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This is for an ethics course. The professor tells the story (in summary):

Josh works for Company A. He comes up with a new idea and presents it to his boss, Paul. Paul tells Josh to meet with Company A's patent attorneys and establish the baseline patents for the idea. Josh does, and the patent applications were produced. Paul then informed Josh that Company A had no intention of producing the patented system. Further, he lays off Paul, claiming it was due to budget cuts.

At this point in the story, it is my understanding that no illegal action has been taken by Company A or Paul. An individual or entity can patent something with or without an intention to use that patent, correct?

The story continues:

Josh is interviewed at Company B. He presents the same idea now patented by Company A. Company B loves his idea, hires him, and allows him to hire 30 others to develop his idea.

Was anyone's actions illegal, particularly Josh's? By allowing Company A to patent his idea, has he transferred the his rights to the idea to Company A?

I am expected to write a paper comparing the story between two ethical frameworks. It would be great to understand the legal aspect here.

Thank you.

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  • It depends a lot on the country and the employment contract. Companies in industries where IPR is important tend to include patent rights to employee inventions, so most likely Company A owns the patent. nolo.com/legal-encyclopedia/… Sep 12 at 21:46
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    In the U.S., without other details, this a black and white case. Company get a patent, if it is issued. Company B can't make, sell, offer for sale, import or use it without permission from A. It doesn't lend itself to any further legal analysis and you do not need to cite this comment or the answer posted since the information is so clear from multiple sources. Cite U.S. patent law (35 USC XYZ) if you cite anything. Sep 12 at 22:58
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[This answer is with reference to United States patent law; the situation could be different in other jurisdictions.]

Let's recall exactly what a patent does:

A patent grants the patent holder the exclusive right to exclude others from making, using, importing, and selling the patented innovation for a limited period of time. Source: Wex Legal Encyclopedia

So since A holds the patent, nobody else, including Josh and Company B, can make, use, import or sell Josh's invention, unless Company A grants them a license to do so. The fact that Josh was the particular employee of A who came up with the idea does not give him any special privileges in this regard. It is also irrelevant whether A themselves choose to market the invention.

However, patents are not secrets; indeed they are public documents. So Josh does nothing wrong by telling B about the invention. Nothing stops Josh or Company B from studying and researching the patent, or thinking about products that could incorporate it. But B needs to know that the invention is already patented and that they will have to negotiate a license with A if they want to develop it into a product; they might even need a license to create a prototype or use the invention in their R&D process. ("Negotiate" here likely means "pay A whatever they demand"; A could also just flatly say no.) The associated costs may certainly make B less interested in the idea.

If Josh deliberately conceals this fact from them, he may at the very least be fired when B finds out, as they surely will if they do a proper patent search. I'm not sure if he would have further personal liability if, for instance, B ends up infringing the patent and is sued by A.

Note that if Josh, while working at A, had also discovered related ideas that weren't included in the patent, those ideas may be A's trade secrets which Josh may not reveal to B.

By the way:

By allowing Company A to patent his idea

You make it sound like Josh had a choice. Instead, Josh would almost certainly have been working under an agreement to assign to his employer the patent rights to anything he invents in the course of his employment. Such agreements are standard in most industries. Even if he wasn't, A might still own the rights automatically if they had hired Josh specifically to invent things. See https://www.nolo.com/legal-encyclopedia/who-owns-patent-rights-employer-inventor.html. Thus, Josh never had a chance of keeping those rights. His compensation for inventing stuff at A is supposed to be his salary, not the rights to the IP itself.


Speaking of ethics, make sure to cite this post properly as a source for your paper.

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  • At company B Josh can also try to develop a design-around to company A's application/patent. There may be other ways to reach the result without infringing. Sep 12 at 22:52
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The legal issues are too black and white to have any meaningful impact on an ethics discussion. The IP belongs to A and B can't use it.

A's not planning to build a product around the patent is irrelevant to the law and I do not see it bring up any ethical issue, but some people who do not understand patent law might.

There might be ethics issues if A hired Josh with the specific plan to fire him as soon as the application was filed and intentionally misled him about these plans.

Another issue might be Josh's duty to not disclose A's confidential information (the application does not become public right away), and Josh's duty to not draw B into developing an infringing product.

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What is a patent?

Specific details vary by country but the general principles are close enough that it doesn't matter which laws we look at. From the Patents Act 1990:

13 Exclusive rights given by patent

(1) Subject to this Act, a patent gives the patentee the exclusive rights, during the term of the patent, to exploit the invention and to authorise another person to exploit the invention.

(2) The exclusive rights are personal property and are capable of assignment and of devolution by law.

