Does the customer or design engineer own the designs? Schematics?

[BThompson]

The situation is a self-employed design engineer (1099 independent contractor - listed as "vendor" in company's ledger), who designed advanced/customized PCBs and their firmware and provided the schematics, manuals, firmware, and support to a company that acquired customers, manufactured the boards, sold the boards, and dealt with customers and also helped with technical support.

There is no contract. The engineer and business owner knew each other and the engineer was already designing on his own then they established a relationship decades ago where the design engineer could avoid customers, meetings, etc. and just work at home designing. The company provided nothing materially to the engineer to facilitate his work.

The engineer's invoices to the company were solely based on time invested.

So the engineer still has the design files in his possession. Any insight into the value, if any, of those files and who owns what regarding the schematics? Thanks for any help with this.

Added: Does the company have rights to those design files or are they the designer's property, on his computer, in his house, having never signed a contract granting rights to anyone else?

[ataradov]

Only lawyers would be able to answer this. Doing anything IP related without consultation with a lawyer is just stupid and has potential to cause a lot of issues in the future. Not having a contract does not make it any easier.

Even if you don't want to spend the money, some law forum would probably give a more informed answer.

And the lawyers would need more information. It would probably vary by state and in the absence of any other formal documents, it all may hinge on how the invoices were worded.

[jpanhalt]

There is no question that only a licensed attorney can give you an answer.  Since you are inthe US, this might be of interest:

Source: https://www.copyright.gov/circs/circ09.pdf

If a work is made for hire, the employer or other person for whom the work was prepared is the initial owner of the copyright unless both parties involved have signed a written agreement to the contrary.

Your situation might be a little different in that you got a 1099 (independent contractor/vendor) rather than a W2; however, I don't think that will change what sounds more like a work for hire.  You also gave all of the design information to the buyer, which might be enough to swing any doubt to a work for hire.

It's redundant to tell you or your friend to get an attorney next time and have everything related to IP in writing.  As for the present matter, the friends should talk and agree how to move forward.  I suspect any lawsuit would be expensive and have a high risk of failure.

[nctnico]

The situation is a self-employed design engineer (1099 independent contractor - listed as "vendor" in company's ledger), who designed advanced/customized PCBs and their firmware and provided the schematics, manuals, firmware, and support to a company that acquired customers, manufactured the boards, sold the boards, and dealt with customers and also helped with technical support.

There is no contract. The engineer and business owner knew each other and the engineer was already designing on his own then they established a relationship decades ago where the design engineer could avoid customers, meetings, etc. and just work at home designing. The company provided nothing materially to the engineer to facilitate his work.

The engineer's invoices to the company were solely based on time invested.

So the engineer still has the design files in his possession. Any insight into the value, if any, of those files and who owns what regarding the schematics? Thanks for any help with this.

Added: Does the company have rights to those design files or are they the designer's property, on his computer, in his house, having never signed a contract granting rights to anyone else?

When I became full-time self employed I dug deep into this issue to avoid problems. This is how I understand copyright works where it comes to doing contract work:

Who (contractor or customer) owns the copyright depends on the situation. If the contractor works at the customer and receives strict guidance on how to do a job (having a supervisor, being handed detailed specifications, etc), then the copyright is owned by the customer. On the other side, if the contractor works at his own premises, creates the specification and does the job without any further support from the customer, then the copyright belongs to the contractor.

I have found a few lawsuits where a customer has sued a contractor to handover source files for software that the contractor has written especially for the customer. Turns out the contractor owns the copyright.

In my terms & conditions I have added a clause that says the copyright transfers to the customer after I have been paid in full. This has proven to be a very good idea.

From here: consult a lawyer to discuss your specific case. From your text I assume the contractor has fallen ill or died?

[SiliconWizard]

While consulting a lawyer was a good tip, I think ntnico gave the two typical cases.

Of course... best tip is: never work without a contract. IP details should be put clearly in the contract.

When contracting work, it's usual to grant all IP rights to the client upon completion. *They* will usually require it. If they don't, they are just stupid.

