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The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us)



STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL


Opinion No. 6027

January 11, 1982

CIVIL SERVICE COMMISSION:

Authority to determine royalty interest of classified employee in patent

STATE ADMINISTRATIVE BOARD:

Licensing of patent developed by employee

The Civil Service Commission may, as a condition of employment, determine that a classified civil service employee shall receive a specified portion of the royalties obtained from the licensing of a patent developed by such employee in the course of state employment.

The State Administrative Board may license commercial exploitation of state-owned patents developed by state employees subject to such royalty interest, if any, of the employee as may be determined by the Civil Service Commission.

Paul H. Wileden

Secretary

State Administrative Board

Department of Management and Budget

Stevens T. Mason Building

Lansing, Michigan

The Civil Service Commission has informed the State Administrative Board that it is giving consideration to sharing with employees royalties on such patents as may be developed in connection with the employees' duties. It is presumed that royalties would be generated pursuant to licensing agreements under which the patented idea is commercially exploited.

The authority of the Civil Service Commission to provide incentives for state employee initiative and creativity was discussed in OAG, 1969-1970, No 4702, p 160 (July 17, 1970). The Civil Service Commission had developed a program providing monetary awards for suggestions to improve state service. The Attorney General upheld the constitutionality of the program.

OAG, 1975-1976, No 5081, p 649 (October 15, 1976), reviewed the law concerning the right of a state college or university employee to a patent for work product developed in conjunction with his or her public employment and stated:

'This right granted to inventors is a property right exclusive to the inventors under the Patent Act.

'One exception to the general rule allowing the inventor to patent his invention is that his right may be superseded by that of his employer. If an express agreement exists between an employer and an employee regarding patent ownership, the courts will enforce it although the plaintiff has the burden of proving the existence of the agreement. It is also to be noted that an employee may not avoid the obligation to assign a patent to his employer by deferring his patent application until after his employment has ended.

'In the absence of an express contract, a court may determine the existence of an implied contract and may sign the patent rights of an employee's invention to the employer.

'In some situations, it may be noted, employers are entitled to 'shop-rights' in inventions of their employees. In United States v Dubilier Condenser Corporation, 289 US 178; 53 S Ct 554; 77 L Ed 1114 (1933), the court stated:

"Recognition of the nature of the act of invention also defines the limits of the so-called shop right, which shortly stated, is that where a servant, during his hours of employment, working with his master's materials and appliances, conceives and perfects an invention for which he obtains a patent, he must accord his master a non-exclusive right to practive he invention . . .' [Footnotes omitted.] OAG, 1975-1976, No 5081, supra, at 652.

Thus, specifying an employee's right in a patent is a proper function of the employment contract.

The authority of the Civil Service Commission with regard to the terms and conditions of employment is derived from Const 1963, art 11, Sec. 5. In pertinent part, it provides:

'The commission shall classify all positions in the classified service according to their respective duties and responsibilities, fix rates of compensation for all classes of positions, approve or disapprove disbursements for all personal services, determine by competitive examination and performance exclusively on the basis of merit, efficiently and fitness the qualifications of all candidates for positions in the classified service, make rules and regulations covering all personnel transactions, and regulate all conditions of employment in the classified service.'

Pursuant to that authority, the Civil Service Commission establishes the terms and conditions of employment within the state classified service. Farrell v Unemployment Compensation Commission, 317 Mich 676; 27 NW2d 135 (1947). Within its field, the Civil Service Commission has plenary power. Viculin v Department of Civil Service, 386 Mich 375; 192 NW2d 449 (1971). Accordingly, the Civil Service Commission must be held to have the authority to establish the conditions of employment for state classified employees, including determination of what royalties, if any, employees shall receive from inventions developed in the course of state employment and patented by the state.

In the absence of such a rule, the common law would apply. Thus, the state may provide by contract with employees that patents for inventions of the employee shall be assigned to the state without payment of royalty. In the absence of such an agreement, either express or implied, the state may use the patented invention on a nonexclusive right basis and without compensation. OAG, 1975-1976, No 5081, supra.

1954 Es Sess PA 2; MCLA 17.401 et seq; MSA 3.407(1) et seq, Sec. 1, which empowers the State Administrative Board to enter into contracts regarding patents owned by the state, or in which the state has a property right, provides in pertinent part as follows:

'The state administrative board is authorized and empowered to enter into contracts relating to any . . . patent . . . owned by this state, or in which this state has any property right. The state administrative board is authorized to employ, as occasion demands, patent attorneys on request of the attorney general. The contracts of the state administrative board may provide for the exploration of the character, use, properties, capabilities, or commercial value of such invention or discovery, and may provide for the granting of licenses to make, or have made, use, and sell such invention or discovery, whether patended or not, upon such terms and conditions as seem expedient and proper to the state administrative board. . . .'

Thus, the State Administrative Board is authorized to enter into contracts for the commercial exploitation of such patents 'upon such terms and conditions as seem expedient and proper.'

The State Administrative Board is the appropriate agency to enter into contracts to license patents in which the state has a property interest. In addition to recognizing such royalty interests as may be provided by Civil Service Commission rules, such contracts are subject to approval of the Attorney General as to form and validity. 1954 Ex Sess PA 2, supra, Sec. 2.

It is my opinion, therefore, that it is within the constitutional authority of the Civil Service Commission to provide, as a condition of employment, that a classified civil service employee shall receive a specified portion of the royalties obtained from the licensing of a patent developed by such employee in the course of his or her state employment. The authority to enter into licensing agreements for the commercial exploitation of such patents inheres in the State Administrative Board. Such agreement, however, would have to be cognizant of the royalty interest of the employee as it may be specified by Civil Service Commission rule and such contract would be subject to the approval of the Attorney General as to form and validity.

Frank J. Kelley

Attorney General


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