Managing Ownership of Employee-Developed IP: Trickier Than It Seems

May 13, 2024

When your employee comes up with a new idea – whether it is a new product, creative work, trade secret, improved process, or an element of your brand identity – does your company have ownership of what that employee created? Well, it depends on what intellectual property protections you have in place.  

Intellectual Property at Work 

Employers often mistakenly assume that any intellectual property an employee develops is automatically assigned to the employer. However, this is not always true.  

Employee Creation of Patentable Inventions 

One category of employee creations that companies do not acquire automatically from employees are new and useful inventions – in other words, patentable inventions. Any patentable inventions of an employee must always be assigned to the company in writing, if the company wants to own the invention. You may have heard about “invention assignment agreements” for employees, and that is what these types of agreements accomplish – the agreement transfers ownership of the invention to the company. Without an invention assignment agreement, a company will not own its employees’ patentable inventions. 

Work Made For Hire & The Copyright Act 

A second category of employee creations that companies must be careful to ensure they own are creative works, such as marketing materials, educational materials, creative output made for customers, and even software code. These types of works are copyrighted works. You may have heard about the copyright concept of “work made for hire,” where an employee’s creative works are automatically owned by the company in some cases.  In actuality, the Copyright Act’s “work made for hire” section is very limited, and only confers ownership to the employer in two situations:  

  • Where the employee is a real employee in the sense of a “W-2 employee who has taxes withheld, gets employee benefits, and whose work tasks, work location, work environment, work schedule, work equipment, and supervision are controlled by the company,” AND that employee makes the creative work in the course of their regular job duties;  


  • Where a contractor is hired by a company with a signed written agreement  to create certain special (and somewhat rare) types of commissioned works. But beware, the list of special commissioned works is very limited and specific, and many, if not most, types of works a company might hire a contractor to make are not covered by the Copyright Act’s “work made for hire” section! For example, logos, artwork, graphics, photography, videos and other marketing creations, other types of advertising and copy writing, websites, social media campaigns, creative output for customers, software coding, reports and written analysis, even AI prompts or AI output (to the extent it is copyrightable), are all NOT covered!  

Key Takeaway for Employers 

What does this mean for your company? If you use independent contractors rather than true employees, you usually cannot rely on the “work made for hire” section of the Copyright Act to provide your company with ownership of what your contractors make. It is critical to have a signed agreement with any contractors that includes an assignment of all copyrighted works that the contractor creates for you.  And, even if your employees are real “employees,” to avoid any gray areas, it is a best practice for employee agreements to include a copyright assignment.  

The Assignment of Trade Secrets  

A third category of things that your employees/contractors may create includes trade secrets such as recipes, algorithms, and customer lists, special proprietary methods or know-how that makes your products work better than the competition, as well as things like data sets and confidential company information.  

All of these types of things should be assigned to a company in an employee agreement. And because these types of things may derive their value from not being generally known, it is critical to protect these types of proprietary information with a non-disclosure agreement that prohibits your employees from disclosing your valuable information.  

 A good employee agreement, invention assignment agreement, or independent contractor agreement will cover all of the above bases.  

If you would like assistance with reviewing the intellectual property provisions of your employee agreements, inventor assignment agreements, or independent contractor agreements, CGL can help. We have recently expanded our IP expertise, and we would love to work with you. 


The materials available at this website are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of and access to this website or any of the e-mail links contained within the site do not create an attorney-client relationship between CGL and the user or browser. The opinions expressed at or through this site are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney.

Other Articles

Stack of folders labelled trademarks on an office boardroom table FAQs about Trademark Protection
Illustration of a lightbulb with a padlock in the centre of it showing the concept of intellectual property rights and patents vs trade secrets Patents vs Trade Secrets: Which IP Approach is Right for You?
Illustration of business person conducting competitor analysis using a computer and a world map 5 Things You Need to Know About Your Competitors to Manage Risk

    Ready to Talk?
    Contact Us

    We would to hear from you

    Please take a moment to tell us a few things about your needs and someone from our team will reach out to you as soon as possible.

    We would to hear from you

    Thank you for reaching out!

    Someone from our team will get back to you shortly

    We would to hear from you