Rights in Employee Inventions and Ideas: An overview of United States Law

Catherine L Fisk. New Zealand Journal of Industrial Relations. Wellington:Jun 1998. Vol. 23, Iss. 2, p. 47-62

Introduction

Knowledge that employees develop at work may be more valuable to an employer if it is not shared with other firms. One way to restrict access is to prevent the employee from using information the employee has gained by performing the job or from using new processes or ideas the employee has developed. Another is to prevent all other employees from having free access to the knowledge. A variety of legal doctrines assist United States employers in obtaining control over the inventions, knowledge, and other creative products of their employees. The most important of these doctrines are found in the laws of patent, trade secrets, non-competiton agreements, and copyright. These areas of law are of considerable importance, not only in the burgeoning knowledge-based industries, but throughout the economy (Cherensky, 1993; Van Slyke & Friedman, 1990; Parker, 1984; Stedman, 1974).

Most people are aware that inventions and other creative works have played a crucial role in the health of the US economy. What is not so obvious is how many of these inventions are devised by employees, and that most employees who invent are bound by contracts requiring them to assign the patent and their rights in the invention to their employer (Parker,1984: 608; Howell,1983: 864; Gullette,1980: 738; Kastenmeier, 1982). A large minority of copyright registrations are works that employees make for hire. According to a 1955 study, 40 percent of the copyright registrations were for works made for hire [Community for Creative Non-Violence v. Reid, 490 US 730, 737 n.4 (1989)]. The majority of trade secret cases involve employees (Milgrim, 1996: s.5.01, p.5-2[1]). In a few recent high-profile cases courts have enjoined employees from working for a competitor of their current employer because of the risk that the new employment would lead the employee to reveal trade secrets.

In the US, the laws governing employee-generated intellectual property are a disparate array of state and federal statutes and common law. The laws of the 50 states, sometimes statutory and sometimes common law, define rights over trade secrets, covenants not to compete, and the enforceability of contracts assigning rights in inventions. Federal statutes govern the validity of patents and, in some cases, patent assignments, as well as employer ownership of copyrighted works that were created by employees as works-for-hire. The complex nature of federal-court and state-court jurisdiction means that there is no court that can unify principles, unless the US Supreme Court hears the case. Thus, cases challenging the validity of patents and copyrights may be tried only in federal court; while for most trade secret violations, breaches of covenants not to compete, and issues involving the assignment of rights, jurisdiction may exist only in state court. Research and summarization of the law is further complicated by the fact that each of these bodies of law developed quite independently from one another, and the effect of the

employment relationship on rights has not been an organizing principle in their development.

This article summarizes the basic principles of the law relating to employer and employee rights in the four areas of inventions, trade secrets, covenants not to compete, and copyright. It also discusses some of the recent issues that have arisen in these areas and includes citations to the leading recent scholarship as an aid to further research. As collaborations and corporate activities may increasingly take place across national borders and as the market for intellectual property now spans the globe, a greater understanding of US law in this respect may be useful as a practical matter.

The theme that unites these disparate areas of law - to the extent there is a theme - is uncertainty and unpredictability. In all four areas, the doctrines determining ownership are multifactor inquiries that call for detailed assessment of the facts involving the nature of the employment relationship and the circumstances surrounding the creation of the product. These multifactor inquiries evolved because the judges who developed the doctrines chose to pursue flexibility and nuance at the expense of predictability. The flexibility of these fact-intensive inquiries may seem well-suited to do justice in individual cases, but they make it difficult to predict outcomes in advance (Willborn, Schwab & Burton, 1993: 283). The expense and unpredictability of litigation lead employers whenever possible to determine rights by contract and, when disputes do arise, it is likely that parties resolve them informally. The limited empirical research on the implementation of these doctrines suggests that the law in action may be very different than the law on the books, but it is not entirely clear whether on balance employees have greater or fewer rights in practice than the law envisions.

