Ownership of Intellectual Property Created in the Workplace
The ownership of any form of Intellectual Property (IP) rights, such as patents, copyrights, database rights and design rights, often creates opportunities to exploit these valuable assets in the marketplace. This may be achieved through various avenues, such as the sale of IP rights, the licensing of marketing rights and the creation of franchises.
For many employers and businesses IP rights are highly valuable assets and, it is thought that eighty per cent of a business’s value can be attributed to its intellectual property.
Disputes over the ownership of IP rights inevitably arise, particularly where an IP asset has been created by an employee during the course of employment. In these situations, the ability to identify ownership quickly can be invaluable to achieving a swift and cost-effective resolution.
Where ownership remains unclear, disputes may progress through the Civil Courts, resulting in significant expense and what can often be a lengthy and time-consuming process.
As between an employer and an employee, the general statutory position is that an employer will own any IP created or developed by an employee during the course of their employment. However, as to be expected, the circumstances surrounding the creation and ownership of IP are not always particularly clear.
Stuart Southall of KANGS outlines the relevant statutory law and comments upon steps available to minimise the prospects of dispute.
The Statutory Provisions
Patent Disputes
A patent is a form of IP that gives its owner the legal right to exclude others from making, using or selling an invention for a specified period of time.
Section 39 (1) of the Patents Act 1977 provides that:
Notwithstanding anything in any rule of law, an invention made by an employee shall, as between him and his employer, be taken to belong to his employer if:
- it was made in the course of the normal duties of the employee or in the course of duties falling outside his normal duties, but specifically assigned to him, and the circumstances in either case were such that an invention might reasonably be expected to result from the carrying out of his duties; or
- the invention was made in the course of the duties of the employee and, at the time of making the invention, because of the nature of his duties and the particular responsibilities arising from the nature of his duties he had a special obligation to further the interests of the employer’s undertaking.
This enables employers to claim ownership of an employee’s invention, contingent on the above criteria being met.
In Prosycor Ltd v Netsweeper Inc [2019] EWHC 1302 (IPEC), it was found to be immaterial that the invention was developed in the employee’s own time as it fell within his employment duties.
Copyright Infringement
Copyright is a form of IP that gives its owner the exclusive legal right to distribute, adapt, display and perform a creative work, usually for a limited time.
Section 11 of The Copyright, Designs and Patents Act 1988, provides that:
The author of a work is the first owner of any copyright in it, save that where a literary, dramatic, musical or artistic work, or a film, is made by an employee in the course of his employment, his employer is the first owner of any copyright in the work subject to any agreement to the contrary.
In Penhallurick v MD5 Ltd [2021] EWHC 293 (IPEC), the Court found that, whilst much of the creation of the copyrighted works took place at the employee’s home, those works were the primary reason for his employment, and his employers were entitled to ownership in the work.
Database Rights
We have previously written about database rights, but in short, a ‘database right’ subsists in a database where there has been a substantial investment in obtaining, verifying or presenting its contents.
The Copyright and Rights in Databases Regulations 1997 provides that:
The person who takes the initiative in obtaining, verifying or presenting the contents of a database and assumes the risk of investing in that obtaining, verification or presentation shall be regarded as the maker of, and as having made, the database.
However, where a database is made by an employee in the course of his employment, his employer shall be regarded as the maker of the database, subject to any agreement to the contrary.
Design Rights
Design rights are governed by a number of statutory provisions and regulations.
A ‘design’ means the appearance of the whole or a part of a product resulting from the features of, in particular, the lines, contours, colours, shape, texture or materials of the product or its ornamentation.
The Registered Designs Act 1949 provides that:
- A design shall be protected by a right in a registered design to the extent that the design is new and has individual character.
- A design is new if no identical design or no design whose features differ only in immaterial details has been made available to the public before the specified relevant date.
Section 2 states that:
The author of a design shall be treated as the original proprietor of the design save that where a design is created by an employee in the course of his employment, his employer shall be treated as the original proprietor of the design.
The Copyright, Designs and Patents Act 1988 states, at S.215 that:
The designer is the first owner of any design right in a design save that where a design is created by an employee in the course of his employment, his employer is the first owner of any design right in the design.
The Regulation on Community Designs (6/2002/EC) for registered and unregistered designs
Article 14 provides that the right to the design shall vest in the designer or his successor in title provided that where a design is developed by an employee in the execution of his duties or following the instructions given by his employer, the right shall vest in the employer, unless otherwise agreed.
Potential Preventative Measures to Minimise Dispute
In general terms, in the absence of clear evidence to the contrary, the rights to a creation belong to the creator, except where that person is working for a company which is likely to be the owner.
However, this default position may well be either supported or defeated in several ways.
Employment contracts
The potential for dispute may be anticipated by conditions inserted into an Employment Contract which confirms that employee creations belong to the company, thereby overriding any law that specifies that the creator is owner.
It is prudent for any employer to ensure that Employment Contracts deal with IP ownership, irrespective of whether the rights are likely to automatically transfer to the employer by virtue of the statutory provisions.
New Partnerships | Trading Venture Agreements
It frequently happens that parties agree to pool their resources and trade together to develop an idea involving any form of IP, which was the brain child of one of them. At this point, the likelihood is that the creator is not an employee of the company, thereby, potentially, preventing the operation of the statutory provisions.
Whilst owners and directors have special obligations to their company, defined by company law, there is plenty of scope for technical issue to develop which ought to be addressed in a Joint Venture Agreement, or similar, from the outset.
Consultancy Agreements
Where a consultant, or similar exterior contractor, is tasked with providing their specialised services, should that relationship result in IP being created, that person, as inventor may well own the creation.
Doubtless, there will exist a wealth of technical argument supporting both parties in the event of dispute, but the prudent employer will always require that a detailed Consultancy Agreement or other form of contractual agreement is in place from the outset.
How Can We Help?
Any intellectual property dispute as to the ownership of an IP right between an employer and an employee can be extremely costly and, in some cases, difficult to resolve satisfactorily. Such disputes can also place significant strain on the relationship between the parties, potentially resulting in lasting damage if the matter is not resolved swiftly.
The team at KANGS possesses the experience to identify where a right exists, where those rights may have been breached and assist in seeking the appropriate remedy. Our intellectual property lawyers will act to stop any infringement and protect your rights from misappropriation.
If you need assistance, please contact our team using the details below.
Tel: 0333 370 4333
Email: info@kangssolicitors.co.uk
We provide initial no obligation discussion at our three offices in London, Birmingham, and Manchester. Alternatively, discussions can be held through video conferencing or telephone.
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