Intellectual Property Ownership: Designer vs. Client 3

I'm not a PE, nor do I intend to become one (at this point), so this is a DESIGN business.

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Don't worry about what we think. Worry more about what the code says in the state you do business.

I'm certainly no lawyer but I haven't seen anything in what I believe to be the relevant chapters/parts of the Tennessee State Code that would define this ownership - only that it must be defined. In a prior life, I negotiated many contracts including Joint Development Agreements (in a totally different field) where we explicitly defined limits of IP ownership (working with corporate attorneys) and never heard mention of the law giving favor to one party over the other - except in the case where no other agreement was in place.

Once you get around to getting insurance, one of the questions on the 25-page form (that they use to establish your rate by the way) will be "Do you ever do work without a contract?" or words to that effect. Answer "yes" to that one and your insurance cost DOUBLES if they will even insure you (and they probably won't, I was rejected by a dozen firms before I found the one I'm using now). Why? Because not having a contract dumps any dispute into the he-said-she-said quagmire. How does that apply to your question? If you always have a contract for services, that contract must spell out explicitly who owns any IP developed. There is no code, it is just what is in the contract. I've had contracts where I retained all IP and contracts (for a MUCH higher fee) where the client retained all IP.

One contract said that if the tests of the product proved to be successful then the client had one year from the date the on the test-results-report to file a patent or all IP rights reverted to me. They filed the patent at 11 months 2 weeks. No problem, I was well paid to develop it, but I would have filed in 2 weeks and one day if they hadn't.

I was in a class last week put on by my state's Board of Licensure for Professional Engineers and Professional Land Surveyors. We talked a lot about what constitutes "holding yourself out to the public as an Engineer" (and therefore being required to have a license). One of the cases presented was a company called XYZ Design (at least on the slides we were shown) that did calculations and drawings for Architects and Structural Engineers. Someone turned the company in to the board and the finding was that the "Design" firm was on the wrong side of the line and had to cease and desist or face very Draconian fines and penalties (up to and including the possibility of jail time). They get really cranky on Structural issues and probably would not be so harsh about product-design, but who knows for sure?

David Simpson, PE
MuleShoe Engineering
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David - thanks for your reply, that's exactly the type of information I was looking for and jives with my prior experience. I expect I'll end up with an a la carte ontract with add-on clauses to use/remove as needed.

Your comment about the customer keeping IP for a higher price is one specific idea that I was wondering about. What is a much higher fee? Double? I suppose it depends on the perceived value of any potential IP generated. The 1-year to act concept is one I hadn't considered - but that's interesting as well. If you missed that one by only 2 weeks, you were probably already moving with paperwork - that's close!

As far as putting myself out as an engineer, I am very aware of the thin line and keeping myself on the safe side of it. That's not to say that I could never inadvertently step over it, just that it's something I actively consider. So far, and in the foreseeable future, all of my work is mechanical product design as opposed to anything civil/structural which makes it a little easier. All of the TN code around engineering is clearly related to "public safety" and structural/civil matters. If I get anywhere near that stuff (may have an opportunity to do some millwork design for a construction industry friend), I will engage an engineering firm to review and sign all drawings.

Again, thanks for the feedback - very much appreciated.

Mikah B.

What The Tick was telling you has nothing to do with your proprietary designs...it has to do with whether the engineering board of the State of Tennessee considers that you might be doing engineering work. "Design" often constitutes engineering of said design, even if it doesn't include such things as calculations. Consider that even an opinion often constitutes the practice of engineering. That's why you need to make sure that what you're doing doesn't fall within those parameters or you'll find yourself in deep do-do with the board.

Now for the contractual issue...The ownership of intellectual property is a contractual issue. Most licensed engineers will not give up ownership of documents or ideas as they may incur liability as a result of the use of such documents or ideas. If you give up ownership of intellectual property, make sure your liability stops there, with an indemnification for its use or re-use. Otherwise, make sure you maintain ownership of all documents, designs, ideas, or patents. Get with an attorney on these issues to develop contractual terms and conditions in your contract.

As zdas04 noted, you need to use standard contracts with appropriate terms and conditions of your services and the product you deliver.

Thanks for the clarification Ron - I was reading The Tick's response in the context of my original question and apparently missed his point. As I mentioned above, I'm quite aware of the laws and I believe I can do what I've set out to do and stay well on the good side of the issue. The only prosecuted cases I've been able to find here in TN relating to this classification question seem to be very grievously on the wrong side of the line - up to and including companies with "Engineering" right in their name and no PE on board!

I had not considered the liability issue with IP that I generate - a good reason to default my contracts to retain ownership of any IP I might generate.

Mikah B.

You do not have to be on the wrong side to get dragged into a lawsuit. You still need insurance against "probable" liabilities. Proving innocence is also very expensive and not always successful.

Rafiq Bulsara

Only thing that counts is what was agreed upon in a written and signed contract between the parties doing the business.



Rafiq Bulsara

The fee stayed the same, but I charged them for all the hours I worked on the idea (and since I get paid for thinking about stuff, that was a lot of hours). If I end up owning the IP, I only charge for the time spent on their behalf.

