When do employers own the IP derived from an employee’s work?

Employee Preston accepted employment at Marathon Oil Company under a written contract with an express “at-will” term of employment. After Preston began employment, Marathon asked Preston to sign a separate written employment agreement that, among other things, assigned to Marathon all “Intellectual Property” defined in the agreement to mean “all inventions, discoveries, developments, writings, computer programs and related documentation, designs, ideas, and any other work product made or conceived by EMPLOYEE during the term of employment with MARATHON which (1) relate to the present or reasonably anticipated business of MARATHON GROUP, or (2) were made or created with the use of Confidential Information or any equipment, supplies, or facilities of the MARATHON GROUP.”

A dispute arose over ownership of an invention and the question of whether the second employment agreement purporting to assign all Intellectual Property to Marathon was enforceable based solely on the consideration of continued employment or whether some new consideration was required given that Preston had already signed a prior agreement for the same consideration. Although the agreement expressly said it was governed by Ohio law, the parties agreed that Wyoming law applied pursuant to appropriate choice of law rules. The U.S. District Court certified the question to the Wyoming Supreme Court which confirmed that continued employment was sufficient consideration to support the second employment agreement. Thus, the U.S. District Court confirmed that the assignment was enforceable against Preston and that Marathon was the owner of the Intellectual Property in dispute.

Note: Although the question of creation of certain intellectual property rights may be governed by federal law, contract rights are generally governed by state law. Be sure you know what state law will apply to your employment contracts and how that might affect your rights as an employer or employee, particularly when it comes to ownership of intellectual property created by an employee within the scope of his or her employment.

Case Name: Preston v. Marathon Oil Company, 684 F.3d 1276 (Fed. Cir. 2012)

Date: July 10, 2012

Jurisdiction: United States Court of Appeals for the Federal Circuit

Case Type: Contract, Patent Assignment, Employment At-Will

Case Status: Appeal after bench trial

Trial Court: Second employment agreement was enforceable and employee breached by not assigning

On Appeal: Second employment agreement was enforceable and had the effect of automatically assigning future Intellectual Property without need for a further assignment from employee.