Now IP stuff can get tricky. In particular, you may want to state clearly (again in a contract) what it is that you'd be allowed to do with the contracted work or parts thereof in future contracts.
For instance, say you wrote an interesting library for this job, and you'd like to be able to reuse it in the future without infringing on your current client's IP. Yeah, tricky. Or maybe you are even using some libraries or blocks that you already had in store *before starting this job* - if you're not careful about what you grant exactly, this client may get the full rights and you may not be able to ever reuse those blocks that you had in store. That may even backfire (if the client was really annoying and things went sour) if you used those blocks with previous clients and suddenly it becomes really unclear who owns what.

Make - things - clear. That will avoid having to pay lawyers ridiculous amounts when it's too late.

[nctnico]

That is a good comment. To be complete: I have a whole section about IP in my terms & conditions about the license for my own libraries, the customer's IP and third party IP. I have copied a lot from model contracts for software development although many that I have found where aimed towards giving the customer as little rights as possible in order to maximise vendor lock in. I didn't use/copy those parts; it just doesn't feel right to me to 'forcibly' bind a customer to me.

[BThompson]

Thanks so much for your response and for getting what I was trying to say. Yes, the design engineer has passed away. He had shown me a stack of hard drives that had the design files, schematics, manuals, firmware for each board that he designed and told me that the design files on the drives belonged to him. The company has been saying they are going to come and take his computer to get those design files. No question about it, they just plan on coming and taking his personal computer, with tons of personal photos, videos, etc. from his home office where he worked alone for the last 20 years.

The one law firm I spoke to seemed frustrated that there were no patents or copyrights in place and never called me back. I think they thought this was just too small of a situation but they would be very wrong considering those who bought the boards are the biggest entities in technology and scientific research and according to the owner of the company in question the boards are used when the most advanced ADC signal processing is required. I just couldn't convey the situation properly. Your insight is very helpful and appreciated and if I may I would like to tell you the facts as of today.

A bit of background:

* The company in question, among other companies and individual customers he dealt with in the 90s, just became the one that he preferred out of convenience. It was small, he never had to deal with customers or "the office," and they provided him steady work so he worked with only them for the next 22 years.

The process:

* This small company has an inventory primarily of PCBs designed by the engineer for previous customers, and they either sell these existing boards or the customer conveyed custom requirements to the company.
       -If there were custom requirements the company would send the engineer the email exchanges with the customer and then he did the design, firmware, and manual.
       -After simulation testing he sent the schematic, firmware, and manual to the company (along with lists of required parts if necessary)
           
* The engineer determined his own schedule, hours worked, and all factors involving the creation of the board short of physical testing, manufacturing, and shipping it. He determined the course of actions to be taken from the point of design up to the manufacturing of the boards, and the company deferred to him in all aspects of the process, including when the customer had issues.

(The company deferred to him because he was one of the originals from the vacuum tube era and was one of the best, if not the best in the world at the work they were doing. The company was dependent on him and it behaved accordingly. I don't want it to seem the engineer was in anyway demanding. He was the opposite. He was very polite, cooperative, soft-spoken, and appreciative of the people he dealt with. He didn't even care so much how talented someone was, just that they cared about the work.)

* All designs were done on the engineer's personal computers. All supplies prior to physical testing and manufacturing were purchased by the engineer. Not sure if the company provided the design software. If so it wasn't 100% of the time over the years and it was just because they had an extra copy or something.

* Again, no contract, and also no stipulations whatsoever on exclusivity. He could have at any point worked with another company or individual customer and used his designs in the company's inventory as a basis to produce a new board for them.

* On his taxes he would always have a 1040 as "sole proprietor", but over the years sometimes in that section he would list the company in question under "Business Name" along with their address. Sometimes he left those blank and sometimes he left "Business Name" blank then used his home address. I don't understand this at all.

* The company issued a 1099 (Independent Contractor)s form to him and in their ledger they had him as "vendor".

