Shop Right

A term commonly used to describe certain employers’ rights with respect to IP created by employees in the course of their employment. The key dangers with shop right are

  • first, that it is often poorly understood, even by IP lawyers;
  • second, that the nature of shop right can vary depending on the form of IP;
  • third, that it varies with each jurisdiction that the right arises in; and
  • fourth, that ‘choice-of-law’ or ‘conflct-of-law‘ rules vary, so that sometimes the law of the place of creation or employment applies and sometimes the law of the jurisdiction in which the IP right is asserted applies.

Under the United States copyright statute, works of authorship made for hire by employees working within the scope of their employment automatically become the property of the employer (work made for hire or ‘work for hire.’) However, patent rights do not automatically become the property of the employer, rather the employer may own the rights based on complex case-law based rules and factors including whether the employee was “directed to invent.” Indeed in the United States it is possible, depending of the facts of the situation, that an employer’s shop right may be limited to a royalty-free license to use the patented invention, without assignment or licensing rights, while the employee/inventor might be able to resign and go into competition with a former employer or sell or license the patent rights to a competing company.  The nature of the employment relationship may also be important – a dangerous potential exception to Shop Right is where the inventor is a contractor, know as Contractor IPSee Inventor’s Bonus, Collective Work.

A key exception to shop right in most jurisdictions is that it does not apply to contractors or consultants.