employee inventions: anticipating, incentivizing and managing employee innovations from a legal...

Employee Inventions: Anticipating, Incentivizing, and Managing Employee Innovations from a Legal Point of View

Daniel A. Nye

Senior Attorney

Alaska Airlines/Horizon Air

IP Law Summit

September 15-17, 2011

Red Rock Resort

Las Vegas, Nevada

Alaska Air Group• Alaska Airlines® and Horizon Air®, subsidiaries of

Alaska Air Group (NYSE: ALK), together serve 90 cities through an expansive network in Alaska, the Lower 48, Hawaii, Canada and Mexico.

• Alaska Airlines ranked “Highest in Customer Satisfaction Among Traditional Network Carriers” in the J.D. Power and Associates 2008, 2009, 2010 and 2011 North America Airline Satisfaction StudiesSM

• For reservations, visit www.alaskaair.com. For more news and information, visit the Alaska Airlines/Horizon Air Newsroom at www.alaskaair.com/newsroom

Background Employer/Employee Law of Inventions

Three Basic Rules:• Background common law (and many statutes) provide that

an individual who invents something entirely on his or her own retains complete ownership of that invention.

• Employers and employees can lawfully contract that an employee’s inventions made while at the workplace and relating to the employer’s business will belong to the employer.

• Inventions made wholly outside the workplace and unrelated to the work place and employer’s business will generally still belong to the inventor in spite of any contract.

Managing Innovation

Issues and Tools:

Employment Contract

Consideration

• At Initial Employment

• After Initial Employment

Contract Formalities:

Research & Development - Specific Hiring

General Hiring

Key Issues:

• Prior Inventions

• Disclosure Requirements

• Pre-Invention Assignments

• Other drafting considerations

See Sample of Invention Agreements (Exhibit A)

At-Will Employees

Intellectual Property Employment Policies

Statutory Background

California StatuteCALIFORNIA CODES

LABOR CODE

SECTION 2870-2872

2870. (a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer's equipment, supplies, facilities, or trade secret information except for those inventions that either:

Relate at the time of conception or reduction to practice of the invention to the employer's business, or actual or demonstrably anticipated research or development of the employer; or

Result from any work performed by the employee for the employer.

(b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.

2871. No employer shall require a provision made void and unenforceable by Section 2870 as a condition of employment or continued employment. Nothing in this article shall be construed to forbid or restrict the right of an employer to provide in contracts of employment for disclosure, provided that any such disclosures be received in confidence, of all of the employee's inventions made solely or jointly with others during the term of his or her employment, a review process by the employer to determine such issues as may arise, and for full title to certain patents and inventions to be in the United States, as required by contracts between the employer and the United States or any of its agencies.

2872. If an employment agreement entered into after January 1, 1980, contains a provision requiring the employee to assign or offer to assign any of his or her rights in any invention to his or her employer, the employer must also, at the time the agreement is made provide a written notification to the employee that the agreement does not apply to an invention which qualifies fully under the provisions of Section 2870. In any suit or action arising thereunder, the burden of proof shall be on the employee claiming the benefits of its provisions.

Washington StatuteRCW 49.44.140

Requiring assignment of employee's rights to inventions — Conditions.

(1) A provision in an employment agreement which provides that an employee shall assign or offer to assign any of the employee's rights in an invention to the employer does not apply to an invention for which no equipment, supplies, facilities, or trade secret information of the employer was used and which was developed entirely on the employee's own time, unless (a) the invention relates (i) directly to the business of the employer, or (ii) to the employer's actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by the employee for the employer. Any provision which purports to apply to such an invention is to that extent against the public policy of this state and is to that extent void and unenforceable.

     (2) An employer shall not require a provision made void and unenforceable by subsection (1) of this section as a condition of employment or continuing employment.

     (3) If an employment agreement entered into after September 1, 1979, contains a provision requiring the employee to assign any of the employee's rights in any invention to the employer, the employer must also, at the time the agreement is made, provide a written notification to the employee that the agreement does not apply to an invention for which no equipment, supplies, facility, or trade secret information of the employer was used and which was developed entirely on the employee's own time, unless (a) the invention relates (i) directly to the business of the employer, or (ii) to the employer's actual or demonstrably anticipated research or development, or (b) the invention results from any work preformed [performed] by the employee for the employer.

[1979 ex.s. c 177 § 2.]

RCW 49.44.150

Requiring assignment of employee's rights to inventions — Disclosure of inventions by employee.

Even though the employee meets the burden of proving the conditions specified in RCW 49.44.140, the employee shall, at the time of employment or thereafter, disclose all inventions being developed by the employee, for the purpose of determining employer or employee rights. The employer or the employee may disclose such inventions to the department of employment security, and the department shall maintain a record of such disclosures for a minimum period of five years.