Ownership of inventions

The patentee (the person(s) in whose name the patent is issued) is the presumptive owner of a patented invention. The federal patent statute provides that the patent for an invention may be issued only to the first inventor(s). When, as is now usually the case, the inventor is an employee hired to work on an invention and the employee works in collaboration with other employees, some difficulty can arise in determining which person's ideas were so crucial as to merit the status of being "the first and true inventor." During the nineteenth century and the first half of the twentieth, patent law largely assumed that a single individual or a few individuals had been the inventor(s) and thus should own the patent, unless there was a valid agreement to assign its ownership to someone else. Indeed, patents could not be issued in the name of a corporation until the mid-twentieth century. Today's law, however, is premised on a paradigm of corporate invention. The individual inventor is but a link in a chain of many employees who had worked on the problem, and to the extent that his idea was the one that finally solved the problem, he could not have done so without standing on the shoulders of many others. Consequently, today, corporate ownership of patents is the norm rather than the exception.

Irrespective of the name that appears on the patent, employers and employee inventors often seek to establish ownership through litigation after the patent is issued. Where neither challenges the validity of the patent, ownership is a question of state law, not federal patent law, and thus state courts are most likely to have jurisdiction over the dispute. In this context, the analysis depends on whether the parties have a contract purporting to allocate rights in inventions.

Invention rights in absence of a contract

In the absence of a contract addressing ownership of inventions, the employer's and employee's respective rights depend on the nature of the employment and where the acts of invention took place. If the employee is hired specifically to design a particular invention, the employee must assign the resulting patent to the employer [Solomons v. United States, 137 US 342, 346 (1890)]. If an employee is hired generally to invent, and designs an invention and develops an invention on her own time, she owns the patent but the employer has a license to use the patent without paying royalties to the employee [United States v. Dubilier Condenser Corp., 289 US178 (1933)]. This license is known as a "shop right." The employer's shop right is a non-exclusive, royalty-free license to use and manufacture the patented invention. The shop right is nontransferable [Francklyn v. Guilford Packing Co., 695 F.2d 1158 (9th Cir. 1983)]. If the employee assigns the patent to a third party, the third party can exploit the patent itself but cannot obtain a monopoly because of the employer's shop right. How valuable the shop right is to the employer of course depends on the industry.

An employee not hired to invent who develops an invention on her own time and using her own resources owns the patent. Her employer has no rights to it, even if the employee used knowledge she acquired on the job in developing the invention. If an employee was not hired to invent and develops an invention on company time or using company resources, the employee owns the invention but the employer has a shop right for its use [United States v. Dubilier Condenser Corp., 289 US 178 (1933)]. This means that the employee can sell, license, or exploit the patent as she pleases, but she lacks a monopoly over it, for the employer has a right to manufacture and sell the patented item.

The shop right doctrine is not frequently litigated these days because so many inventive employees are bound by contract to assign their inventions. Employers would rather not rely on the vagaries of the hiring-to-invent and shop right doctrines because of the risk that an employee could convince a court that the invention was conceived and reduced to practice entirely outside working hours. Indeed, few employees aware of the law would ever admit to having had an inventive idea between 9 am and 5 pm.

Nevertheless, among the steady, if not large, stream of cases over the last 30 years, there have been a few noteworthy ones. For example, the Samsonite luggage company obtained a shop right to the patent for improved luggage developed by a shop foreman because the inventions had been designed on company time with company material [Hewett v. Samsonite Corp., 507 P.2d 1119, 1121-22 (Colo. App. 1973)]. A mechanical engineer who designed an improved pump for spraying chocolate to create M&M candies

was held to have accorded a shop right to M&M, even though he was employed by a third party and worked in the M&M plant only as an independent contractor [Crowe v. M&M/Mars, 577 A.2d 1278, 1280-81 (N.J. Super. 1990)]. Even a general laborer who was employed to sweep floors was found to have granted a shop right to his patent process for removing worms from pecans because he developed the idea while at work in the pecan processing plant [Wommack v. Durham Pecan Co., Inc. 715 F.2d 962, 971 (5th Cir. 1983)].

As can be seen from these cases, if a connection exists with a workplace and the act of invention, the owner of the workplace is likely to gain the shop right to the invention. This is the case even when there is no employer-employee relationship and when the employee has not been hired to invent.