WHAT I'M WANTING TO FIND OUT:

(please forgive if this is the dumbest question ever): Can design files, such as with Quartus, be made into some more tangible, free-standing format or are these files exclusively tied to the particular program in which the design originated?

With no copyrights or patents......

Does the company have a right to those design files? If not, does that establish ownership by the family? If so, is that ownership just based on the physical possession of them or can intellectual property be established?

Does the company own the schematics? If not, does the family own them or does anyone at all? If not, can the family provide them to who they choose, even without IP rights?

So is there a recommendation for a particular kind of lawyer? I don't even know if this is an IP issue. Any suggestion on what information they want to hear up front that would convince them of the merit, if any, of these questions of ownership?

Thanks for any more assistance or opinions.

[ataradov]

How exactly they are "going to come and take his computer to get those design files"? You don't need to be a lawyer to figure out that's illegal at the very least without a court order.

They may or may not own the rights to the IP, but they definitely have no claim over physical media it is stored on.

Quartus projects would likely contain Verilog files as the actual substantive part. Those are somewhat standard, but the design itself may be tied to specific devices.

Physical possession likely does not matter in this case. But resolving IP ownership would be hard.

It would probably depend on what your goal here is exactly. If you want to cooperate and provide the files to them, but just the relevant files, not family photos, I bet they will work with you. And it should be possible to figure out what they need. And it should be possible to bill them for the time you spend doing that. If you want to keep the files and use them somehow, it would be hard.

[BThompson]

Thanks a lot for replying. I guess all that matters is what it looks like on paper but in the real world the company existed merely to sell his designs, with him controlling everything except for acquiring customers, dealing with customers, and manufacturing the boards. The company wasn't necessary at all as far as the boards existing. It was just convenient for him. That's it. He designed for customers and companies before them and would have again had the company folded or went in another direction. It just doesn't seem right that they get ownership. The owner said after he passed away that the company only existed because of him, and that is so true. My newer post explains in detail the relationship. All he wanted to do was the work. It seems even the question of ownership was a mere annoyance to him. He just wanted the relationship the company gave him which enabled him to only deal with the designing. (He only told me recently of the hard drives and that he believed he had ownership and what he wanted me to try and do with them.) That's all he needed them for yet they needed him for their very existence and income. The company can't create any new boards with new advanced requirements and considering how much he was needed for support they won't even be able to support existing advanced boards. That the owner will be able to just sell the designs off for god knows how much money- I mean without even trying and with much on the company's part to deter more orders due to indifference, distraction, and internal legal situations, they easily averaged $15 mil a year as a tiny company. He generated that revenue. How does a mere middle man get full credit and ownership? I will follow that link you provided and again I appreciate your reply very much. These replies have been the first help since I started looking into this. It's actually meant a lot to be in this forum since I feel people here would understand his work more than most and that is all he did was the work. At 84 he was still in his office designing and problem solving. Thank you again for your reply.

[ataradov]

If a percentage could be attached as far as value in getting the board in the customer's device it would be the engineer 90% and the company 10%

Yes, engineers like to think this. This is never the case. Design and engineering is important, but not worth a dime if you can't or don't want to market and sell it.

So, you want to get the money from those designs. This is 100% "get a lawyer" territory. There is no "guessing" you can do here.

And on the company side, I'd just consider looking for another contractor. This time with a real contract. Even if they get the files, chances are that they are in some outdated tools and nobody would be able to figure out what is what.

[jonpaul]

Bonjour a tous....

We consulted for decades (1970s..2000s) in analog, audio, medical, magnetics, high voltage, EMI, SMPS, etc. eg GE, Garmin, Welch-Allen

The designer is normally considered as "work for hire" and ALL of his or her "work product" becomes property of the customer/employer.
Exceptions are if the contracts or POs have other provisions.
The default is the individual looses his or her rights in return for the payment.

All  large firms will have contracts that claim  ALL inventions and rights during the contract,  even if the consultant or designer or employee works  on  other non related projects on your own time and lab!
This has been litigated for decades and is well known. Beware that ANY litigation nowadys is bound to be VERY long and costly.....our old patent cases extended for 15 YEARS....

