by John Wojtowicz (Director - Law Central Legal)

A patent over an invention can be of enormous value to the owner; it grants exclusive rights to exploit the patent for a fixed term of 20 years. Accordingly, when an employee makes an invention that relates to their employer’s business, there is a critical question of who has the right to patent the invention. Unlike other jurisdictions such as the United Kingdom, Australian patent legislation does not expressly deal with ownership of employee inventions, making this question a difficult one in many scenarios.

What determines ownership of an employee’s invention?

The most important factor in deciding whether it is the employee or employer that owns an invention is the employment contract. In the simplest cases, such as that of an employee who has been specifically retained for research and design (R&D) work, the employment contract will have a clause that directly deals with rights to inventions made in the course of employment. This should clearly lay down rules for working out when an invention, and what kinds of invention, will belong to the employer.

However, difficulties arise when the employment contract does not address inventions, or if it is unclear whether making the invention was part of what the employee was paid to do. To avoid these problems, employment contracts should contain a clause explicitly stating that inventions made at work, which relate to the business, belong to the employer. Alternatively, you might wish to draft a company policy on intellectual property created at work and incorporate it into the employment contract.

What happens if there are no express clauses in the employment contract? Gold and Platinum Members read on for how “implied terms” are interpreted.

Determining whether an invention is covered by “implied terms” boils down to two questions: first, did the employee have a ‘duty to invent’; and secondly, did the employee make the invention in the course of their employment duties?

How do I identify a ‘duty to invent’?

Several factors can help in working out whether an employee has a duty to invent; that is, is it part of their job to invent things. These include the nature and seniority of the employee’s position, the nature of the employee’s duties, and whether or not the employee received a specific instruction regarding the invention. Sometimes, an employee will make an invention that improves a workplace process, but is quite unrelated to their specific role in the company (e.g. a sales manager inventing a mechanical device). In this situation, it is more likely that the employee has no duty to invent and the invention belongs to them and not the employer. It is much easier to identify a duty to invent where the employee has been engaged for an R&D team or project.

Gold and Platinum members read on for an analysis of UWA v Gray (2009) which considers the difference between a “duty to invent” and the more general “duty to research”.

How do I know if an invention was made in the course of employment duties?

Even if there is a duty to invent, an employee’s invention will need to have been made in the course of their employment duties for the employer to own the invention. Important considerations here include whether the invention was made during working hours, whether the employers’ materials were used, and whether the invention related to what the employee was instructed to do.

What if I pay an employee to invent product A, but they come up with product B?

Suppose I employ you to invent a marker pen, which you do, but you also invent a biro. Clearly, I own the rights to the marker, but who owns the biro? Essentially, the same considerations apply: was there a duty to invent; and was the invention made in the course of employment duties? If the answer to both of these is yes, the biro should belong to me. This kind of scenario can be reimagined in the biotechnology or health sciences fields, where key discoveries (e.g. penicillin) are not uncommonly made by accident.

Gold and Platinum Members read on for a more detailed analysis of the question of who owns these “derivative inventions”.

In summary, the best course of action for an employer is to ensure that the employment contract is well-equipped to deal with an employee invention. Otherwise, the employer is faced with the more difficult problem of having to imply a contractual duty granting ownership to the employer.

Employees duties under the Corporations Act

If the employee is employed or has been employed by a company, then section 183 of the Corporations Act 2001 (Cth) stipulates that any information obtained by the employee whilst employed by the company cannot be improperly used by the employee to gain advantage for themselves or somebody else. See Bulletin issue 475 for further commentary.

Disclaimer: The content of this Bulletin is general information only. It is not legal advice. Law Central recommends you seek professional advice before taking any action based on the content of this Bulletin.

Related documents:

• Employment Contract
• Independent Contractors Agreement
• Confidentiality Agreement
• Build a Company (Elodgement)