Contracts assigning inventions

Ownership of employee inventions is an area of law where contracts predominate. Most employees who invent on the job - most inventors - are bound by contracts governing invention rights. The law governing such contracts is a mix of state statute and common law; therefore, normally these cases are litigated in state court. The law in this area varies widely among the 50 states.

In most states, contracts requiring employees to assign their inventions to their employers are generally enforceable. See Standard Parts Co. v. Peck, 264 US 52 (1924); IngersollRand Co. v. Ciavatta, 542 A.2d 879 (N.J. 1988). However, there are limits to the permissible scope of such contracts. Most states' common law will enforce contracts requiring assignment of employee inventions only if the contract is reasonably limited in time and subject matter. For examples of these cases, see Ingersoll-Rand Co. v. Ciavatta, 542 A.2d 879 (N.J.1988). In addition, courts in some jurisdictions will decline to enforce a contract that they find unduly injurious to the employee or contrary to the public interest [Ingersoll-Rand Co. v. Ciavatta, 542 A.2d 879 (N.J. 1988)].

The application of this law can in some instances be quite harsh to employees. An employer who discourages an employee from pursuing a particular line of inquiry can later claim ownership of the patent if the employee persists and obtains a patent. In a recent, highly publicized case, a laboratory assistant had been forbidden by his employer from pursuing a particular series of experiments. Despite this, he continued them on his lunch hour and on weekends. Eventually the employee developed a substance that was worth millions of dollars. The employer thereupon demanded assignment of the patent, and the employee understandably refused. A court ordered the employee to turn the invention over to the employer, and the employee actually served three years in jail rather than comply with the court order. (Jaroff, 1997: 64).

Several states have statutes limiting the enforceability of contracts assigning invention rights. Examples of these can be found in California (Cal. Lab. Code s.2870), Minnesota (Minn. Stat. Ann. s.181.78), North Carolina (N.C. Gen. Stat. s.66-57.1-57.2), and Washington (Wash. Rev. Code s.49.44.140). California, for example, provides that

contracts requiring employees to assign inventions to their employers are unenforceable as regards inventions that the employees develop entirely on their own time without using the employer's resources or trade secrets.

There are, however, significant exceptions to the apparently broad California prohibition on assignment agreements. The employer can enforce a contract requiring assignment of inventions, irrespective of the limitations described above, where the invention relates "at the time of conception or reduction to practice" to the employer's business or to its "actual or demonstrably anticipated research and development" or where the invention results from work performed by the employee for the employer. In Cubic Corp. v. Marty, 229 Cal. Rptr. 828 (Cal. App. 1986), for example, the court enforced an assignment over the employee's objection that it did not cover the invention in question, was unconscionable, and was not supported by sufficient consideration. These are quite significant exceptions, for in most cases an employee's invention, even if developed entirely on her own time without use of employer resources, will have something to do with the work she has done for the employer. How many employees, after all, have such broad technical expertise that they can be employed to do one kind of work yet invent something wholly unrelated to any aspect of that work or of the employer's business?

Much of the academic and legal concern recently has been whether stringent enforcement of patent assignment agreements diminishes the incentives employees have to perfect inventions and thus reduces the inventive productivity of the US economy as a whole (Parker, 1984). Scholars have suggested that US law be changed to provide financial rewards for employees who invent, as in many countries in Europe and Asia. This would provide some of the incentives to invent that the law, as currently enforced, removes (Parker, 1984: 615-22). Although such legislation has been introduced in the Congress, it has not passed.

Trade secrets

The law of trade secrets in all 50 states protects any information that the employer has reasonably successfully endeavored to keep secret, whether or not it is patentable or copyrightable. To constitute a trade secret, information must be secret and derive independent economic value from its secrecy. Even if information constitutes a trade secret, its use by others is permissible unless they acquire or use it in a wrongful manner. (Milgrim, 1996: s.3.03; Bone, 1998; Uniform Trade Secrets Act s.1(2)). Wrongful acquisition or use generally means use in breach of a duty of confidentiality (as by an employee) or use of improper means to acquire the secret.

