The tricky issue of ownership of employee inventions

It is typically assumed that the intellectual output of an employee belongs to their employer; and indeed, the common law in Australia will imply a term into employment contracts (where one doesn’t already exist) to the effect that the employer is entitled to the product of the work that the employee is paid to perform. This is the case even when the product is a patentable invention and Australian patent law vests rights in the first instance in the individual inventor.

However, there is an important common law exception to this rule which is particularly applicable in academia, but also translatable to scientific research institutes. This exception means that in certain circumstances the employee, rather than the employer, will own the output of their work. These circumstances can create issues for research institutes who seek to commercialise, license, sell, or otherwise deal with such intellectual output where their title to it is not clear.

Therefore, in order to effect ownership and commercialisation strategies without doubt, it is important for employers to ensure that the intellectual property created by their researchers vests on creation in the employer, through the insertion of appropriate clauses in employment contracts and/or binding intellectual property policies.

The common law exception

The reason why it is so important to have appropriate clauses in place is to avoid the situation that arose in the University of Western Australia v Gray[1] and Victoria University of Technology v Wilson[2] cases. In these cases the universities had failed to adequately displace the common law through the proper incorporation of intellectual property policies into the employee’s employment contracts, with the effect that when the dispute arose, the courts had to approach the issue from the common law perspective.

In these two cases the intellectual property created by the academics in question was ultimately deemed to be the property of those academics, and not the relevant University which employed them. These cases have relevance for research institutes as well. In fact, UWA v Gray was extensively cited in the Australian Patent Office case of The Royal Children’s Hospital v Alexander[3].

In the UWA v Gray and VUT v Wilson cases a distinction was drawn in respect to whether it could be implied that the academic is employed to invent, in addition to their role to perform research (UWA v Gray), or whether the research that the academic undertakes is of a kind which would normally result in the making of inventions (VUT v Wilson). Where the academic is not employed to invent (as found with Gray), or the research they undertake is not of a kind that would normally result in inventions (as found with Wilson), then it would be more likely that the academic’s inventions would be owned by the academic and not the employer.  In VUT v Wilson the court said that, while all the circumstances must be considered in each case, unless the contract of employment expressly so provides, or an invention is the product of work which the employee was paid to perform, it is unlikely that an invention made by the employee will be held to belong to the employer (my emphasis).

There are a few different considerations to take into account outside of the academic arena such as, for example, in research institutes. As was discussed in UWA v Gray, the nature of universities and the public purpose they serve means that there is an underlying objective of generating and disseminating information; this can negate any implication of a duty to invent because, for the purpose of profiting from such an invention an environment must exist where the results of the research are kept in confidence. As described in RCH v Alexander, in an industrial setting, an employer is interested in commercialising their inventions and therefore publication of an invention which destroys the validity of future patent rights would be undesirable.

For this reason, in the private sector, a duty of confidentiality on employees typically exists. However, this circumstance can not on its own determine whether there is an implied duty to invent; other relevant factors would need to be taken into account. In RCH v Alexander, for example, the Patent Office found that one of Alexander’s inventions was an improvement to a device where the existing design was already effective, and it could not have been expected of him as part of his employment at the RCH to pursue this particular improvement. Therefore, for this reason, and because Alexander’s employment contract did not displace the common law, it was determined that the invention belonged to Alexander and not his employer.

It is a difficult lesson to learn for these universities and institutes where, in good faith, they may have had an expectation of owning the work products of their employees, but it goes to show that it is always worthwhile, for any entity in the business of research, to carefully establish IP ownership from the outset.

Elizabeth Campbell

[1] University of Western Australia v Gray (2009) 179 FCR 346.
[2] Victoria University of Technology v Wilson (2004) 60 IPR 392.
[3] The Royal Children’s Hospital v Alexander [2011] APO 94.

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