What’s The Big Idea? Protecting Employer-Owned Intellectual Property

by Pepper Hamilton LLP
Contact

A version of this article was originally published in the December 2012 issue of The HR Specialist. It is reprinted here with permission.

With the year-end holidays fast approaching, many businesses are in the midst of assessing their 2012 performance and planning for 2013. If those plans do not include a review of employment agreements and policies that seek to protect the intellectual property assets of the business, perhaps they should. This year provided two examples of the problems caused by employees whose employment agreements seemingly provided the employer contractual ownership of its copyrights. In this season of gift giving, it seems fitting that the toy and game industry provides the setting for valuable lessons that all employers who seek to protect their intellectual property assets can learn.

This year saw the settlement of high-stakes litigation between the creators of the highly successful “Call of Duty” video game franchise and Activision, the game’s manufacturer. Activision employed the game’s creators, Jason West and Vince Zampella, under a series of employment agreements beginning in 2003. The “Call of Duty” games generated an estimated $7 billion in revenue since the first release in 2003, yet the working relationship between Activision and the “Call of Duty” creators turned contentious. In 2010, after learning that West and Zampella were communicating with rival game manufacturer Electronic Arts, Activision terminated their employment, took the position that West and Zampella breached their fiduciary duties, and refused to pay them bonuses and royalty payments. In response, West and Zampella sued for wrongful termination and sought more than $36 million in damages. Thereafter, Activision filed a countersuit that sought $400 million in damages. The terms of the settlement were not disclosed, but creative control and the intellectual property rights, and the lucrative royalty stream associated with those rights, were key elements of a case that arose out of an employment contract.

The year also saw what should be the final round of the longstanding copyright infringement battle over the “Bratz” doll. Eight years after the lawsuit was initially filed in 2004, toy manufacturers Mattel and MGA Entertainment continued to litigate the intellectual property assignment provisions of a former Mattel employee’s employment agreement. Carter Bryant, a former Mattel employee, first began working on a design for a new doll when he was employed by Mattel. Bryant’s employment agreement included an assignment to Mattel of all inventions (which included other intellectual property rights including copyright) that he conceived at any time during his employment with the company. After Mattel secured a $10 million award in its favor, the Ninth Circuit vacated the award. The Ninth Circuit reasoned that the definition of the word “inventions” in Bryant’s employment agreement did not specifically include the assignment of his “ideas.” Similarly, the Ninth Circuit determined that the phrase “at any time during my employment” in Bryant’s employment agreement was ambiguous and could have referred to the entire time – including nights and weekends – during Bryant’s employment, or it could have only referred to the time that he was working. In the hands of the jury, these seemingly unambiguous terms cost Mattel millions of dollars.

The jury in the second trial found in favor of MGA Entertainment and awarded it a $310 million verdict. In early 2012, Mattel gave up the fight over the copyright infringement issue, but appealed the amount of the $310 million verdict, which included an award of $172 million for misappropriation of MGA’s trade secrets and $137 million in attorneys’ fees and costs. The issues raised by these cases extend beyond the toy and game industry and beyond those employees who are hired to create copyrightable or patentable products. Whether it’s the circumstances surrounding a “for cause” termination, or the scope of the phrase “at any time during my employment,” both the “Call of Duty” and “Bratz” cases demonstrate the importance of protecting intellectual property rights and financial resources with contracts that are clear and specific to the business interests that are intended to be protected. Many employers forego written agreements that assign copyrights to the business and rely upon the Copyright Act’s “work for hire” provision to protect their copyrightable assets. Generally, a “work for hire” establishes the copyright ownership with the employer, rather than the employee. The Copyright Act, however, limits the types of works that are covered. Furthermore, the “work for hire” doctrine does not apply to independent contractors who perform services for a business. Establishing contractual rights, in addition to those set forth in the Copyright Act, to protect company intellectual property rights is a practical step for all employers.

Employment agreements are an appropriate first step in analyzing the strength of an employer’s contractual intellectual property asset protection. The analysis, however, should not end there. Other contracts that are likely to, or should, embody intellectual property rights protection include independent contractor agreements, confidentiality agreements, restrictive covenant agreements, licensing, technology development agreements and technology transfer agreements. So before the next big idea walks out the front door, prudent businesses should invest the time to analyze the strength of their contractual intellectual property rights and implement agreements that could be the difference between recouping or losing millions.

Written by:

Pepper Hamilton LLP
Contact
more
less

Pepper Hamilton LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.