Patent Ownership in Employee Inventions: Drafting Assignment Clauses That Survive Audit and Litigation

Introduction : While the value of a patent is in its utility, it cannot have any value if there is no certainty of ownership. Corporate patent portfolios are overwhelmingly based on employee-invented inventions, and so are the disputes that arise years later, which are not about the merit of the invention but about who owns it. While there is a vesting rule for copyright in several jurisdictions that works created in the course of employment vest in the employer, there is no such automatic vesting rule in Indian patent law. Instead, it's in the general law of contract and, if not, in residue of the theory of master and servant. 

As the employee takes to the workplace, this blog will explore how employee-made inventions should be credited, recorded and reviewed in a corporate IP chain of title. It reviews the statutory landscape in India, compares it with the UK statutory scheme and the US default rule and dissects assignment language, onboarding documents, confidentiality commitments and proof-of-authorship requirements, all of which can be the difference between an audit going or failing and a court ruling. It wraps with tips for drafting in practice for in-house counsel and law firms.

Legal Provisions

A. Statutory Position in India

According to section 6 of the Patents Act, 1970, there are three categories of persons, who can apply for a patent: (i) the true and first inventor; (ii) the assignee of the true and first inventor for the right to apply; and (iii) legal representative of deceased person so entitled.  This means that an employer that has not actually invented the invention can only be an “assignee”, and not simply assumed to be an assignee. The Act does not explicitly state that the “true and first inventor” cannot be a person who imports the invention into India or to whom it is first communicated from outside the country.  Where the application is made by an assignee, the proof of right to apply (usually an assignment deed or a signed declaration), must be attached to the application or be filed within the prescribed period.

The formal requirements for a valid assignment are set out in section 68 : the assignment is not valid unless it is in writing, reduced to a document embodying all the terms and conditions of the parties’ rights and obligations and duly executed. This is more stringent than the regular rules of contract law, oral assignments of patent rights are not valid, even if they are clearly indicated by the conduct of the parties. Registration with the Controller is provided for by section 69. An assignment is not required to be registered as a condition of its validity between the parties, and an unregistered assignment will not be admitted as a document of title in any proceeding unless the Controller or court order to do so, thus if an employer relies on an unregistered assignment, it can lose its proof of ownership in an ongoing court action.  Indian patent law does not even have an analogous default rule to vest the invention on the employer when the employee makes it; it is all dependent on the contract, which is read in conjunction with general law of master and servant.

B. Comparative Position: The UK's Statutory Scheme

Under Section 39 of the Patents Act 1977, a person's invention must be regarded as being made by his or her employer if the invention could reasonably be expected to derive from the employee's normal duties or from duties particularly entrusted to the employee. All other inventions are an employee's. This is required by Section 42; a term in a contract which reduces the employee's rights is not enforceable. Sections 40-41 also provide compensation for employees if a patent is of “outstanding benefit” to the employer. Despite that, courts still apply the “normal duties” test on a fact-intensive basis, and a clear documentation of the normal duties is still necessary.

C. Comparative Position: The US Default Rule

In the United States, patent law starts with a presumption of ownership to the inventor unless it is assigned by an enforceable agreement. The Supreme Court in United States v. Dubilier Condenser Corp. ruled that if an employee is expressly engaged to invent, he or she must assign the patent to the employer, but where the employer is not engaged in the invention, the patent remains in the hands of the employee even if he or she has been using the time and resources of the employer, and the employer only obtains a “shop right”, a royalty-free right to use the invention. This default is essential when an employer, who would like to own, but not simply use, its employees’ inventions, has an invention to assign.

Legal Analysis

A. Present Assignment Versus a Promise to Assign

The most consequential drafting choice is tense. In Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, Inc., a researcher agreed to assign to Stanford any inventions created after the date of the original agreement and signed a second agreement with a predecessor of Roche in which he agreed to assign and did assign his rights.The present-tense language transferred the researcher's expectant interest at the moment of invention, the courts ruled, whereas Stanford's “agree to assign” was simply a promise that needed to be followed by an additional step of transfer. 