Fifteen states follow the common law rule that prohibits employees from using or communicating information that constitutes a trade secret. A trade secret is defined as a secret or confidential plan, process, mechanism, compound or list that is disclosed to an employee in the course of employment. The American Law Institute has recently codified the common law of trade secrets. An employee is obligated by the confidential nature of the employment relationship not to use the secret or reveal it to anyone except as the employer permits. However, if the third party figured out the secret through reverse

engineering or independent derivation, the third party is entitled to use the information, even though it may be a trade secret as to other parties.

The other 35 states have adopted the Uniform Trade Secrets Act (UTSA), which is essentially a distillation and rationalization of the common law rules and differs only slightly from them. The UTSA prohibits "misappropriation" of "trade secrets." "Misappropriation" is defined to include wrongful use or acquisition of a trade secret. Wrongful use means revelation in breach of a duty to maintain secrecy; wrongful acquisition includes industrial espionage and knowingly deriving knowledge of a trade secret from one who owed a duty to maintain its secrecy or limit its use. The UTSA defines a trade secret as any information "that derives independent economic value, actual or potential, from being not generally known to the public or to other persons who can obtain economic value from its disclosure or use" and that is the subject of "efforts that are reasonable under the circumstances" to maintain its secrecy.

In many states, theft of trade secrets is a crime as well as a civil wrong. However, criminal prosecutions for trade secret theft are rare. The federal government has also recently enacted legislation making theft of trade secrets a crime, apparently because of a concern that American firms suffer significant losses in the misappropriation of trade secrets, especially by foreign firms. The Economic Espionage Act of 1996, 18 U.S.C. s.1831 et seq., applies to both domestic and foreign firms and persons who steal or conspire or attempt to steal trade secrets. Violations of the law are punishable by a maximum of 15 years in prison and fines of up to (US) $10 million.

A few recent high-profile investigations may be evidence that criminal prosecutions for violations of the federal law may be less unusual than state criminal prosecutions for trade secret theft. A financial information unit of Reuters Holdings PLC, the British publishing giant, is reportedly the target of a federal criminal investigation into whether it violated the Economic Espionage Act by attempting to break into rival Bloomberg's computer system to steal proprietary codes used to analyze data about bonds (Starkman & Knecht, 1998: A4). Other recent cases brought under the Act include one involving an effort by a Taiwanese company seeking to persuade employees of American pharmaceutical firm, Bristol-Myers Squibb Co., to sell the secret formula for the anticancer drug, Taxol, and one involving a former employee of the label-maker Avery Dennison Corp. selling information about the company's adhesive technology to a Taiwanese company (McMorris,1998: B5).

The same information cannot be both patented and a trade secret (Milgrim, 1996: s. 8.02[2]). The reason is that to obtain a patent, inventors must disclose their inventions to the public, which vitiates the secrecy required by the trade secret law (Milgrim, 1996: s.1.06[1]). An inventor could seek to establish the secrecy of the invention first and then, having obtained trade secret protection, apply for a patent, but the Patent Act's "on-sale bar" prohibits issuance of a patent on an invention that has been in use for more than a year before application for the patent (35 U.S.C. s.102(b); Rooklidge & Jensen, 1995; Barrett, 1972). Firms in various industries have differed over the years as to whether they

preferred to rely on patents or trade secrets to maintain monopoly control over valuable information.

Among current issues in the law of trade secrets are a variety of interrelated questions concerning the preferable scope of trade secret protection. For example, under what circumstances should economically-valuable employee knowledge, such as customer lists, processes, marketing strategies, or computer software or hardware design, be accorded trade secret protection? Broad protection for trade secrets might make employees who possess valuable knowledge captives of their firms either because so much of their useful knowledge is a trade secret that they cannot effectively switch jobs, or because any firm considering hiring away such an employee might fear the litigation that would ensue to establish what knowledge the employee could or could not use in a new job. In some instances, courts have indeed enjoined employees from taking employment with particular firms: a high-level employee of the Pepsi Cola soft drink firm was enjoined from leaving to work for a competing beverage manufacturer because the court concluded that the employee would inevitably use his knowledge of Pepsi's trade-secret market strategies in his new employment [PepsiCo, Inc. v. Redmond, 54 F.3d 1262, 1265-67 (7th Cir.1995)]. On the other hand, narrow protection of trade secrets might reduce the economic incentives for innovation by denying innovators the chance to recoup the costs of their creative processes or information before competitors are allowed to profit from the idea.

