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Intellectual Property in the Workplace: to whom does it belong?

In the Information Age, intellectual property is a very valuable asset of your business. Most successful businesses, large and small, are built on intangible assets or IP. Intellectual property can be in the form of a copyright, for example, a short story or a drawing, a patent for an invention, or a trademark for a logo or slogan. 

The copyright assets of a business are important not only because they protect the original expression of ideas but also because a business should value its IP assets as it would physical assets in the sense of calculating the time and money put into developing them or how much a competitor might pay for them. 

IP assets are created by individuals, who are, more often than not, employees who are paid to produce an output. Now the question is, who is entitled to own intellectual property created in the workplace? Is it the employer or the employee? Let’s look at the story of John.

John’s Case

John is a writer for ABC Publishing. As part of his job description, he is in charge of creating written content or articles for ABC Publishing’s entertainment magazine called, “Entertainment Now”.  John’s talent, however, is not only limited to writing. In fact, as a computer programming graduate, he is also really good at computers.

So, when he is not too busy catching up on deadlines at work, John tinkers with his laptop to develop a “fitness app” that can help people achieve their fitness goals. Everyone in the office, including management, are aware of John’s fitness app and they freely allow him to work on it even during office hours, so long as it does not affect his work output and productivity.

After a year, John completes the development of his fitness app and he launches it on Apple Store and Google Play. The fitness app is very successful. When ABC Publishing learns of the success of John’s fitness app, management informs John that the fitness app is their property, as it was developed on the premises of the business and during John’s work hours. Therefore, as John’s employer, ABC Publishing insists they are the owner of the fitness app and not John, and that all of the proceeds from the fitness app should be paid over to ABC Publishing. Is ABC Publishing correct?

“In the course of employment”

In Australia, the general rule is that where a person creates a copyright in the course of their employment, the copyright in that work will be owned by the employer.

The Copyright Act states that:

Where a literary, dramatic or artistic work…. is made by the author in pursuance of the terms of his or her employment by another person under a contract of service or apprenticeship, that other person is the owner of any copyright subsisting in the work by virtue of this Part.

For the employer to own the employee’s copyright, however, the work must have been produced by the author in pursuance of the terms of his or her employment. The court in Edsonic Pty Ltd v Cassidy considered the meaning of of “in pursuance of the terms of his or her employment” and observed that:

  • The mere existence of the employment relatonship will not give the employer ownership of inventions made by the employee during the term of the relationship,
  • This is even so if the invention is germane and useful for the employer’s business and the employee made use of the employer’s time and resources to comple the invention.

To understand what “in the course of his or her employment” means, we should consider what the contract of employment expressly provides, what the employee is paid to perform and any directions that an employer gave to the employee to perform specific tasks or duties as part of that employee’s role.

In John’s case, it is clear that the articles he writes for Entertainment Now are owned by ABC Publishing. The works relate to the business of ABC Publishing and John was paid to write these articles as part of his job description as a writer. But the same cannot be said with respect to the fitness app, as the creation of apps was not what John was paid to do under the terms of his employment. He was not under a contractual duty to create apps for ABC Publishing. The fact that John worked on the fitness app during work hours or used a computer that belonged to ABC Publishing, notwithstanding, the basic rule applies and, as the creator of the fitness app, John owns the copyright in the work.

Take away points

The question comes down to what was the employee paid to do?

The court found in the landmark case of University of Western Australia v Gray [2010] that absent an express agreement to the contrary, rights in relations to works created by academic staff will ordinarily belong to the academic staff unless the staff have a contractual duty to produce those works.

It is essential that the scope of an employee’s duties in his or her contract are clearly stated. Intellectual property clauses in employment contracts must be properly drafted to ensure that intellectual property created by employees in the course of the employee’s employment are owned by the employer. If the duties of an employee are to include creating IP rights, then it is important that the written employment contract states this.

Johanne Sarcilla, B.A., LL.B

Contact W3IP Law on 1300 776 614 or 0451 951 528 for more information about any of our services or get in touch at law@w3iplaw.com.
Disclaimer. The material in this post represents general information only and should not be taken to be legal advice.

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