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Does an Employer Have Rights to an Invention by its Employee? |
Employers are not entitled to ownership of inventions or patents by the employee based on the mere existence of the employer - employee relationship. A determination of ownership must be made on a case by case basis according to the Supreme Court in Victoria University of Technology v Wilson & Ors [2004] VSC 33 (18 February 2004). |
Two academics at the Victoria University of Technology developed a patentable invention and two related computer programs. The issue was who owned the invention and the programs was whether the academics (or interests associated with them) held the invention or computer programs on trust for the university, or were accountable to the university for the invention or programs. In making its determination in this case, the Court looked at the following:
- The intellectual property policy as set forth in the terms and conditions of the academics' employment contract;
The university said that its intellectual property policy encompassed the invention or the computer programs. The Court disagreed.
- The use of university time and resources in developing the invention and computer programs;
It is an implied term of employment that an employer owns inventions or discoveries made in the course of employment by the employee, doing what the employee is engaged and instructed to do during working hours. The employee becomes a trustee for the employer, and must give the benefit of discovery or invention to the employer.
However, the mere existence of the employer - employee relationship will not give the employer ownership of inventions made by the employee during the relationship. This holds true even if the employee used the employer's time and resources.
- Whether the invention and programs were developed within the scope of employment;
The university argued that the academics were paid to be researchers, and the invention was the product of that research. The Court disagreed because prior case law required the employer to show that the invention was within the ambit of the employee's day to day obligations to the employer.
- Whether the work was undertaken in a private capacity;
The Court found that the work was undertaken as a university project up until 23 September 1999, after which it was done in a private capacity.
- Whether equitable considerations, particularly fiduciary duties, were breached, and if so, the consequences of the breach.
The Court stated that the extent of the employee's duty of fidelity and loyalty to his or her employer depends on the facts in each case. As academics, these professional employees owed a duty to their employer not to profit from their position at the expense of their employer and to avoid conflicts of interest and duty.
The Court said there was a breach of those fiduciary obligations because:
(i) The opportunity to design the invention and computer programs was presented to the academics in their capacities as heads of the university departments.
(ii) The opportunity was available to the university, in that those presenting the opportunity would have accepted the system being designed in the name of the university, instead of in the name of the individuals.
(iii) The academics began working on the system design in their capacities as employees until 23 September 1999. At that time, they entered into an agreement with a third party and formed a company with the academics listed as shareholders. The company owned the intellectual property rights, and its assets consisted of the invention and the computer programs.
(iv) The agreement of 23 September 1999 took the design and the opportunity to profit from the design away from the university and transferred it to the individuals as shareholders.
(v) The individual employees did not provide full and true disclosure to their employer.
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| The Court imposed a constructive trust over the shares in the company formed by the individuals in favour of the university. Alternatively, if the academics paid to the university an amount of money equal to the value of all shares held and/or sold, they would be allowed to own the shares outright. |
| Victoria University of Technology v Wilson & Ors [2004] VSC 33 (18 February 2004) |
http://www.austlii.edu.au/au/cases/vic/VSC/2004/33.html
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Peter McNamara |
peter.mcnamara@cmlawyers.com.au
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