We never had such conflict with our customers, as we negotiated contracts with exceptions and made them aware that as experienced consultants we had ma other customers and intend to continu in the field. We used a "general proposal provision" from our old friend Dr. Nathan SOKAL (ex MIT, RIP, Class E amplifier  inventor)

Just my experience....

Bon Chance,

Jon

[BThompson]

Thanks for the reply but I wasn't making a general statement about value. It was specifically this relationship and as I pointed out he did sell his designs on his own and through other companies but just stuck with this one company out of convenience. So I slipped and spoke of things that don't matter. All that matters is what the law says and basically I need to know if the company can come and take his computer for want of those design files. I know I need a lawyer but just wanted any insight people could give here, even if what kind of lawyer I should get since maybe it's just a matter of private physical property and not IP, but certainly the circumstances suggest a question of IP and ownership of all of it. So when the law firm I spoke to didn't call me back I came here before trying another lawyer to see where I went wrong in my explanation or if I just called the wrong kind of lawyers. Anyway, thanks again for the reply.

[ataradov]

I need to know if the company can come and take his computer for want of those design files.

Nobody can take the physical property. How would that even work? Are they going to break in and steal it? How would they even know where those files are stored?

As far as which lawyer to get - probably any that wants to deal with this. I personally have no experience with that. And it might not be easy, since the issue is very convoluted and likely go nowhere.

The issue is 100% IP-related unless those computers were provided and owned by the company.

[nctnico]

@BThompson:

Probably a good way forward would be to add up the annual income made from the work on average for the past 5 years, multiply that annual income by 5 to 10 and assign that as a monetary value to the design files. IOW: sell the files as part of the inheritance. This likely involves some haggling so start higher. IMHO this will be the fastest way out and provides a fair compensation for the engineer's family.

If that doesn't work out, continue to look for a lawyer. Likely a lawyer that deals with inheritances has come across similar situations or knows a collegue who has. Situations like these happen all the time.

Now the big question is, how to phrase this to a lawyer in a short way? Maybe something along the lines 'Somebody designing products by himself and selling them through a third party company has died. The third party company claims ownership but I strongly doubt they have such ownership. I need legal help'.

The trick is not to start off with a long story. Nobody understands long stories and thus won't call you back. The long story comes later as part of the fact finding exersize which will be conducted by a lawyer in a structured manner. Again, keeping answers short and to the point is key to make this process go smoothly. It looks as if you did a lot of fact finding work already so putting together a dossier together with a lawyer shouldn't take a lot of time.

[jpanhalt]

@BThompson:

Probably a good way forward would be to add up the annual income made from the work on average for the past 5 years, multiply that annual income by 5 to 10 and assign that as a monetary value to the design files. IOW: sell the files as part of the inheritance. This likely involves some haggling so start higher. IMHO this will be the fastest way out and provides a fair compensation for the engineer's family.

No way is that equitable for IP.  In science, the usual royalty for published work is/was 10% to 15% of net sales.  If you get a patent, then it's something else.  The unidentified person here did not have a patent.

[nctnico]

Ofcourse you can argue about what is a fair price. But realistically: the company that sells the product has priced their products based on what they have to pay the engineer annually. If you are going to ask a huge sum of money, their pricing strategy no longer adds up and thus they will hire someone else to simply re-design the stuff potentially leaving the heirs with nothing (and maybe a huge bill from a lawyer on top). The company will need to pay somebody to support the products either way which is already an extra expense and as somebody already pointed out; the existing designs may be such a mess that this alone is a huge monetary setback.

That is why I'd try to figure out what the company would be willing to pay for the designs and what they can pay for the designs before going the legal route. The company will want to move forward and the longer the process takes, the more they will be inclined to do a re-design in order to keep sales going.

[BThompson]

So helpful! Thank you. And thank you for letting me omit the names.

You are referring to the engineer's annual income? In this case the engineer was responsible for generating the total of the company's revenue so wouldn't that be relevant as well? I do know that if a design for an ADC PCB can have value in and of itself then these designs are as valuable as any of this nature can be.