The present assignment was first signed, so it took precedence, even though it was signed later, leaving Stanford without the ownership that it assumed it had.

Since then, there have been several Federal Circuit decisions that affirm this. The university bylaw in Omni MedSci, Inc. v. Apple Inc. was not an operative transfer of rights, but merely an expression of future disposition, permitting the inventor to sell or otherwise assign his rights. A clause meant to transfer rights automatically should use self-executing, present-tense language, “hereby assigns” and not “shall assign,” “agrees to assign,” or “shall be the property of,” which create at most a future obligation. Many drafters include both “hereby assigns and agrees to assign” to include existing and after-arising assignments, but there is some ambiguity as to which clause affects which invention.

B. Formalities Under Indian Law: Writing, Execution, Registration

The writing and execution requirement in Section 68 is not simply good practice, but is the entire foundation of the employer's title because Indian law provides no default allocation. It should be a standalone clause, rather than a reference to “inventions made in the course of employment.” Employers should also make an assignment by Form 16 when each disclosure is made and each application is filed, instead of waiting for a transaction or dispute to trigger the assignment. By then the inventor may have already departed the company or be hard to reach for a confirmatory signature. 

C. Onboarding Documentation and Proof of Authorship

In India, a title security is dependent on the assignment clauses in the employment contracts, signed IP policy acknowledgements, standing invention disclosures and dated notebooks or version control records of conception and reduction to practice. The significance of proof of authorship is that the Indian courts recognize the “true and first inventor” as the one who used his or her “skill and judgment” to make the invention, rather than just following a known process. Late-stage validity challenges and competing claims are caused by sloppy records, incorrect inventor identification (by omission/over-inclusion).The property right is vested in an unnamed but genuine co-inventor and may be revived even if he or she has been forgotten. 

Relevant Case Laws

V. Manicka Thevar v. Star Plough Works, AIR 1965 Mad 327 (India): The Madras High Court ruled that a “true” and “first” inventor is one who has made out the invention by “genuine skill and judgment”, not the one who merely copied off the work of others or followed instructions.

Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, Inc., 563 U.S. 776 (2011) (USA): An agreement to assign rights in the future did not automatically transfer the rights; instead, a present assignment was preferred to a previous promise to assign.

United States v. Dubilier Condenser Corp., 289 U.S. 178 (1933) (USA): The employer has no interest in the invention other than the non-exclusive “shop right” unless the employer was engaged to create the invention.

Niranjan Shankar Golikari v. Century Spinning and Manufacturing Co. Ltd., AIR 1967 SC 1098 (India): A reasonable negative covenant of exclusivity and confidentiality, which do not impose too harsh a restraint, and are not unconscionable or oppressive does not violate Section 27 of the Contract Act while in employment.

LIFFE Administration and Management v. Pavel Pinkava, [2007] RPC 30 (Court of Appeal, England and Wales): Confirmed that only Sections 39-43 of the Patents Act 1977 apply to employee inventions, and that an employee's responsibilities might change so that relying on just the original written contract would be hazardous.

Practical Implications

The absence of an automatic statutory allocation under the India scheme places a far greater burden of documentation on both local and multinational entities than under the UK scheme. In the context of mergers and acquisitions as well as licensing transactions involving licensing, during due diligence unknowns are uncovered including unsigned or inadequate contracts, unregistered assignments and inventors who have departed and for whom no further documentation can be obtained.

Such issues could result in significant delay and a downwards revision of purchase price in the case of merger and acquisition transactions, and in licensing transactions could result in a single expensive remedial assignment negotiated from a position of extreme weakness at a late stage in the transaction, at a time when the inventor has long since left the University or company employing him. In disputes, such as patent invalidation actions or patent infringement actions, a party’s standing to sue is dependent upon a chain of title which has been maintained without interruption. Accordingly, a party faced with a meritless patent claim would seek to attack the claimant’s chain of title in the hope of uncovering an unregistered assignment or other similar weakness. 