(3) A patent has effect throughout the patent area.

15 Who may be granted a patent?

(1) Subject to this Act, a patent for an invention may only be granted to a person who:

(a) is the inventor; or

(b) would, on the grant of a patent for the invention, be entitled to have the patent assigned to the person; or

(c) derives title to the invention from the inventor or a person mentioned in paragraph (b); or

(d) is the legal representative of a deceased person mentioned in paragraph (a), (b) or (c).

55 Documents open to public inspection

(1) Where a notice is published under section 54 or under subsection 62(3), the specification concerned, and such other documents (if any) as are prescribed, are open to public inspection.

(2) Where a notice is published under paragraph 49(5)(b) in relation to an application for a standard patent, or under subsection 62(2) in relation to the grant of an innovation patent, the following documents are open to public inspection:

(a) all documents (other than prescribed documents) filed in relation to the application or the patent, whether before or after the acceptance or grant;

(b) all documents (other than prescribed documents) filed, after the patent ceases, expires or is revoked, in relation to the former patent;

(c) copies of all documents relating to the application or patent (other than prescribed documents) given by the Commissioner to the applicant or patentee, or the former applicant or patentee;

being documents that have not already become open to public inspection.

As an employee of A, any intellectual property Josh creates in the course of his employment is legally the property of A. This distinction can be important: if Josh is employed as a truck driver by the post office and his patent is for a new mining technique then that is clearly not in the course of his employment, however, if he were a mining engineer employed by BHP-Billiton it clearly is. We don't know what Josh's job was or what the patents are for but it is clear that he was set to work on them by his employer and that they are therefore in the course of his employment. Josh has no legal claim on the patents.

Patents are personal property like a car or television. If I choose not to use my car or television, that doesn't mean that you can. Similarly, if I choose not to use my patent, then legally you can't either unless I give you permission.

However, patents are subject to geographical limitations. An Australian patent gives exclusive rights in Australia and nowhere else. If they want protection in the United States and France and the Ukraine, they have to get patents in those countries. Further, no patents apply in outer space.

Josh is interviewed at Company B. He presents the same idea now patented by Company A. Company B loves his idea, hires him, and allows him to hire 30 others to develop his idea.

Your ethics teacher is a bit off on the law here: you can't patent an idea. A patent can only be granted for an invention "any manner of new manufacture the subject of letters patent and grant of privilege within section 6 of the Statute of Monopolies, and includes an alleged invention." An idea is not an invention - many people had the idea of being able to fly before the Wright brothers invented the aeroplane.

So, if what you have stated is what has actually happened here there are no legal issues here. The idea behind the patent is public knowledge so Josh has done nothing wrong by revealing it. Similarly, so long as Josh and company B don't infringe any of company A's patents there is no legal impediment to them exploiting the idea. To continue the example, helicopters and rockets both exploit the idea of flight but they would not infringe any hypothetical patent on aeroplanes.

Even if Josh had signed a non-disclosure agreement with A, he has not breached it. Such agreements are limited to confidential information - patent applications are public documents and are therefore not confidential.

What would be illegal is if Josh and company B exploited the patents without permission (within the geographic limits of the patent) rather than the idea that led to the patents. However, there are a number of exemptions to patent protection.

Ethics

There are a lot of ethical issues involved in patents and intellectual property in general. There are also some very interesting ethical questions about the whole nature and existence of personal property.

The law is a reflection (sometimes distorted) of the ethical consensus of society. The legal implications of the question are straightforward, the ethical considerations are something else. For example, what if the patents company A refused to use were a 100% effective and safe lifetime vaccine for cancer?

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Company B has the right to hire 30 people to develop Josh’s idea and spend lots of money on it. They just can’t sell or use any product they produce without paying whatever A demands as license fees. It would be much better to offer A money for their patents before they start spending.

If Josh neglected to tell B the unimportant detail that his bright idea is already patented, B will be very unhappy when they find out. Legally that will be interesting.

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    I understand the (very good) point of this answer that some actions are not infringing. But technically it is hard for B to develop an infringing product without some use of that product, for testing as an example. That use could be infringing. Also making is infringing. Hard not to do while developing. No need to sell or offer to sell to be infringing, in the U.S. Sep 13 at 14:31
  • I think the point was more that it is legal for B to waste money developing a product they can't sell. A would obviously not sue them for developing the product, they would wait until a product is heavily advertised and going to stores, and then ask for patent license fees.
    – gnasher729
    Sep 13 at 17:33
  • As I said, it is a very good point. I was making the point that there are things one might not think of as infringement but are infringement even though you are extremely unlikely to be sued. Sep 13 at 19:32

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