Who exactly is the owner of an employer’s intellectual property?

Assumptions can be dangerous when it comes to patents and copyrights
By Donya Vahidi
|Canadian HR Reporter|Last Updated: 10/02/2017
Intellectual Property
Many employers assume they own the intellectual property created by employees related to their business. Credit: Omelchenko (Shutterstock)

Many employers assume they own the intellectual property created by employees related to their business. This is a dangerous assumption — to retain ownership, employers must be familiar with the laws related to ownership and explicitly indicate in the employment contract that any intellectual property developed by the employee under the contract is solely owned by the employer.

Patents and copyrights are the most common areas of intellectual property that are often seen in employer-employee disputes. What’s noteworthy is the laws that govern ownership vary when it comes to patents and copyright.

Also, the rules are applied differently when it comes to employees versus independent contractors. As such, it is imperative that employers educate themselves on the distinction before beginning 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, and source codes in relation to technology, website content, user interfaces and logos. Given the broad spectrum, copyright ownership disputes are inevitable in employer-employee relationships.

The Copyright Act

The Copyright Act specifically addresses ownership rules in the employer-employee context.  Section 13(1) states the author of a work is the first owner of copyright in the work. Despite this general rule, section 13(3) 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 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.

• The work must be created in the course of the worker’s employment, as part of his duties under the contract of services.

The first two requirements speak to whether or not the worker is an employee or an independent contractor. This should be on every employer’s radar as contractors typically own their intellectual property, even if such intellectual property is created within the scope of their engagement.

Employers can solve this by clearly defining relationships in employment agreements. Courts often look deeper to determine what kind of relationship was formed. Courts will look at several factors, including but not limited to control by the employer, ownership of tools, resources or materials used in the scope of the work, compensation and risk of loss to the parties.

As for the third requirement, it is not entirely clear what “in the course of employment” means. Often, this term is interpreted by determining whether the employee is performing duties or tasks assigned to him by the employer, while using the employer’s resources and equipment, and during his employment hours.

However, with more people working from home, it has become more difficult to determine what is created in the course of employment, and what is created with the employee’s own resources or during his 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 that indicates the employee retains ownership.

The Patent Act

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 their employment, disputes around the ownership of patents are also very common in the employer-employee context. 

Generally, the rule of thumb concerning patents is an employee owns her 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 that 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 this is a grey area that is mainly fact-driven. The conduct of the employers and employees is often taken into account, along with language in the employment agreement.

Employers should not assume all intellectual property created by employees will automatically be owned by the employer. 

Given the importance and value of intellectual property, employers must be familiar with the laws that govern ownership. At the very least, employers should have all employment agreements carefully drafted with such ownership rules front of mind.

These agreements should identify the intellectual property as specifically as possible, examine past and future intellectual property, and clearly explain which party retains ownership of such intellectual property.

It is strongly recommended that employers have employment agreements drafted by experienced intellectual property lawyers who are familiar with these rules to avoid disputes over ownership in the future.

Donya Vahidi practises corporate commercial, intellectual property, technology and entertainment law at Boughton Law in Vancouver. For more information, visit www.boughtonlaw.com.

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