineering blueprints, operating manuals etc. as the copyrights in these materials were owned by the original contractor.  In essence, they were forced to go back to the old contractor for the additional work as they needed the blueprints and manuals to efficiently proceed with the building expansion project.


With respect to patent rights, all patent rights are personal.  The rights in a patent rest independently with the inventor of the patent, who must be named on the patent applications by law.  Therefore, individual employees and independent contractors which create patentable material will own the patents outright absent a contractual agreement with the company to transfer such patent rights to the company in exchange for the company either employing them or paying them to create a deliverable on which the patent is based.  For instance, if you have a number of plant workers or engineers that are working on a fuel processing plant, and they come up with modifications or improvements to the fuel processing equipment, these individuals would own any patent rights for their improvements, not the company, even if they came up with the improvements in the course of their employment.  The only way to prevent this is for any such employees or contractors to sign an explicit agreement which indicates that they transfer any patentable subject matter that they come up with in the scope of their employment to the company.  


Any trade secrets a company has, if maintained by their employees as confidential, will be maintained by the company as a trade secret.  However, any independent contractors that the company works with which bring trade secrets to the company may potentially still belong to the independent contractor unless specifically transferred to the company.  Additionally, potential trade secret protection for the company can be lost if no reasonable means of protection are taken to keep such information secret when working with an independent contractor.  Such a reasonable form of protection would be to use a confidential agreement with the independent contractor.


It is critical that a company manage its relationships with its employees and independent contractors such to maintain and control ownership of its intellectual property.  For instance, all employees that the company hires should sign an agreement that any intellectual property that they create in the course of their employment with the company, is owned by the company.  The employee should also agree to sign any subsequent legal documents necessary to perfect such assignments to the company.  Likewise, when a company works with an independent contractor, such as a web designer, graphic designer, software vendor, etc., the company should make it explicitly clear by contract that they either own any intellectual property rights embedded in the work being done for them, or at least secure from the independent contract a license to utilize such intellectual property rights without having to pay additional monies to the independent contractor down the road. 


The bottom line is, if your company is paying for the work, it should make sure that it owns the IP rights embedded in such work by using a formal written contract, either with the company’s employees or with any third party contactors.

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