Protecting your business’ IP is essential to running a successful business, and having access to the advice of an expert IP solicitor is always advisable. Determining who owns the IP made by employees is not always an easy area of law to navigate, since both employee and employer may assert their own rights. This risk can usually be managed by drafting the employment contracts correctly and carefully with an experienced IP solicitor.
What should employers be aware of?
- Employers should be aware of the origin of any IP rights in materials made by employees – Who is the owner? Who is the owner if the employee quits? What is the best way to protect your own business’ interests against those of the new employer of an ex-employee? An IP solicitor can assist in answering these important legal questions.
- There should be an express term written into every employment contract which states clearly that all IP will be owned by the employer if created ‘in the course’ of employment. These contracts should be drafted by an employment lawyer to ensure they are legally effective.
- Employers should also consider including a post-employment restraint clause, especially when the employees have access to confidential information that could be valuable to competitors.
Who owns IP under statute, common law, and equity?
Generally, the Copyright Act 1968 (Cth) tells us that the creator of the product, or ‘work’, will be the owner of the copyright in it. The creator is the person who actually put the work into ‘material form’ (i.e. made it real). This rule is applicable to any dramatic, artistic, literary or musical work. For example, the source code of a business’ software can be considered a literary work, which will be protected by this copyright. An example of an artistic work could be the visual layout of a website (the icons and images and their placement), which would also benefit from this copyright protection.
Under the Designs Act 2003 (Cth), if an employee authors a design while in the course of employment, or while contracted, with someone else, that person is entitled to register as the owner of the design on the design register.
However, with the help of a IP solicitor, both of these provisions can be altered or omitted by a contract.
What about the contract?
Being too reliant on the provisions of the statutes, when seeking to assert your ownership of IP that has been made by employees, can be a risky way to go. The same can be said for any trade secrets or confidential information that has been disclosed during their employment. So, what is the clearest and most effective way to claim ownership as an employer over the IP created by your employees? By including these terms and provisions into the employment contracts themselves, the business will be safeguarded against employees claiming the ownership rights to IP they have created during their employment. Here is what you should be doing:
- Always include a clause in all employment contracts that states that all IP that relates directly or indirectly to, or that assists in the performance of, the role of the employee, becomes the property of the employer. This provision will prevent the current or ex-employee claiming they created the IP outside the ‘course of employment’ of his or her employment. To draft this effectively an IP solicitor should be consulted.
- Always keep the contracts up-to-date if an employee is promoted to make certain that the IP provision relates directly to their current role.
- Employ ‘restraint of trade’ clauses to protect the business’ confidential information (like trade secrets or customer lists).
How important are employee restraint clauses?
The first means of protecting your business’ valuable confidential information is a direct restraint against using or disclosing such information for any reason other than employment-related purposes. This should have effect both during and after employment. Here, however, in order to enforce such a clause, it must be known what confidential information the employee has disclosed, so that a court would be able to ensure compliance by the employee of a court ordered injunction.
The second means of protecting your business is by including a restraint clause on engaging in certain conduct. It is important that such a clause only go as far as is necessary to protect your business. In other words, it must be reasonable. A ‘restraint on conduct’ clause is more likely to be reasonable in a contract if the parties have freely negotiated and legal advice from an IP solicitor has been sought.
In summary, to ensure that IP made during the course of employment remains the property of the business, a tech solicitor should draft your employment contracts. Finally, to protect your business’ confidential information, these contracts should always consider ‘restraint’ clauses limiting the use of such information by current and ex-employees.