Work Made For Hire Agreements Under Delaware Law

With the increasingly rapid changes in today’s technological business world, companies are  faced with many new challenges to protect their intellectual property from competitors. This includes developing measures to protect the intellectual property and work created by employees. To this end, many employers require employees to assign over all of their
youngconaway intellectual property rights. These so-called “work made for hire” agreements generally grant the employer ownership of any intellectual property applicable to the employer’s business and developed by the employee during his employment.

A recent case decided by Delaware’s federal district court illustrates the importance of such agreements. In Le v. City of Wilmington, C.A. No. 08-615-LPS, a City employee sued the City for copyright infringement. The employee’s suit related to an Instant Ticketing program designed by Le for the City’s Department of Licensing and Inspection. The program was designed to allow the City to track license violations electronically, rather than through paper tickets. Le alleged that he had developed the program at home, on his own time, with the intention of marketing it to the City and other municipalities.

Subsequently, the City eliminated Le’s job, and Le sued the City for copyright infringement when it continued to use the Instant Ticketing program. While the lawsuit was eventually resolved in favor of the City, it likely could have been preempted entirely by a well-drafted intellectual-property-assignment agreement. In the absence of such an agreement, the City was forced to rely upon federal copyright law to prove that Le’s program was a “work made for hire.”

While targeted intellectual-property-assignment provisions are important to many businesses, there is an increasing trend to draft broad provisions, granting the employer ownership of all intellectual property developed by the employee during his employment, regardless of its applicability to the employer’s business. These broad ownership provisions pose considerable legal problems, and should be avoided, particularly in Delaware.

Delaware law prohibits employers from requiring assignment of employee work that is created entirely on the employee’s time without use of any employer resources unless the work (1) relates to the employer’s business or research and development, or (2) results from work performed by the employee for the employer. 19 Del. C. § 805. Any policy in violation of this statute is expressly declared to be void as against public policy.

Only one case has addressed the restrictions imposed by 19 Del. C. § 805. In Agilent Technologies, Inc. v. Kirkland, C.A. No. 3512-VCS, the Delaware Court of Chancery cited the statute as providing the outer limits of an acceptable assignment agreement. The Court then went on to find that the employee-defendants had violated their contractual obligations to assign work-related inventions to their employer. The Court then ordered the defendants to either (1) withdraw their pending patent applications covering the relevant work, or (2) assign the patents to their former employer.

The Le and Agilent cases illustrate the benefits provided by a targeted intellectual-property-assignment agreement. However, employers should be careful not to get overly ambitious with such agreements. A proper assignment agreement will grant the employer ownership of all employee-created work, related to the employer’s business, research or development, and created during the period of employment. Anything broader may be unenforceable under Delaware law.

Lauren Moak

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