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Biotech News Employee Inventions In brief: Partner Andrew Wiseman and Lawyer Clare Cunliffe look at recent cases on employee inventions and identify some common pitfalls encountered by employers. |
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Introduction
The case law involving employee inventions demonstrates that it is difficult to protect intellectual property without adequate safeguards in place. We look at some recent case law and provide some suggestions for employers seeking to protect their intellectual property.
Common traps for employees
Unclear relationship between employee and employer
- Case study
In Spencer Industries Ltd v Collins (2002) 54 IPR 434, the respondent, Mr Collins, asserted that the patentee, Spencer Industries Pty Ltd (Spencer Industries ), had no entitlement to an invention made by Mr Collins during his employment with Spencer Industries.
While no formal document assigning the invention existed, Spencer Industries claimed ownership of the invention by virtue of Mr Collins' employment.
Mr Collins made the invention outside the course of his normal duties with Spencer Industries (which involved product sales and service), although he had previously developed innovations for Spencer Industries. The invention was made by Mr Collins while on holidays and refined by him in his own time, following an initial lack of interest by Spencer Industries. Mr Collins demonstrated his invention to Spencer Industries, who filed a petty patent application. Spencer Industries asked Mr Collins to execute an assignment, but Mr Collins refused when the parties could not reach agreement on terms (Mr Collins wanted royalty payments or a commission).The Patent Office held that the ownership of the invention vested in Mr Collins alone.
- What you can do
Employers must be careful not to rely solely on the employment relationship in asserting ownership of employee inventions.
It is important to inform employees that ownership of inventions arising in the scope of employment will vest in the employer. Ideally, all employment contracts should contain a clause in which the employee agrees to assign all inventions made during the period of employment with the employer and in the employer's field of business to the employer. Of course, this clause should be appropriately cast to ensure that it is not unduly onerous (since a clause which catches inventions made on the employee's initiative and in the employee's own time may prove difficult to enforce).
Employers should be diligent in ensuring that assignments of intellectual property are executed to avoid subsequent disputes as to the ownership.
Use of confidential information after employment
- Case study
In Primmcoy Pty Ltd v Teer (2003) 60 IPR 164, the respondent, Mr Teer, claimed that he was entitled to ownership of an invention which had been partly invented by an ex-employee of his company, Mr Jones. Mr Jones had left the company at the time of its purchase by Mr Teer. The new employer of Mr Jones, Primmcoy Pty Ltd, subsequently applied to patent an invention made by Mr Jones. Mr Teer claimed that the invention had been made while Mr Jones was employed by Mr Teer's company.
The Patent Office held that Mr Teer was entitled to part-ownership of the invention, based on the Patent Office's findings that:
- Mr Jones had made an inventive contribution to the invention during the period of his employment with Mr Teer's company; and
- Mr Jones owed fiduciary duties to Mr Teer's company by reason of his employment.
- What you can do
To the maximum extent possible, employers should try to protect the confidential information developed by employees which may give rise to a patentable invention. One commonly used method of restricting the use of confidential information after the termination of an employment relationship is the use of a 'restraint of trade' clause. Although many employment contracts (particularly for key employees) contain these clauses which commonly seek to limit employees' rights to work for competitors for a period after their employment ends and may also seek to restrain employees use of know-how/confidential information, these clauses are notoriously difficult to enforce. Even where they are enforced, the remedies available for breach may be of little comfort to employers where an ex-employee has used proprietary information to develop valuable IP for a competitor. Restraint of trade clauses should be carefully vetted to maximise enforceability.
In addition, employers should ensure that an intellectual property policy is in place to ensure that employers identify all intellectual property held by employees, and that this intellectual property is 'captured' by the company, so that the loss of a valuable employee does not mean the loss of valuable intellectual property.
Employers should also be careful to ensure that new employees with bright ideas have not appropriated the proprietary information of ex-employers as a foundation for new work.
Keeping your paperwork in order
- Case study
In Bundaberg Foundry Engineers Ltd v Track Shop Pty Ltd (2001) 54 IPR 546, the Patent Office considered a number of objections to the extension of term of a petty patent. Amongst other things, it was argued that the named inventor was not the only inventor, and that employees of the patentee had provided assistance to the named inventor in arriving at the invention.
Upon consideration of the conflicting evidence, the Patent Office concluded that the evidence did not clearly establish that the employees had materially contributed to the invention.
- What you can do
This case demonstrates the need to keep clear contemporaneous records of employee's contributions to inventions. This may assist in demonstrating the chain of title and entitlement to an invention (and may also be useful in demonstrating the novelty and inventiveness of an invention).
- Case study
In Stack v Brisbane City Council (1999) 47 IPR 525, Justice Cooper of the Federal Court held that a petty patentee, Mr Stack, was not entitled to a petty patent where:
- Mr Stack, who was a co-inventor, had applied for the petty patent to the exclusion of the other inventor, Mr Grieves, and there was no evidence that Mr Grieves had given up or assigned his interest in the invention to the Mr Stack; and
- the invention was made in the course of the co-inventors' employment duties, but the patent was applied for in Mr Stack's name and not in the name of the co-inventors' employer.
Stack's entitlement to the petty patent was opposed not by Mr Grieves or by the co-inventors' employer, but by third parties who were alleged to have infringed the patent.
- What you can do
Even where employee inventors and employers clearly understand the relationship between themselves and the ownership of the inventions, it is important to ensure that any documents formalising ownership of intellectual property (such as an invention, design or a copyright ownership) clearly set out all relevant inventors, authors or creators and the employers' chain of title to the intellectual property. Failure to name all inventors on a patent application, for example, may jeopardise ownership of the patent, even where the matter is not in dispute between the parties.
Conclusion
As the examples above demonstrate, the path to protecting an employer's intellectual property is strewn with pitfalls. However, employers can protect their intellectual property by developing a clear intellectual property policy and ensuring it is consistently adopted.
For further information please contact Andrew Wiseman on +61 2 9230 4701