IP rights in the workplace
Intellectual Property (IP) rights protect creations of the mind, including trademarks, patents, copyrights, designs, database rights, and trade secrets. IP rights are valuable assets for many employers and businesses, particularly those operating in IP-intensive industries such as information technology or life sciences.
Disputes often arise over who owns IP, created during the course of employment or under a consultancy agreement. This article examines the UK legal framework governing IP ownership in the workplace, and how employers and businesses can implement best practices to secure ownership of IP developed by employees during employment, or by consultants under agreements.
The current legal framework
Employee created IP
In employer-employee relationships, the general statutory position is that an employer will own any IP developed by an employee in the course of employment. For registered IP (e.g. patents, design rights) ownership belongs to the registered holder. For unregistered IP, the following legislative provisions form the statutory basis for an employer’s first ownership rights:
- Section 39 of the Patents Act 1977 for inventions (i.e. patents)
- Section 11 of the Copyright, Designs and Patents Act 1988 for copyrights
- Section 14 of the Copyright and Rights in Database Regulations 1997 for database rights
- Section 215 of the Copyright, Designs and Patents Act 1988, Section 2 of the Registered Designs Act 1949 and Article 14 of the Regulation on Community Designs (6/2002/EC) for registered and unregistered designs
There is no statutory provision for first ownership of trade marks, however, it is accepted that the owner is the entity that first uses a trade mark if it has not already been registered.
Consultant created IP
The position is fundamentally different for consultants. As independent contractors, consultants retain ownership of any IP they develop unless specifically stated otherwise. This is a crucial distinction that businesses can address by drafting appropriate clauses in consultancy agreements.
Exceptions and Limitations
IP created outside employment
IP developed by an employee outside the course of employment is not usually subject to employer ownership. However, IP developed outside working hours but related to an employee's job description or using employer resources may still belong to an employer. So, the individual circumstances of each case can be important factors in determining ownership.
Many disputes arise from a lack of clarity surrounding what "course of employment” entails, making it crucial for employers to define this clearly in employment contracts.
Moral rights in copyright
Moral rights are intended to protect the integrity and ownership of copyright, such as the right to be recognised as an author of a copyrighted work or the right to object to the derogatory treatment of a copyrighted work. These rights remain with employees unless explicitly waived. So, although an employer will retain first ownership of the economic rights in copyright (e.g. the right of redistribution or rental), an employee’s ownership of the non-economic moral rights in copyright could prevent an employer from being able to edit or revise a copyrighted work, which may restrict its commercial value.
Compensation for inventions
Employers should note that employees may be entitled to compensation for inventions developed during employment if the invention provides an "outstanding benefit" to an employer under Section 40 of the Patents Act 1977. We have considered when employers may be liable for compensation in a previous article.
Best practices for securing IP ownership
In Employment Contracts:
- Include clauses which affirm an employer's right to first ownership of any IP created during the course of employment.
- Clearly define the "course of employment" by specifying the employee’s role, working hours, job description, and function within an organisation.
- If the production of copyright is commercially valuable or otherwise important to an employer, include clauses which waive an employee’s moral rights in copyright.
- Include clauses which require immediate disclosure of any IP created during the course of employment.
- Consider including indemnification clauses which protect against third-party IP infringement claims.
In Consultancy Agreements:
- Include clauses which facilitate the assignment of ownership of IP created by a consultant under an agreement to the contracting business.
- If an assignment cannot be agreed, consider including clauses which provide a licence for the contracting business to use and commercially benefit from any applicable IP.
- Clearly define the consultant’s role, working hours, job description, and function within an organisation.
- Include clauses which require immediate disclosure of any IP created by a consultant under an agreement.
- Include indemnification clauses which protect against third-party IP infringement claims.
By Mark Thompson & Keith Dunn of A&L Goodbody LLP.