A second major set of recent issues concerns the enforcement of trade secret protections. On the one hand, some fear the law conceivably could prevent the formation of start-up companies entirely. If putative trade secret owners can easily obtain preliminary injunctive relief against former employees who are now seeking to start a new company using a technology that is claimed to be a trade secret, the former employer can eliminate the entry of a new competitor. The most worrisome specter is that trade secret law could spell the death of Silicon Valley innovation. On the other hand, some suggest that trade secret law is in fact dramatically underenforced in Silicon Valley on account of social norms and economic incentives that prevent firms from using trade secret law to prevent the defection of talented employees who seek to start new companies to develop and market new computer products (Hyde, n.d.).

The nature of these questions about the proper scope and enforcement of trade secret laws has seemed to scholars in the intellectual property field to call for empirical and economic answers. Accordingly, much of the recent scholarship on trade secrets, as indeed much of the legal scholarship on intellectual property generally, is of the law-and-economics school (Bone, 1998; Sterk, 1993; Trebilcock, 1986; Kitch, 1980).

Covenants not to compete

Unlike the laws governing patents, copyrights, and trade secrets, the law of non-competiton agreements or covenants not to compete does not attempt to control ownership or dissemination of knowledge directly. Rather, it regulates competition. However, such agreements are usually used to prevent dissemination of valuable

knowledge, and indeed in some jurisdictions they are enforceable against employees only to the extent that the employees' competitive employment would risk the disclosure of trade secrets.

In most states, covenants not to compete are enforceable provided they are reasonably limited in time, geographic scope, and the nature of the work covered. This is the traditional common law rule that has been followed, with slight variations, since Mitchell v. Reynolds, 24 E.R. 347 (1711). In analyzing the three factors making up this rule of reason, courts consider four other factors: (1) whether the covenant protects a legitimate employer interest; (2) whether the covenant is broader than necessary to protect that interest; (3) whether enforcement of the covenant would harm some particular public interest; and (4) whether enforcement of the covenant would cause some particular hardship to the employee (Blake, 1960; Handler & Lazaroff, 1982). In addition, in many states there is some question whether a restrictive covenant is enforceable without payment of substantial additional consideration if the employer requires the employee to sign it during or at the end of an employment relationship rather than at the beginning (Liebman & Nathan, 1987).

Courts generally define the reasonableness of the agreement in terms of its duration, geographic scope, and the nature of work covered by reference to the employer's legitimate interest in protecting itself from unfair competition. Thus, for example, only an employer competing in a world-wide market might be able to enforce a ban on postemployment competition anywhere in the world. An employee possessing valuable trade secret knowledge could be restrained from competition only so long as the knowledge remains a trade secret and not obsolete. An employer manufacturing a particular type of computer software probably could not restrain a former employee from working on a different type of computer software or on computer hardware. Because courts differ in their views on these sorts of reasonableness issues, commentators have long lamented the uncertainty in the law (Callahan, 1985; Handler & Lazaroff, 1982).

In some states, however, most notably California, covenants not to compete are unenforceable against employees or former employees except in narrow circumstances. In California, a non-competiton agreement is enforceable to protect trade secrets or to restrain conduct that would constitute the tort of unfair competition (Cal. Bus. & Prof. Code s.16600). Thus, courts will uphold a contract not to solicit the former employer's customers when the customer list is a trade secret or a contract not to "raid" the former employer's employees when to do so would constitute a tort of unfair competition. But even when a contract would be enforceable under this exception, it still must comply with the three-factor "rule of reason" followed in the other states, and courts will still consider the additional four hardship and public interest factors.

