Australia: Tricks Of The Trade (And How Not To Get Trapped) - Intellectual Property And Government Grants

Last Updated: 9 July 2008
Article by Clare Doneley

Key Point

  • IP ownership, warranties and indemnities all need to be considered carefully.

The Commonwealth and States provide substantial funding to private enterprise through Grant Agreements. This article looks at some of the intellectual property issues in publicly funded Grant Agreements, and the traps government agencies should be aware of when establishing Grant Agreements. The issues identified in this article also generally translate to other types of agreements involving intellectual property assets.

Project IP

The first task should be to establish what is the scope of the project IP, as this will drive negotiations over ownership of intellectual property rights in the project IP.

Often ownership rights are confused with use rights. Drivers for a government agency in determining whether ownership of project IP should be retained may, in some projects, include whether a Crown objective is to publish the project IP to facilitate knowledge transfer to the public, or to avoid agreeing to a third party holding monopoly rights to the disadvantage of others.

Ownership of project IP may be required by the Crown where an objective is to control licensing and use of the project IP. For example, if an agency is contributing funding to research, the outcomes of which may benefit the broader community, the Crown may want to secure ownership of the intellectual property rights in the project IP so that this can be achieved.

Irrespective of ownership, in some cases the Crown will require the rights to use the project IP and will therefore need appropriate licence rights. The terms of a licence would need to be negotiated and the Crown would need to consider what rights it needs in order to use the project IP. For example, if the Crown wants to be able to provide project IP to a third party, then it will need a licence that allows sublicensing.

Background IP

Not all rights that the Crown may require will be project IP. Parties often contribute background IP to a project. Background IP is usually defined as any rights that a party contributes to the project that pre-exist the date of the Agreement but limited to background IP incorporated into project IP, or rights that a party needs for the purposes of the Agreement. If the definition were not limited in this way, it could capture every right ever created by a party - whether or not it related to the Grant Agreement.

The Grant Agreement should deal with background IP contributed by both parties. If the Crown requires use of background IP contributed by the recipient, then it will need to ensure that appropriate rights to use that background IP are secured. In most cases this will be by way of a licence. The agency will need to consider the scope of this licence. For example, if the Crown is going to own the intellectual property rights in project IP (and can therefore do whatever it wants with the project IP), the licence to any recipient background IP incorporated into that project IP needs to be correspondingly broad. Otherwise, the Crown may only have rights to use part of the project IP.

Moral rights

The Grant Agreement should address any moral rights in project IP and background IP that the Crown will own or have a licence to use. Moral rights are rights granted to authors of works to protect their reputation and the integrity of their work. Depending on the nature of what is being produced as a result of the Grant Agreement, this could be an important issue. Moral rights remain with the individual who has created the work and cannot be assigned. The issue of moral rights is addressed by requiring the recipient to obtain moral rights consents from individuals that perform the Grant Agreement, that allow the Crown to deal with those works without infringing the moral rights of the individuals concerned.

Confidential information and privacy

It is also important to ensure that the definition in Grant Agreements of confidential information and any privacy consents used by the recipient to collect personal information relevant to the performance of the Grant Agreement don't unintentionally limit the Crown's right to use project IP and background IP. For example, the agency may have negotiated a broad licence to use project IP and background IP, or even own those rights, but if the recipient claims that the material contains the recipient's confidential information and the agency is subject to confidentiality obligations, then the Crown's use may be restricted. The same issue can arise with privacy, if the consents obtained from participants by the recipient aren't broad enough to allow the personal information collected to be provided to the Crown.


Irrespective of who owns project IP and background IP, the recipient should provide a warranty that the acts of the Crown (or a person authorised by it) in relation to that material do not infringe the intellectual property rights or moral rights of any person. The Crown would need to be prepared to provide a corresponding warranty where it is providing the recipient with background IP to perform the Grant.

Some organisations will be able to give reasons for why such a warranty causes concern, and in that case, the agency will be able to assess and address the issues identified. However, if the recipient's reluctance to provide such warranties is more far-reaching, the agency will have to consider whether the Crown has appropriate protection under other clauses of the Grant Agreement, such as indemnity clauses.


The agency may want to seek an indemnity from the recipient in relation to any claims or losses that arise as a result of the infringement or alleged infringement of a third person's intellectual property rights or moral rights.

For the agency, it is important that this indemnity is broad enough so that infringement includes any acts which, but for the Crown Use provisions in the various intellectual property legislation, would result in infringement or alleged infringement. For example, the Crown Use provisions of the Patents Act 1990 (Cth) provide that the Crown does not infringe a patent where it exploits an invention for the services of the Crown. However, the Crown still may have to negotiate terms, including remuneration, with the patent owner. In this situation, the Crown technically won't have infringed a third party's intellectual property rights because of the Crown Use provisions, but the Crown may still have to pay remuneration to the patent owner. If the intention is that the recipient bears those costs, this is achieved by expanding the definition of infringement in the indemnity provision.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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