[1979 ex.s. c 177 § 3.]

Alaska Airlines System Regulations2.130 INTELLECTUAL PROPERTY

Alaska Airlines and Horizon Air are committed to protecting any potential intellectual property an employee creates consistent with the general rules outlined below.

•  • Intellectual Property • Alaska Air Group as a general rule is the owner of all rights to any invention created by an employee or group of employees that use

Alaska Airlines or Horizon Air equipment, supplies, facilities, time or trade secret information while developing that invention. The same general rule applies if the invention is created away from the workplace but relates directly to the business, anticipated research and development, or results from any work performed by the employee for Alaska Airlines or Horizon Air. Any such invention is viewed by Alaska Air Group as “Confidential Information” and as such is governed by Confidentiality Agreements in place between Alaska Airlines or Horizon Air and the employees of either company and between either of these companies and outside third parties.

•  • Alaska Air Group also recognizes that under current Washington law, the general rule outlined does not apply “ to inventions for which

no equipment, supplies, facility, or trade secret information of the employer was used and which was developed entirely on the employee’s own time, unless (a) the invention relates (i)directly to the business of the employer, or (ii) to the employers actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by the employee for the employer” (RCW 49-44-140 (3)).

Confidentiality Agreements

Employee Handbooks, Policy Statements

Incentivizing Innovation

Monetary Incentives

• Tiered Rewards

• Royalties

• Funding for Initial Innovative Activities

Non-Monetary Incentives

Public Acknowledgement

Other Non-Monetary Incentives

Procedures to Promote Program and Encourage Innovation

• Idea Submission Drop Boxes/On Line Submission System

• Innovation Workshops

• Universal Award System for Ideas and Innovations

• Confidentiality

• Senior Management Leadership

• Role of Inside and Outside Intellectual Property Counsel

Case Studies from Alaska Airlines

Existing Alaska Air Group Patents

Airport of the Future ® Airline Two- Step Check-In System and Method

Facial Recognition Software

Remote Airline Passenger Check-In (“Web Check- In”)

Current or Recent Alaska/Horizon Projects:

Jet Engine Service Training Device (Patent applied for)

Onboard Device Carrying Case (licensed to employee)

Various Mobile Phone Applications (Complex Compliance, Data Security, Legal Issues)

Post-Invention Negotiations

• Obtain Clear Right to Intellectual Property

• Retain Rights to Company as Needed

• Possible License to Innovator or Third Party Designee

• Other Issues

(Sample Assignment and Licensing Agreements Attached as Exhibit B)

Smart Phone Applications

Frequent Current Source of Employee Ideas and Innovations– Relative Ease of Creation and Innovation

– Ease of Sharing

– Use of Intellectual Property, Trademarks, other IP

– Compliance Issues

– Data Privacy and Security Issues

– Difficulty in Identifying Owners

– Employer/Employee Conflict Source

– Mobile Phone App Assessment and Council Charter (Attached as Exhibit C)

Daniel Nye, Senior Attorney

Daniel Nye specializes in complex commercial transactions and intellectual property and marketing issues for Alaska Airlines and Horizon Air. In this capacity he regularly assists with aircraft and aircraft equipment purchase, sale and finance transactions, with company mergers and acquisitions, inter-airline agreements, fuel and fuel consortium transactions, intellectual technology and alaskaair.com related matters.

Nye oversees the intellectual property portfolio of Alaska Air Group, including patent and trademark licensing and litigation.

Nye is also responsible for marketing and sponsorship agreements, and cargo, onboard service and immigration and visa-related matters.

Nye was selected as a Diversity & Inclusion Integration Leader and serves as liaison to the GLOBE Employee Resource Group in this capacity as well.

Nye joined Alaska Airlines in 2007, after spending 9 years practicing in Dubai and Saudi Arabia, most recently with the London-based international law firm, Trowers & Hamlins. Prior to his Middle Eastern tenure, Nye was a principal for seven years with Graham & James/Riddell Williams in Seattle, and before that was founder and managing attorney of the Seattle office of the Portland-based law firm, Ater Wynne.

Nye holds a Juris Doctor and a B.A (Journalism) degree from the University of Oregon, and an M.A. in Scandinavian Languages and Literature from the University of Washington.

Nye is fluent in the Scandinavian languages. He is a member of the Washington and Oregon State Bars. A native of Shelton, Washington, Dan lives in West Seattle and has two grown daughters.

Exhibit A Sample Assignment and Licensing Agreement

Exhibit BInvention Assignment and License Agreement

Exhibit C Mobile Phone App Assessment and Council Charter