Do I own intellectual property that my employees create?

The comments below apply to all categories of intellectual property: trademarks, copyright, software, patents, trade secrets and confidential information, designs, circuit layout rights, and plant breeder's rights.

As a general rule, an employer will own the intellectual property created by its employees in the course of their employment.

However, intellectual property that is created by an employee, other than in the course of employment, is owned by the employee, not the employer.

What does 'in the course of employment' mean?

The most important single factor in deciding ownership of intellectual property created by employees is whether or not the employee had a duty to create intellectual property as part of their employment duties.

An employee who creates intellectual property in the normal course of their duties cannot claim to own that intellectual property.

However, if the employee is not employed to create intellectual property, but does so, then the employee will own the intellectual property.

Consideration needs to be given to all the circumstances:

  1. How are the employee's duties described in any written employment contract?
  2. Are there duty statements that record the duties of the employee's position?
  3. Did the employer direct the employee's activities that led to the creation of the intellectual property?

The fact that an employee used the employer's equipment is not enough by itself to show that the employer should own the intellectual property created with the use of that equipment.

Example 1

A software writer is employed to write a software program to manage databases of inventory being transported by road.

The software writer spends mornings working on the employer's software program.

The software writer spends the afternoons writing a new computer game, on the employer's computer, and using the employer's software development language and other programs and utilities.

The software writer licenses the computer game for a licence fee of $100,000, and royalties of 10% of sales.

Does the employer own the computer game and is the employer entitled to those monies?

No.

The employee's duties:

  1. were to write a software program to manage databases of inventory being transported by road
  2. were not to write a computer game.

The writing of the computer game was therefore outside the course of employment, and the software in the computer game is therefore owned by the employee.

The employee may be subject to disciplinary action for wrongfully using the employer's computer and software development language and other programs and utilities, and for not working on the employer's business in the afternoons. The employee may even be subject to dismissal.

But that does not affect the ownership of the copyright in the software in the computer game.

Whether the intellectual property was created during working hours, or outside working hours, does not affect ownership. Whether it was created at the employer's premises, or at the employee's home, does not affect ownership.

Example 2

An engineer is part of a team of co-workers that are together working on a solution for a new mechanical device, but they just can't get it to work.

At 6.30am one morning while taking a shower, and not giving any thought to work matters, it occurs to the engineer that redesigning the shape of a valve will achieve the flow through the device to make it work.

The engineer calls a friend who is a patent attorney, who advises him that the valve is sufficiently novel, and non-obvious to be patentable.

The engineer goes to work and keeps his innovation to himself.

Over the next few days the engineer files a patent application.

Only after filing the application does the engineer disclose the valve to the employer, and makes a proposal that the employer license the innovation from the engineer in return for royalties.

Does the employer own the innovation, and the right to apply for a patent?

Yes.

The engineer's employment duties were to solve the technical problem of making the mechanical device work.

If an employee could claim that ideas that entered the employee's mind after working hours belonged to the employee, employers who pay employees' salaries to develop intellectual property would never own any intellectual property.

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