Legal Question in Intellectual Property in Georgia

Re: Source Code as Intellectual Property in a Bankruptcy

I agree with Mr. Burdick that you need to tread carefully.

The general rule on ownership of inventions in an employment setting is: "An individual owns the patent rights to the subject matter of which he is an inventor, even though he conceived it or reduced it to practice in the course of his employment." However, there are two major exceptions to the general rule: (1) an employer owns an employee�s invention if the employee is a party to an express contract to that effect, or (2) where an employee is hired to invent something or solve a particular problem, the property of the invention related to this effort may belong to the employer.

Thus, if these employees were hired, for example, to solve a problem such as how to develop some type of internet technology, this work would probably belong to the company. If, on the other hand, the employees were hired to program some other solutions but developed this technology on their own, there could be an argument that the technology belongs to the employees (assuming that no intellectual property rights agreement exists between the company and the employees).

Mr. Burdick is also correct that there may be trade secret implications if these employees leave and attempt to develop similar technology. If the property belongs to the company and the employees leave, any copies of source code, developer's notes, flowcharts, etc. probably would be considered trade secrets of the company, and copies taken by former employees could constitute misappropriation of trade secrets. In addition, while Mr. Burdick is correct that employees are generally entitled to take their skills and know-how with them to other jobs, there have been some decisions in other federal circuits that an employee, who takes the knowledge in his head that he learned at another company and goes into competition with that company where it is inevitable that he will disclose or use those trade secrets he has in his head, may be enjoined from working at that new company. See, for example Pepsico, Inc. v. Redmond, 54 F.3d 1262, 1268-69 (7th Cir. 1995). While that issue has not been decided in Georgia, about half of the states considering this theory of trade secret misappropriation called the "inevitable disclosure doctrine" have agreed that employees may be prevented from working for a competitor if it is inevitable that they will disclose former employer's trade secrets, even if the employees' knowledge of the trade secrets is only in their heads.

The foregoing is general information only, not specific legal advice as to the particular facts set forth in the poster's question. Because specific facts in a situation may affect legal advice significantly, it is recommended that the poster consult legal counsel directly for advice. No attorney/client relationship has been created or should be implied by anything contained herein.

Re: Source Code as Intellectual Property in a Bankruptcy

As to ownership of the IP, if these are employees, the company owns the copyrights in the absence of an agreement, while the employee-inventors own the patents in the absence of an agreement (or an implied agreement such as described by Mr. Kent). The company also owns any trade secrets.

The bankruptcy of the Company does not affect ownership of IP assets. However, in a Chap. 11 there may be a desire to sell the assets to generate cash. If the employees or an investor want to buy these assets, they may be able to do so, although the sale will have to be at market value and with court approval. If a Chapter 7, the trustee will certainly want to sell the assets. But whatever happens, someone will continue to own them - either they will stay with the reorganized company, be sold, or be abandoned, in which case they remain with the company. You cannot infringe without risk in any of these situations.

Replicating the technology may well be infringement. If you copy the code, including remembering it, that would infringe copyright. If you use trade secrets (non-public methods), that would infringe. As for patents, it depends on the scope of the patent claims.

Re: Source Code as Intellectual Property in a Bankruptcy

1.Probably the company owns the intellectual property, unless an employee agreement says otherwise.

2. Employees are generally not prevented from using their knowledge and skills. They are prevented, normally, from misappropriating the confidential information of their former employer. It is a perilous undertaking the potential former employees are considering.

The specifics are quite important and there are serious risks. To accomplish the objective of developing a program to accomplish an objective proposed for a former employer, expert legal help is vital. It should be a firm versed in both computer law and employment law or a lawyer who has skill in either area and is assisted by a lawyer skilled in the other area. I have litigated in both areas and the juries tend to look for the level of effort required subsequent to leaving the employer and the degree of differentiation from the employer's technology. I suggest you spend some money on legal advice before attempting this so that certain key steps are taken properly to maximize your defenses should the former employer rise from the ashes to strike at you.