by John Wojtowicz (Director - Law Central Legal)

Ownership over designs, products, and patents, has long been disputed by employees and employers. Employers have a wide variety of reasons for claiming ownership over the work of an employee. These reasons include: the invention is directly related to the field of work which the employee was employed in; it was unrelated work done during work hours; unrelated work was done on company laptops; or the employee had contractually attributed future inventions to the employer. All of these examples commonly occur and they present compelling arguments for the employer to claim ownership over the employee’s product. However, there is no guaranteed right in any of these examples that ownership will rest with the employer. Employers need to be aware of the law which surrounds intellectual property, to ensure the employment is done on terms which remove any ambiguity of ownership.

The common law accepts that any invention or discoveries made by an employee during the scope of their employment will be the property of the employer. This is a term that the courts will imply into employment contracts unless an intention is expressed to the contrary. Upon making an invention or discovery, the employee becomes a trustee over that invention or discovery, and is bound to give any benefit arising from the invention or discovery to the employer. The common law position has since been reflected in statutory provisions. These statutory provisions operate in addition to the common law and cover patents, designs and copyrights. The legislation confers ownership of the patent, design, or copyright to the employer if they are made within the course of employment. The relevant sections are:

• Patents: s 15 Patents Act 1990 (Cth)
• Designs: s 13 Designs Act 2003 (Cth)
• Copyright: s 35 Copyright Act 1968 (Cth) 

The combination of common law and legislation might make employers feel comfortable with the legal rights of ownership they have over their employees work, but this should not be the case. There are two requirements which must be met by the employer in order to invoke ownership rights under the common law and the statutory provisions. Firstly, there must be an employee/employer relationship. This condition will usually be satisfied, though issues can arise if the ‘employee’ isn’t really an employee but instead an independent contractor. The second requirement is that the invention or discovery is made ‘in the course of employment.’ This is the requirement which will pose the biggest difficulty to employers wanting to invoke rights of ownership.

In the course of employment:

This is often the issue at the crux of most intellectual property disputes. Was the invention or discovery made in the course of employment? This section of the bulletin will outline the process of determination used by the courts to decide if the invention or design was made in the course of employment.

The main question considered by the court is: what was the person employed to do? This is often crucial in determining if the task was within the course of employment. If a person is employed to develop tyres and that person develops a tyre at home in his own time, then the tyre developed at home will likely be the property of the employer. The rationale of the court is that the employer should benefit from the employee doing work which the employee is paid to do. If someone is paid to develop tyres, the employer should benefit from any tyres developed. In determining the purpose of employment, the employment contract will be the first consideration for the courts. If the employment contract is silent on the issue, then the actual duties carried out by the employee will be examined by the court. However, employers should be aware that the courts will often construe the purpose of employment narrowly. This can be shown in several recent Australian cases.

In the case of Courier Pete Pty Ltd v Metroll Queensland Pty Ltd [2010] FCA 735, the Federal Court considered who owned the designs for a modular water tank. Mark Collymore was an employee of Metroll. Mr Collymore’s position at Metroll was not clear in the employment contract. The court looked to the facts and decided he was employed mainly as a sales person. He did occasionally contribute to the design of products but this fell outside his normal role. At home and in his own time, Mr Collymore developed a design for a modular rain water tank. Metroll claimed they had a right to ownership since designing water tanks was one of the roles Mr Collymore held within the company. The Federal Court dismissed the claim, holding that inventing was not within the scope of a sales person’s purpose within a company, regardless of the fact he would occasionally contribute to the design of rain water tanks.    

A second case where the court showed a preference to narrowly construing an employee’s purpose of employment was University of Western Australia v Gray [2009] FCAFC 116. In this case Dr Gray was employed by the University of Western Australia as a lecturer, researcher, and to generally stimulate research among staff and students. Dr Gray created several inventions which were to be used in the treatment of cancerous tumours in humans. Part of the research for the inventions was conducted during his time at the University of Western Australia. It was held in the circumstances that the duty to invent was not implied into employment for the purpose of research. The court did comment that this would be decided on the individual circumstances of each case.  As a result of the decision, the inventing done by Dr Gray was not within the course of his employment and he retained ownership rights. These two cases provide an indication that the court will construe the purpose of employment narrowly, excluding any ancillary tasks that may be completed by the employee.  

A factor the court may take into account is whether the design or invention was made during the hours of work or with work resources. If a design or invention is developed during the hours of employment or with work resources then it could suggest that that inventing or designing was part of what the employee was employed to do. Caution should be used by employers who seek to rely on this factor alone when attempting to exercise the right of ownership. In Victoria University of Technology v Wilson [2004] VSC 33, Nettle J held that the fact something was invented or designed during work hours would not alone satisfy the course of employment requirement. The invention or design must still relate to the work which the employee was employed to do. Nettle J went on to say a remedy may be found contractually for misusing work hours, but unless the invention or design related to the purpose of employment, then it would not be within the course of employment.       

How can you protect your interest in intellectual property?

Both employees and employers should be taking active steps to ensure their interest in any design or invention is protected. The common law and statutes may provide relief after the previously outlined requirements have been met. Importantly though, there is no guarantee of success for an employer or an employee if they attempt to rely on those remedies. The best method of protecting an interest is by clearly setting out the rights of each party in an employment contract. A well drafted contract can even create an arrangement which is contrary to the statutory provisions if that is more appropriate to the specific employee/employer relationship. The employment contract should clearly set out the purpose the employee is employed for. It should also indicate which rights of ownership over a design or invention will lay with the employer and which will lay with the employee. This can prevent potentially lengthy and expensive litigation. It can also ensure that the correct party retains ownership over what could be a commercially lucrative design or invention.

Employment contracts and intellectually property clauses have previously been discussed in these bulletins. The discussion is contained in issues: 472, 475, 478, and 514.

Gold and Platinum members read on for discussion of moral rights such as the accreditation for authorship of technical papers and whether they are retained by an employee over copyright material.

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 (Non Disclosure)
• Employment - Conduct Issues Letter
• Employment - Performance Issues Letter
• Employment - Termination Letter
• Employment - Transferring Employee Letter

Related webinars:

• Webinar Recording - Employee v Contractor