The proscription of many employee non-competiton agreements in California may be regarded as a crystallization of the traditional criticism of such covenants generally. Unlike much of the law protecting employer interests in employee intellectual product and property, covenants not to compete prevent dissemination of employee knowledge by preventing the employee from working at all in a certain line of work. As such, they can

seem particularly subject to abuse and overreaching. When the employee possesses skills that may be valuable to the community - such as that possessed by physicians enforcement of the covenant can seem particularly unfair both to the employee and to the public (Closius & Schaffer,1984; Goldschmid,1973; Sullivan,1977). The court in Iredell Digestive Disease Clinic v. Petrozza, 373 S.E.2d 449 (N.C. App. 1988), aff'd, 377 S.E.2d 750 (N.C.1989), declined to enforce a non-competiton clause against a gastroenterologist on the ground that patients have an interest in choosing physicians and defendant was the only practitioner in the region capable of performing certain services. In Dick v. Geist, 693 P.2d 1133 (Idaho App. 1985), an Idaho appellate court refused to enforce a covenant against a neonatalogist, noting the serious public health consequences of requiring the region's only neonatologist to leave the area.

Courts also vary in their treatment of post-employment non-competiton agreements once they are deemed unreasonable. One scholar who surveyed the law concluded that in most states, the court will revise the agreement to conform to the court's view of what is reasonable under the circumstances (Callahan, 1985). [See, e.g., Eastern Distrib. Co. v. Flynn, 567 P.2d 1371, 1379 (Kan. 1977); R.E. Harrington, Inc. v. Frick, 428 S.W.2d 945, 951 (Mo. Ct. App. 1968)]. In a few states, courts, following the "blue pencil rule," will void the entire agreement, unless the offending provisions are grammatically severable from the contract's reasonable terms. [See, e.g., Reading Aviation Serv., Inc. v. Bertolet, 311 A.2d 628, 630-31 (Pa. 1973)]. Some courts will hold a restrictive agreement unenforceable in its entirety if any part of it is found unreasonable. [See, e.g., RectorPhillips-Morse, Inc. v. Vroman, 489 S.W.2d 1, 4 (Ark. 1973); Philip G. Johnson & Co. v. Salmen, 317 N.W.2d 900, 904-05 (Neb. 1982)].

As with trade secrets, there may be reasons to believe that the law on the books may vary significantly from the law in action. The law is probably both over-enforced and underenforced. Some employers doubtless include invalid post-employment restrictive agreements in contracts and employees ignorant of the law may abide by them. Conversely, many employers probably decide that the costs of enforcing even valid restrictive covenants are not worth the benefits (Willborn, Schwab & Burton, 1993: 283). For example, although the New York Court of Appeals enforced a non-competiton agreement prohibiting a dentist from practicing in the area around Ithaca, New York in Karpinski v. Ingrasci, 268 N.E.2d 751 (NY 1971), the telephone directory indicated 20 years later that the defendant nevertheless maintained an oral surgery practice in Ithaca (Willborn, Schwab & Burton, 1993: 283). Copyright

Of the four areas of law discussed in this article, the employer and employee's interests in copyrighted material is the most heavily controlled by federal statutory provisions. Unlike the patent law, the United States copyright law has a provision expressly addressing ownership of copyrighted materials when the author is an employee. Under sections 101 and 201 of the Copyright Act of 1976, the employer owns the copyright to material that the employee creates as a work made for hire. Although one might expect the existence of a federal statutory provision to lead to national uniformity in the law respecting ownership of the employee-author's creations, here too there is variation among the several federal courts and confusion in the law.

Under the federal Copyright Act, the author of a work is entitled to the copyright, and author is defined as the party who actually creates the work. The work-for-hire rule is an exception to this general rule; if the copyrighted work was made for hire, "the employer or other person for whom the work was prepared is considered the author" and therefore owns the copyright, unless there is a written agreement to the contrary. A work is made for hire if it is "prepared by an employee within the scope of his or her employment" or if it is specially ordered or commissioned in nine statutorily-enumerated circumstances. The statute, however, does not define "employee" or scope of employment. It is the absence of a statutory definition of these two key terms that has created uncertainty as to the scope of the work-for-hire rule (Goldscheid, 1991).