The easiest example is teaching classes. I'm pretty anal about the content of my presentations so I tend to spend about 20 times as long developing a talk as I spend putting it on. So if I'm developing a class for a client and they end up owning the material, a 4 hour class usually costs them 84 hours regardless of how many people they send to it. On the other hand if I'm presenting material that I own and developed on spec, I charge (for a 4 hour class) the equivalent of 2.5 hours per student-I recover my costs with the 32nd student and do pretty well after that.

For a patentable product the line is a bit fuzzier, but typically if I'm developing an idea that doesn't have a client then I eat the time I spend on it. If a client later wants to use or modify it then I typically do the work as a hard dollar bid that is around 3 times my hourly rate (i.e., I look at the job and estimate 15 hours, I multiply that times two, add a contingency, and quote it around 45 hours--I've never failed to win a hard-dollar bid even at that, maybe I'm not charging enough). I would never lie about the hours I spend on a client's project, and I have MSA's with most of my clients that fix the hourly rate for the duration of the Master Service Agreement, but nothing precludes a hard dollar bid.

Another thing that I picked up at last week's course is that (at least in NM) the board's enforcement department is one retired Engineer and two administrative assistants. They don't ever initiate an enforcement action without a complaint from the public. They simply don't have the staff. That says that a person could probably stay below the radar for an entire career wobbling on both sides of the line. But if you ever have a pissed-off client, the chances of his calling the Board are not trivial.

David

I know that with copyright, the copyright belongs to the author the moment a work is published.

Considering the language in most employment contracts, I believe the same is true for patentable IP. Ownership of an idea rests with the originator or inventor and is then transferred.

One thing that can not be "traded" is the identity of the actual inventor. A patent can be owned by a third party, but the actual inventor(s) must be listed as inventors. A company can not be listed as an inventor.

That is true. My name is on the patent my client filed, but the assignment that I signed was just about the most one-sided document I've ever signed (in my mind, they owned it so I didn't care about assigning any potential rights I might think I retained to them).

David

I worked as head of department at large engineering consultancy. Our standard terms and conditions had clause claiming all IP in lieu of any other claim and had term limitations similar to described above (we own unless claimed within 12 months...) It also went on to claim any allowable tax reimbursement under any applicable program.

This clause garnered more questions and rejection than any other term and condition or any other content in our proposals including price. In my tenure, no proposal was signed into contract without the client changing this clause: in other words we were 0% effective claiming IP ownership.

Simply put, we learned claiming other's IP, even if they were not IP savvy, is guaranteed method to alienate a client.

Having said that, reading myriad proposals and RFQ's it is standard practice in every term and condition to attempt to claim IP and associated tax reimbursement. Lawyer's seem to apply "doesn't hurt to try" mentality. In fact, in practice I found it to be both foolish and several times very antagonistic to some companies. And as stated, 0% effective.


If you are working on a design for your clients already patented device then your work would probably be materially covered by that patent.

If you discover, and begin patent process, based on other discovery while working on your clients project then it would be highly advisable, probably, to first negotiate terms and conditions with them. Your patent application would necissitate some reference to your client work in the Prior Art or the Background Of The Invention.

pierdesign and others....don't confuse patentable IP with other forms of IP. While you might give up deemed proprietary rights and assignments, don't give up work product rights unless such infringes on the above.

We own our documents. When we produce a design, report, evaluation or other under contract, we maintain such ownership and the re-use is prohibited without our permission. We are about 95% successful in maintaining this, without alienation.

It gets a lot more sticky with proprietary rights and patentable IP. That's where "standard" terms and conditions don't usually work well.

JACKPOT! I just got a chance to talk to our patent attorney about this.

Ownership rests with the inventor. Inventorship is where the judgment call must be made.

If client X requests, "Make a machine that assembles my widget, please.", nearly all your work is your invention.

If client X requests, "One of these machines, but bigger and in blue.", you don't own much of anything.

Honesty may be the best policy, but insanity is a better defense.

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Tick - thanks for that tidbit straight from the attorneys mouth! The information y'all have provided in this thread has been enlightening and makes it clear to me that this isn't a trivial question. I've got some thoughts on how to tackle it going forward now.

The situation that got me thinking about this was along the lines of:

Client X presents a patented product to me and requests that I improve the design to make it smaller, lighter, and more manufacturable. In the process, I devise a new type of fastener (sort of) that has potential applications well beyond the scope of clients product. So, who owns the fastener?

It's easy in this particular case because client X is a friend and in fact suggested to me that the fastener concept was a unique and patentable concept in and of itself. But, had this been for another client, I could see myself being in a real pickle with no contract in place!

Ron,
You make a very good point about retaining ownership of documents. I wish I could say we are as successful as you in retaining ownership. Many of our clients baulk at that, which causes us to insist on indemnification along with a statement that we retain ownership of all of our standard details.

Alan
“The engineer's first problem in any design situation is to discover what the problem really is.” Unk.

alehman...you are correct to require indemnification and ownership of standard details. It amazes me that clients can be so arrogant as to assume they can take the cumulative experience of a career that goes into a design and usurp that for their purposes. They assume when they are paying our fees they are "buying" our design...not true. They are paying for our time dedication to their benefit.