That Was My Idea!

As an employee, you want to do what’s best for your employer and your company. Consequently, you may suggest or propose more efficient ways of doing business or maybe a new idea in general to help the business and its profits. But what if you don’t get credit for such ideas or suggestions? Are you entitled to be compensated? Maybe, maybe not.

If you believe that you are entitled to receive compensation or recognition for an idea of yours or something you suggested, it is vital to get informed and know your rights as an Employee to ensure your legal rights are protected. Here’s a section of my book “The Employee Rights Handbook” that deals with just that.

Employee Inventions and Suggestions

Workers frequently create valuable suggestions, comments, ideas, designs, manufacturing processes, and inventions. These suggestions often lead to money-saving and money-making devices. If the invention is created while on the job or is used by an employer, is the company obligated to pay the employee for the use of such an idea? Who owns the device or invention created? This section will clarify ambiguous law and give you a better understanding of how to avoid problems and protect yourself in this area. To be able to implement many of the strategies contained herein, it is important to first understand the following basic concepts.

WORK FOR HIRE. A work for hire is defined as a work prepared by an employee within the scope of his or her employment or work specifically ordered or commissioned by the employer which the employee creates in reliance upon an express agreement. Thus, for example, when an employee is specifically engaged to do something (such as solve a problem, develop a new product, process, or machine), he or she is provided with the means and opportunity to resolve the problem or achieve the result and is paid for that work, then the employer is generally entitled to the fruits of the employee’s labors. If a worker creates an invention while on the job, therefore, the invention may be owned by the employer under this legal principle.

THE SHOP RIGHT CONCEPT. If an employee is not hired to invent or solve a particular problem, does the employee have the right to claim any rights to his or her discoveries? Maybe, depending upon the particular facts involved. For example, under the shop right concept, when an employee makes an invention or discovery that is outside the scope of his employment but utilizes the employer’s resources (equipment, labor, materials, or facilities) in making the invention, that invention may be owned by the employee subject to a “shop right” on the part of the employer. This shop right in certain instances may give the employer a nonexclusive, irrevocable license to use the invention indefinitely, without having to pay a royalty.

VALUABLE IDEAS AS OPPOSED TO PATENTABLE INVENTIONS. Using a hypothetical case, Gwen develops a manufacturing process during nonworking hours which she thinks will save the company money. She tells her boss and the idea is incorporated into the company’s production process. Gwen is not compensated for the idea. She resigns and sues to recover a percentage of the money saved by the idea’s use. Gwen’s case is not as strong as it appears. The reason is that ideas, plans, methods, and procedures for business operations cannot normally be copyrighted. This is also true with respect to certain ideas as intellectual property. The law generally states that ideas belong to no one and are there for the taking. Additionally, an idea is presumed to be a work made for hire and the property of the employer if an employee offers it voluntarily without contracting to receive additional compensation. Gwen would have a stronger case if she could prove that the idea was her own original, unique creation not requested or developed while working on company time or on the employer’s premises, and that it was furnished because of a specific promise or understanding that she would be promoted or compensated once it was implemented by the employer. Many workers are unknowingly exploited because they give away their ideas without understanding their rights. Review the following strategies if you wish to avoid being exploited in this area.

STRATEGY 1: Articulate your idea, method, or process in writing. This is essential because it is difficult to prove you are the creator of a valuable idea unless it is set down on paper.

STRATEGY 2: Be sure the writing is detailed and specific. This can increase your chances of proving the idea is a protectable property interest. For example, if you write a proposal for a unique and original television show, be sure to fully describe the characters, budget, and script dialogue rather than briefly discussing the concept of the show.

STRATEGY 3: Avoid volunteering ideas. In one famous case a homemaker mailed an unsolicited cheesecake recipe to a baking company. The recipe was used and became a popular moneymaker. Although the woman sued the company for damages, she lost. The court ruled that no recovery was obtainable because the homemaker voluntarily gave her idea to the company. The lesson to be learned from this case is clear. Since employers generally have no obligation to compensate employees for ideas, inventions, or suggestions that are conveyed voluntarily, think twice before doing this, particularly if company policy states that there is no obligation to pay anything if the idea is used, or that any payments made will be purely discretionary (i.e., not linked to any predetermined formula such as a percentage of specific company savings, revenue, or profits generated from the idea).

STRATEGY 4: Avoid signing any agreement or contract with work-for-hire provisions. Some companies request job applicants and employees to sign agreements stating that all inventions authored or conceived by the employee belong to the employer. Avoid this whenever possible.

STRATEGY 5: Negotiate a predetermined method of compensation and articulate your understanding in writing. For example, the agreement should mention the type of idea being conveyed and the manner of compensation for its use, and should stipulate that the employer will maintain the confidentiality of the idea and will not disclose, assign, or transfer the idea or its value to anyone else without your consent. The sample agreement below illustrates these points in greater detail. If compensation is difficult to ascertain at the time the acknowledgment is negotiated, the agreement can state that the employee will be compensated in a manner mutually agreed upon by the parties and that the idea will remain the property of the employee or individual until such formula is determined.

For a full depth analysis on this topic and many more, visit to purchase “The Employee Rights Handbook” today!

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