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My understanding of the general legal principle of "tools of the trade" is that tools which are necessary for the exercise of a profession are the inviolate property of the tradesman and cannot be taken away from him either by bankruptcy or by employer or by the state or by anyone else. A tradesman has absolute ownership over tools necessary to conduct his trade.

For example, imagine a machinist makes a clamp at his workplace. Even if he uses company materials and time to make the clamp, the machinist still owns the clamp, because it is a generic tool, not a workpiece. If he leaves and goes to work for a different company he can take the clamp with him and he owns it forever. That is my interpretation of the "tools of the trade" principle. This would not apply to a special tool only usable at a particular employer. For example, if the tool would only work on one employers specific machine, then it is not a "tool of the trade", because it is not generic.

My question is whether this principle applies to software as well. For example, lets imagine a programmer writes a sorting algorithm. Such an algorithm is generic and can be used at any employer. Does the programmer have the right to retain and use that sorting algorithm while working for other employers because it is a "tool of the trade"?

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    A cursory internet search suggests that the concept applies only in bankruptcy and has no bearing on the employee/employer relationship. Do you have any sources supporting your clamp example? – phoog Jul 10 '17 at 13:43
  • @phoog I can do internet searches too. I am looking for somebody who knows the case law. – Cicero Jul 10 '17 at 14:58
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Your framing of the issue is basically wrong. There is an exemption, which varies from state to state, from unsecured creditors (but not creditors that take the goods as collateral) in bankruptcy and in debt collection outside of bankruptcy (not always the same exemption), for tangible personal property owned by the debtor which constitutes the debtor's tools of the trade, but that varies from state to state, is a creature of state statute (and the bankruptcy code), is not universal, and is usually limited in dollar amount.

Moreover, the exemption only applies when the tradesman actually owns the tools of his trade which is customary in some professions, but not automatic. It is only the case when the tradesman buys his own tools. There is no generic v. non-generic distinction.

In the software field, education and the public domain can always be accessed. But, intellectual property, that can be protected, that is developed for the employer, is usually work for hire and belong to the employer. This default rule is subject to the terms of the agreements between the parties entered into contractually.

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    @RyanL In bankruptcy under 11 USC, a state can elect to have its citizens governed by the federal default exemptions found in 11 USC, can instead elect under 11 USC to be governed instead by the state law exemptions from creditors that apply outside of bankruptcy. Many states make the latter election. – ohwilleke Jul 10 '17 at 23:56
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    @RyanL The exemptions that apply in the bankruptcy are governed by the state in which the bankruptcy is filed which must normally be the domicile of the bankrupt. – ohwilleke Jul 11 '17 at 0:26
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    @RyanL Your creditors will need to hire one attorney to handle the exemption issue. In actual practice, it isn't uncommon for creditors to need to hire attorneys in multiple states for other issues in, for example, a big Chapter 11 case. For example, suppose you own oil and gas rights in a dozen states whose value and existence is disputed. Your creditors probably would need to hire lawyers in each of those states to litigate those issues (as they, in fact, did in a recent oil and gas Chapter 11 that a creditor client of mine was involved in). – ohwilleke Jul 11 '17 at 0:32
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    @RyanL That is a high risk approach. If one is found to have concealed assets or been otherwise abusive, the bankruptcy court can deny all relief and dismiss the bankruptcy petition. It can also result in criminal penalties. And, bankruptcy cases are now audited on a mixed lottery and suspicion basis. – ohwilleke Jul 11 '17 at 0:37
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    @RyanL Despite, not because of, those multiple corporate bankruptcies. That person would have been ten or twenty times wealthier if he'd put his wealth in an S&P 500 fund and taken up interpretive dancing. – ohwilleke Jul 11 '17 at 0:46
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AFAIK, If you are under contract (NDA & Non-Compete) and the non-compete usually includes verbiage that says anything you built while on company time, belongs to the company. Some contracts even go as far as saying that anything of IP that you build while employed by the company would belong to them as well, whether company time or not.

So that "sorting algorithm" example you gave would belong to the company.

  • To your point "Some contracts even go... whether company time or not.", I would add a note that some States limit the scope of this provision. For example, Washington State Statute 49.44.140: app.leg.wa.gov/Rcw/default.aspx?cite=49.44.140. For related discussion, also see this article: intellectualpropertylawfirms.com/resources/… – Ryan L Jul 10 '17 at 19:38
  • Washington State Statute 49.44.140: "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" – Ryan L Jul 10 '17 at 19:40
  • Washington State Statute 49.44.140 (-con't): "... (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." – Ryan L Jul 10 '17 at 19:41

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