Got a hot idea of your own for an IT product? Your employer can wind up as friend or foe, depending on how you handle matters.
Today's cybercentric economy is fueling IT innovation left and right. Any day now, it might be your turn to bolt awake in the middle of the night with your own technology idea and yell, "Aha!"
If you're receiving a paycheck from a permanent employer when your breakthrough idea strikes, you must tread carefully to protect your idea so you can profit from it. You have several ways to gain from your idea, all of which carry a common underlying theme: Obtain solid legal advice at every turn.
The first thing you must do is check your employment contract to see if you have signed away invention rights to your employer, says Marc Blatt, principal at the Law Offices of Marc Blatt in Los Angeles.
At a minimum, if you think you want to market your idea or prototype on your own, it's important that you conduct your development exclusively on your own time using only your own resources. The minute an employer finds an e-mail or a fax that relates to the idea, the strength of your case for ownership will founder, Blatt says.
In addition, different states have different laws that you should investigate.
You can generally do this by checking the labor laws on a state's Web page. In California, for example, where information technology innovation is rampant, inventions are protected by the California Labor Code and are patentable by the employee, provided that you abide by the do-it-on-your-own-time rule. In many other states, however, employers own anything employees think up, create or develop while in their employ.
Before blabbing about your brainchild, then, it makes sense to take your employment contract to an intellectual property attorney. If you discover that chances are strong that you do indeed own the rights to your idea, you have several options for profiting from it.
Market It Yourself
The development, production, marketing and sales strategies you use will depend to a great extent on the complexity of your specific idea, says Evan Brown, a computer programmer in Cranfills Gap, Texas. Brown is currently in litigation with his former employer, DSC Communications Inc., over ownership rights to an idea Brown says he came up with for simplifying Y2K software conversions while in DSC's employ more than two years ago. The idea did relate to Brown's job description, which is what all the legal hullabaloo is about. Brown didn't make it to the point where he got to market his idea - it never got developed because it was stalled when he presented it to his superiors at DSC.
"The bigger or more complicated the idea, the more resources will be required to deliver a final product," Brown says. "If a person finds that they need to join forces with others, they should by all means get proper legal advice before even disclosing the details of the idea."
When Kathleen Funkey in San Diego was an independent programmer several years ago, she wanted to publish so badly that she "had a blind eye" about the legalities of how to protect her intellectual property, she says.
She had formed a two-person business partnership under which it was her job to develop a spreadsheet-based software application and her partner's responsibility to market it. Funkey was to earn sales royalties. Her partner didn't live up to his end of the bargain, says Funkey, so she broke off the partnership, developed a new product and went into business for herself. She says she was more than a little surprised when her former partner decided that he was entitled to the rights to that software too, and took her to court.
"The second program had nothing to do with the first," says Funkey. She ultimately won the lawsuit but endured years of litigation and went so far as to get a law degree after the experience. In addition, she says, her former partner had access to her source code and he reused pieces of it, which left her work seeming unoriginal.
For such situations, Funkey recommends that programmers put their source code into a third-party escrow to eliminate any question about the state of the original code and restrict inappropriate use of their work.
Funkey says she was naive because an earlier employer, Hewlett-Packard Co., had a "right of first refusal" program in place, and it had worked well. This meant that if an employee developed something on his own time, HP could elect to market it and give the employee a cut of the profits.
Partner With Your Employer
Like HP, many IT employment contracts include a right-of-first-refusal clause.
Provided you consider the financial arrangements to be fair, leveraging the development and marketing resources of an established company can be the least complicated and most economical road to profit. On the other hand, if you don't strike a savvy deal, you could wind up like the beleaguered members of the cast of Gilligan's Island, who have been bemoaning the lack of rerun royalty provisions in their TV contracts for about 30 years.
The case of Brown vs. DSC, in fact, has reached a stony impasse because Brown didn't like the terms offered by his company. When he told DSC management that he had a revolutionary idea for Y2K conversion tools, Brown says the company offered him what he considered an inferior sum for the rights. Brown has never disclosed the specifics of how his software would work and he continues to refuse to divulge the details despite a court order to do so. The case remains in the discovery phase with no trial date set.
The Internet is the Wild, Wild West for patents, and if you can come up with something Internet-related quickly, chances are good that it is patentable. The number of Internet-related patents issued in 1998 increased by more than 100% from 1997, according to the U.S. Trademark and Patent Office.
One quick way to cornering a market is to "Webify" an existing function or business process and apply for a patent. This type of patent activity was sanctioned last January in a landmark Supreme Court decision (State Street Bank & Trust Co. vs. Signature Financial Group Inc.) that established that business methods and software can be patented.
Whatever you do, at the end of the day "it is best to have a written agreement that strictly defines your job definition," says Blatt. "As a general rule of thumb, it is very unwise for employees to leave things to chance and hope to retain ownership rights."
Wexler is a freelance writer in Campbell, California.