I am about to do this free course over the weekend on Altera Quartus to understand what the wife actually has. Instead of saying "designs" I would like to know the name of the tangible thing, like a project file with the extension, etc. I mean for each board there is a folder with the board name, and each one of those has subfolders of "Design", "Schematic", "Manual", and I think notes. I am well versed in computer applications but have never seen an engineering program before and I have never seen so many files within a project before. Would you consider the actual project file to be the tangible thing, the actual design? I assume there is no way to isolate the design from the program and only by generating schematics is the design useful?

So if I haven't added any information to assist in what you think I might say to a lawyer or what kind of lawyer, or even how to go about how to sell something like these designs then I will just go by what you originally said and start there. I can't express how appreciative I am that you took this time and how much clearer things are because of it. I needed your specificity Thank you.

[BThompson]

I was reading earlier that CAD files for mechanical engineering and architects are unquestionably the property of the author unless contractually stipulated so shouldn't it be the same for electronic engineering design? I mean it's technically a form of CAD right? I guess with those it is a copyright.

Years ago he showed me where at least one his boards was in a magazine. I recall a full page photo with the name of the board and a blurb saying basically that this is a new board with new capabilities opening up new possibilities. It wasn't a company's advertisement and I remember that there was no company or name noted. That suggests distinction doesn't it, as far as a potential patent situation I mean?

I only have other engineers to go by but it seems clear that his designs have had a notable effect on the field of ADC PCB design. Starting out in the 1950s he advanced with the technology and then reached a point somewhere in the 1990s where he was advancing the technology himself. LIGO/Cal-Tech among others dealt with that company because they (he) was the only one they had found at that point who could produce the capabilities that they needed. Because of his desire for anonymity/privacy, and because of his age when he passed away, there are only a few people who understand the loss that occurred when he passed away.

Unless the company can find a very talented engineer I really feel the owner will have no choice but to, if the designs or schematics are able to be sold, sell them himself (and then the company is finished but considering the company made around 100 million dollars in the last 10 years imagine what he could sell them for?) and I just feel it would be so wrong for he alone to benefit from the culmination of 65 years of another man's work while the engineer's wife along with the tech and the other engineer that supported the design engineer for 20+ gets nothing. All just because the engineer didn't want to deal with customers? All because the company filled out a 1099 on the engineer? That's it? Or even more unjust, the owner, who is in fairly bad shape as far as age and personal issues, hands it all over to his sons who have nothing to do with anything, having never participated at all in the company or the work?

Anyway, just trying to explain why I feel it's important as to what happens to these designs and why the input I've gotten here has been SO IMPORTANT. It's the first help I've received on this issue.

[ataradov]

unless contractually stipulated

Verbal contract is binding in many states. And that's the problem. If there was a verbal agreement back then, it would be legally binding. But figuring it out is not easy, especially after that long and with one party missing.

From the company point of view, absolute best path forward is to continue to sell exiting designs and hire people to start recreating them from scratch. The legal limbo that existing designs are in is not likely to be easily resolved. They will have to hire someone anyway to maintain them even if they get the files.

Years ago he showed me where at least one his boards was in a magazine.

Completely irrelevant.

But if for instance Cal-Tech wants a new board or wants their existing board changed they won't be getting it from that company.

Where would they be getting it from?

Designs are trivially copied. It would be harder if there were patents, but you already said that there are no patents.

There is no way a company that makes "100 million dollars" does not have this covered. No way at all. Although the fact that they operated this far without putting everything in paper is very strange. Something is surely missing here.

[fourfathom]

I only have other engineers to go by but it seems clear that his designs have had a notable effect on the field of ADC PCB design.
[...]
Anyway, just trying to explain why I feel it's important as to what happens to these designs.

This sounds impressive and it appears that he left a significant legacy.  But this has virtually no bearing on the ownership of the intellectual property and work materials he created.  Many engineers have made profound discoveries and advances in the art while in the employ of a company, or while doing work for hire.  Who owns what depends on the employment agreement or contract, and if there's no contract then you have to resort to negotiation or legal action.