The leading case on the definition of "employee" in the work-for-hire doctrine is the US Supreme Court's 1989 decision in Community for Creative Non-Violence v. Reid, 420 US 730 (1989). In that case, the Court held that traditional agency principles should be used to determine whether the creator is an employee. If the creator is an independent contractor rather than an employee, the work is not made for hire unless the work was specially commissioned under one of the statutorily enumerated circumstances [Community for Creative Non-Violence v. Reid, 420 US at 751]. The traditional common law test for employee status is a multifactor inquiry that considers factors such as the hiring party's right to control the manner and means by which the work is accomplished, the source of instrumentalities and tools, the skill required, the location of the work, the duration of the relationship between the parties, and the extent of the hired party's discretion over when and how long to work in Community for Creative Non-Violence v. Reid., 420 US at 751.

The multifactor test adopted by the Supreme Court in Community for Creative NonViolence v. Reid leaves much uncertainty about when hired authors will be deemed to be employees and when they will be found to be independent contractors. Moreover, the Court did not attempt to define when a work is created "in the scope of employment," which is also necessary to establishing the product as a work-for-hire. The scope of employment concept, which has been used for years by state courts to determine when an employer is vicariously liable for the harms its employees cause to third parties and to determine when employers are liable for employee injuries, is a notoriously fact-intensive and slippery inquiry in which many courts have reached apparently inconsistent results on similar facts.

The work-for-hire doctrine is not the only way in which employers may obtain the copyright to an employee's creative products. An employer may also qualify as a "jointauthor" of a copyrighted work and thus share ownership of the copyright. Employer and employee are joint authors if they "prepared the work 'with the intention that their contributions be merged into inseparable or interdependent parts of a unitary whole" [Community for Creative Non-Violence v. Reid., 420 US at 753]. Many courts have determined that employees and their employers are the joint authors of a copyrighted work even though the work was not made for hire. Here as elsewhere, however, the standards for determining joint authorship "are unclear and unevenly applied" (Goldscheid, 1991: 574).

Conclusion

The legal standards governing employer and employee ownership of the employee's creative products has long been notoriously indeterminate, yet courts have so far failed in their efforts to provide greater certainty. Employers have responded to the unpredictability of the default rules by using contracts to allocate rights wherever possible. Many courts and legislatures have reacted to this trend by expressing concern about the risk of employer overreaching in drafting such contracts. They have therefore created a variety of rules limiting their enforceability under circumstances seen as providing evidence of overreaching. This reaction, however, reintroduces the problem of uncertainty.

The uncertainty in the legal standards is a product both of the endless variety of human behavior and of the difficulty of the underlying policy issues. It is no easy thing to determine what allocation of rights best rewards the employee's ingenuity and the employer's investment in the employee and, at the same time, best protects against the incentives both have to claim the product as their own property.

The fact-specific nature of the inquiries in these four areas of law requires lawyers for firms and employees to pay close attention to the particular circumstances of their case and to the court that will likely adjudicate a dispute. A case that might be decided in favor of the employer in one state or in one federal court might be decided differently in another state or another federal court. Especially in matters governed by state law, those who are drafting employment agreements do well to specify in the agreement which court shall have jurisdiction to resolve any disputes that might arise and which state's law shall apply so that they can choose the law most favorable to their client's interests. At least in the US, courts often respect the choice-of-forum and choice-of-law provisions in contracts when litigation on the contract arises.

Perhaps the time has come to think about a unified approach to the problems of ownership of intellectual and human capital that underlie all these areas of law. The most promising solution seems to be that tried in other countries: to create a system where employees are fairly compensated for their profitable ideas, above and beyond the salary they receive for their daily work. A system of fair and adequate compensation might reduce (although it would never totally eliminate) the employee's incentive to claim an idea solely as his own when the employer has supported the research. The revolution of disputes over ownership might be facilitated by establishing a form of profit-sharing and sharply restricting the enforceability of contracts allocating ownership entirely in the employer unless the statutory profit-sharing was paid.

As with the law of intellectual property generally, the growth of the global markets for labor and technology has raised questions about whether US firms and employees can rely on US law to obtain protection against unfair use of intellectual property by firms and employees in foreign countries. The extent to which US patents, copyrights, trade

secrets, and covenants not to compete are recognized extraterritorially is beyond the scope of this article. Nevertheless, one may expect that US firms and employees in businesses that have international aspects will attempt to extend the protection of US law as far as possible, and familiarity with at least the basic outlines of US law in this area may assist lawyers elsewhere whose practices involve US employment issues.

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