Intellectual Property Ownership: Designer vs. Client
Intellectual Property Ownership: Designer vs. Client
(OP)
Hi guys - I'm brand new to the forum as a member, but have been lurking for months as I transition from the world of corporate Information Technology to working for myself at my own Mechanical Design company. So, first off, thanks for all the great information here!
My business is basically a mechanical systems design and prototyping service and is very much in the startup phase. I use Inventor and Showcase to design and model parts, then use my connections with shops to quote and, if needed, produce prototypes. I'm not a PE, nor do I intend to become one (at this point), so this is a DESIGN business.
Already in my projects thus far, it has come up that in the process of designing a system or part for a clients patented concept, I've come up with something that can stand on its own as a patentable idea. My only client (so far) happens to be a good friend who encourages me to patent whatever I come up with on my own; zero issues of ownership for the IP. But, certainly as I start dealing with other companies, I will need to have a more formal agreement in place regarding any IP generated while working on their job.
So, is there a standard out there regarding this type of situation? Do most agreements typically give the client ownership of any IP related to their project, or to the designer, or is it a case-by-case basis? Just looking to get a feel as I begin to write up my business documents (with some help from an attorney friend).
Thanks for any input!
Mikah B.
My business is basically a mechanical systems design and prototyping service and is very much in the startup phase. I use Inventor and Showcase to design and model parts, then use my connections with shops to quote and, if needed, produce prototypes. I'm not a PE, nor do I intend to become one (at this point), so this is a DESIGN business.
Already in my projects thus far, it has come up that in the process of designing a system or part for a clients patented concept, I've come up with something that can stand on its own as a patentable idea. My only client (so far) happens to be a good friend who encourages me to patent whatever I come up with on my own; zero issues of ownership for the IP. But, certainly as I start dealing with other companies, I will need to have a more formal agreement in place regarding any IP generated while working on their job.
So, is there a standard out there regarding this type of situation? Do most agreements typically give the client ownership of any IP related to their project, or to the designer, or is it a case-by-case basis? Just looking to get a feel as I begin to write up my business documents (with some help from an attorney friend).
Thanks for any input!
Mikah B.





RE: Intellectual Property Ownership: Designer vs. Client
RE: Intellectual Property Ownership: Designer vs. Client
RE: Intellectual Property Ownership: Designer vs. Client
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
www.muleshoe-eng.com
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RE: Intellectual Property Ownership: Designer vs. Client
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.
RE: Intellectual Property Ownership: Designer vs. Client
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.
RE: Intellectual Property Ownership: Designer vs. Client
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.
RE: Intellectual Property Ownership: Designer vs. Client
Rafiq Bulsara
http://www.srengineersct.com
RE: Intellectual Property Ownership: Designer vs. Client
Rafiq Bulsara
http://www.srengineersct.com
RE: Intellectual Property Ownership: Designer vs. Client
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
RE: Intellectual Property Ownership: Designer vs. Client
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.
RE: Intellectual Property Ownership: Designer vs. Client
David
RE: Intellectual Property Ownership: Designer vs. Client
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.
RE: Intellectual Property Ownership: Designer vs. Client
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.
RE: Intellectual Property Ownership: Designer vs. Client
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.
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RE: Intellectual Property Ownership: Designer vs. Client
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!
RE: Intellectual Property Ownership: Designer vs. Client
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.
RE: Intellectual Property Ownership: Designer vs. Client