Who Owns a Company’s Intellectual Property?

By Donya Vahidi

All businesses and employers should be aware of certain intellectual property ownership rules which may impact their rights when it comes to intellectual property developed by their employees under the course of employment.

Of Patents and Copyrights
While intellectual property covers a broad range of subject matter, the areas that are most commonly seen in the heart of employer-employee disputes are patents and copyright. As the rules that govern ownership when it comes to patents and copyright vary, it is important for employers and businesses to be aware of such distinctions before entering into an employment agreement with a potential employee to avoid ownership disputes down the road.

Copyright is the exclusive legal right to produce, reproduce, publish or perform an original “work.” The term, “work” includes an artistic, musical, or dramatic work; source codes in relation to technology, website content, user interfaces, logos, and more. Given the broad spectrum of what is considered a “work,” copyright ownership disputes are inevitable in employer-employee relationships.

Employer Criteria for Copyright
The Copyright Act specifically addresses ownership rules in the employer-employee context. Under Section 13(1), it states that the author of a work is the first owner of copyright in the work. Despite this general rule, Section 13(3) of the Copyright Act provides that where a “work” is created in the course of employment, the employer becomes the owner of the copyright. For the employer to own the copyright of the work created by their employees, the following three criteria must be met:

  • The work must be created under a “contract of services”;
  • The work must be created by an employee, rather than an independent contractor; and
  • The work must be created in the course of the employee’s employment, ie, as part of the employee’s duties under the contract of services.

Thorny “Course of Employment”
While the first two requirements are relatively straightforward, the third requirement is ambiguous. It is not entirely clear what the “course of employment” means, especially given the shifting landscape of work environments. Generally, “in the course of employment”, means the employee is performing duties or tasks assigned to them by the employer, while using the employer’s resources and equipment, and during their employment hours.

However, with more people working from home, it becomes more difficult to determine what is created in the course of employment, and what is created with the employee’s own resources or during their own time. It should be noted, that even if the above three criteria are met, employers are not automatically deemed owners of copyright if there is an agreement in place which indicates that the employee retains ownership.

Look to Precedent on Patent
The Patent Act is not as accommodating as the Copyright Act, in that it does not offer any guidance on the ownership of patent rights in an employer-employee context. As such, employers should be aware of how courts have treated this concept and the general common law rules.

A patent is an exclusive right granted for an invention. As many inventions are created by employees under the course of employment, disputes around the ownership of patents are also very common in the employer-employee context.

“Hired to Invent” the Basic Rule
Generally, the rule of thumb when it comes to patents is that an employee will own their invention unless there is a written agreement in place that assigns or transfers the ownership of the invention to the employer. Where there is no provision that provides for the transfer of ownership, courts will look at the employee’s duties under the contract—and if there is a duty to create that specific invention, the employer is deemed to own such invention. This is often referred to as the “hired to invent” rule.

When determining whether an employee was “hired to invent” the courts will look at several factors, such as whether the employee was hired to invent that specific invention, whether the employer was dealing with the employer’s confidential information, or whether it was a term of the employment agreement that the employer could not benefit from the invention. It is important to note that this is a grey area which is mainly fact driven. Conduct of the employers and employees are often taken into account, along with language in the employment agreement.

Craft Agreements to Clarify Ownership
Given the differences between different types of intellectual property and different ownership rules with respect to copyright and patents, it is important for employers to become familiar with these rules, and ensure that employment agreements are drafted carefully to reflect their ultimate ownership goals.

At a minimum, an employment agreement should set out who owns the intellectual property created by the employee, but it should also take into account the general statutory and common law rules, especially if the employer wishes to circumvent these rules.

Donya Vahidi practices corporate commercial, intellectual property, technology and entertainment law at Boughton Law. As part of her intellectual property practice, she advises clients on brand strategy and protection, trademark applications, cancellations, oppositions, infringement, passing off and unfair competition.

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