[bdunham7]

A lawyer can't "answer" your question, an actual answer would have to come from a judge, perhaps even a jury.  Just off the top of my head with the limited facts provided your answer might be that the designs are works for hire and belong to the company or it might be that despite the 1099 arrangement, the designer and the owner of the company were in a partnership and the designs are the property of that partnership, with the designer's heirs having the appropriate interest in it. I would assume that since there were no ongoing royalties, the agreement was at the very least essentially a perpetual license to use those designs.

The problem the company has is that if they need access to those files and don't have physical possession of them, they need to get them one way or another.  And stealing them (or worse) is a pretty bad way to go about it.  So if I were representing either side I'd be looking for a reasonable settlement.  But if one side seems to think that a designer of a product is due 90% of revenue, it's going to be tough going.

[BThompson]

Thank you to all who have offered their insight and opinion. With no engineering background I have been struggling and when the law firm I contacted never called back and I looked around and saw that there is no one who understood his work or what I have here on these hard drives I just finally thought, "Why not go to the engineers?" I wish I had done it sooner. I apologize for the continued questions and the long posts but this forum is the first help that I've received. I promise your time has not been wasted. Thank you so much.

[BThompson]

That's the whole point. A reasonable and just settlement. When I say "the company" I am ultimately talking about the owner, a tech, an engineer, and a salesperson. It's people and I think everyone, along with the designer's wife representing his stake, should be part of the resolution. They set the tone when while on the phone with them (secretary) as I waited for the coroner to come and take him from his hospital room they said they would be coming to get his computer. As revolting as that is it's also frustrating that a company would think another company is supposed to give them their inventory under such circumstances. They are going on 100% ownership on their part. A couple of "condolence" visits from one employee, with his computer mentioned and the mention being ignored, that is where it stands. I don't think it's occurred to them for a second that we are even questioning their position on ownership. I think they thought the computer would just be handed up and over, and it would have been had he never had that talk with me. It would have never occurred to me to do otherwise, thinking there was a personal relationship established over all that time and wanting to be as helpful as possible. But it's business apparently and I haven't talked to them about it for fear they will lawyer up and I wasn't ready for that. It's why I came here and I've learned a lot. I want a firmer legal position before I deal with them but I feel I'm running out of time. That law firm not calling back, not being interested I suppose, was a bit of a blow to what I thought was supposed to happen, so then I came here. I hate to have to resort to lawyers but their assumption of ownership is rather jarring and it makes me think reason will not be in play. It's why I started to disregard them in my thinking and just wanted to establish ownership and go from there. Even if we sold them to someone else those people mentioned would get what is rightly due them after a 20+ year relationship. Clearly that sentiment isn't going to be returned. I promised myself I wouldn't do another long post but I did want to convey that you haven't been wasting your time on some unreasonable money-grubber. I really, truly only want to do what is right.

[ataradov]

When I say "the company" I am ultimately talking about the owner, a tech, an engineer, and a salesperson.

It depends on how that company is incorporated, but if they have half a brain, individual people would be separate from the company as a legal entity. And legal obligations of a company may be different from what individual people there think or want.

Even if we sold them to someone else

I can guarantee that nobody else would be interested in buying that stuff. You don't just buy random stuff like that and all this legal uncertainty will come up in due diligence process.

Those files have very limited shelf life. And the designer's job was to maintain them. Without that maintenance they will quickly become irrelevant. Your best bet is to try to get a reasonable (not millions) fixed amount of money from them and give up the files.

[BThompson]

Unfortunately I do think that the company's presumption of 100% ownership establishes that a lawyer will have to be involved. Not in any hostile way, just to work towards determining ownership of these designs. It seems so obvious to me that without a contract claiming otherwise, the designer (or "author") owns the original designs but their certainty of ownership really threw me. I only mentioned the seeming distinction of his work regarding the potential for a patent and not that it would inherently establish ownership on the designer's part. Thank you for replying. So much has been cleared up for me thanks to this forum.