Conclusion

Employee invention does not automatically vest your company with ownership rights in India; it must be carefully drafted and documented at the time of invention to give the company these rights. As a group, the assignment clause, onboarding acknowledgment, confidentiality undertaking and disclosure record constitute the entire evidentiary basis of a company's patent portfolio, absent statutory default.

Do not use future-dated language such as “shall assign” this is considered a promise and not a present assignment. Complete section 68 by signing a written assignment; complete section 69 by filing assignments in advance on Form 16. Establish a protocol for recordkeeping that is contemporary to the start of the contract and maintain confidentiality separate from non-compete clauses, and don't presume that everything is an assignment, make it an explicit present assignment with additional assurances clauses. Last but not least, consider the IP chain of title as an on-going internal audit process and not just a due diligence checklist.

Author: Dhruv Minotra in case of any queries please contact/write back to us via email to content@khuranaandkhurana.com or at  Khurana & Khurana, Advocates and IP Attorney.

Endnotes

1. Patents Act, No. 39 of 1970, s. 6 (India); United States v. Dubilier Condenser Corp., 289 U.S. 178, 187 (1933).

2. Patents Act, No. 39 of 1970, s. 6(1) (India).

3. Patents Act, No. 39 of 1970, s. 2(1)(y) (India).

4. Patents Act, No. 39 of 1970, s. 7(2) (India); Patents Rules, 2003, r. 10 (India).

5. Patents Act, No. 39 of 1970, s. 68 (India).Ibid.; see also Patenevo, Patent Assignment and Transmission in India Under Sections 68 and 69 of the Patents Act, 1970 (2026).

6. Patents Act, No. 39 of 1970, s. 69(5) (India).

7. Patents Act, No. 39 of 1970, s. 6 (India) (containing no provision automatically vesting employee inventions in the employer).

8. Patents Act 1977, c. 37, s. 39(1)-(2) (UK).

9. Patents Act 1977, c. 37, s. 42 (UK).

10. Patents Act 1977, c. 37, ss. 40-41 (UK).

11. LIFFE Admin. & Mgmt. v. Pavel Pinkava, [2007] RPC 30 (Eng. & Wales C.A.); Prosyscor Ltd v. Netsweeper Inc & Ors, [2019] EWHC 1302 (IPEC) (Eng. & Wales).

12. Bd. of Trs. of the Leland Stanford Jr. Univ. v. Roche Molecular Sys., Inc., 563 U.S. 776, 786 (2011).

13. United States v. Dubilier Condenser Corp., 289 U.S. 178, 187-88 (1933).

14. Bd. of Trs. of the Leland Stanford Jr. Univ. v. Roche Molecular Sys., Inc., 563 U.S. 776 (2011).

15. Bd. of Trs. of the Leland Stanford Jr. Univ. v. Roche Molecular Sys., Inc., 583 F.3d 832 (Fed. Cir. 2009), aff'd, 563 U.S. 776 (2011).

16. 563 U.S. at 786-88.

17. Omni MedSci, Inc. v. Apple Inc., 7 F.4th 1148 (Fed. Cir. 2021).

18. Omni MedSci, Inc. v. Apple Inc., 7 F.4th 1148, 1154 (Fed. Cir. 2021).

19. Ken Adams, Assigning Future Rights, Adams on Contract Drafting (Oct. 1, 2021), discussing the ambiguity of hybrid “hereby assign and agree to assign” formulations.

20. Patents Act, No. 39 of 1970, s. 68 (India).

21. Patents Act, No. 39 of 1970, s. 69 (India); Patents Rules, 2003, Form 16 (India).

22. V. Manicka Thevar v. Star Plough Works, AIR 1965 Mad 327 (India).

23. Patents Act, No. 39 of 1970, ss. 6, 25, 64 (India).

24. LexOrbis, Rights of Unnamed Inventor in a Patent (2022), discussing the concept of “inchoate property” in an invention pending a patent application.