- Government agencies involved with R&D should review employment contracts to ensure that they expressly provide that intellectual property, particularly patent rights, are to vest in the employer upon creation.
A recent case regarding employer ownership of inventions created by employees has caused quite a stir in research and development circles. Though set in the context of an academic employed by a university, the decision should cause all those whose employees are involved with research and development, including government departments, to consider the way in which they assert ownership over employee-created inventions.
In University of Western Australia v Gray (No. 20)  FCA 498, the Federal Court has taken a narrow approach in deciding that the University of Western Australia was not entitled to ownership of inventions developed by a member of its academic staff.
From 1985-1999, Dr. Gray was employed as a full time employee of the University as a professor of surgery. His work for the University involved researching technologies for use in treating liver cancer.
During his employment with the University, Dr. Gray's work produced a number of inventions which were patented and ultimately acquired and further developed by Sirtex Medical Limited, a publicly listed company of which Dr. Gray was a director and significant shareholder.
In 2004, the University initiated proceedings seeking a declaration that Dr. Gray had breached his contract of employment and that he held his shares and options in Sirtex (valued at approximately $150 million) on trust for the University, and that Sirtex Medical Limited held its patents on trust for the University.
Who owned the intellectual property?
The Court accepted the University's argument that a term was automatically implied into all employment contracts with academic research staff who used University facilities, to the effect that intellectual property developed in the course of employment belonged to the University.
However, the Court found that this is only the case where the employee is doing work which an employee is engaged and instructed to do. Inventions which are not the product of work which the employee was actually engaged to perform will not be the employer's property.
The Court found that while Dr. Gray was employed to conduct and stimulate research, he was not employed to invent. It followed that no term vesting ownership of intellectual property in inventions developed by Dr. Gray in the University could be implied into Dr. Gray's employment contract.
The Court did accept that while there was a possibility that Dr. Gray would develop inventions capable of attracting patent protection in the course of his research, it did not follow that a term that the University owned the rights to the invention should be implied into his employment contract.
The Court considered that Dr. Gray's employment obligations differed from those of a person employed by a private commercial entity, whose obligations include the advancement of the employer's commercial purpose. Dr. Gray was not required to advance a University commercial purpose when selecting the research he would undertake.
The University's alternative arguments, based on breach of fiduciary duty and breach of University regulations, also failed.
The decision is important as it highlights circumstances where an employer could be deprived of the benefit of ownership of valuable intellectual property created by an employee.
The decision indicates that a court will not readily imply a term vesting ownership of intellectual property in the employer into the employment contract of a public sector employee, whose activities do not include a duty to invent.
In the context of government departments, the decision is particularly relevant when considering patentable inventions created by employees, as the Patents Act 1995 (Cth) does not make provision for automatic crown ownership of inventions made under the direction and control of the State (unlike part VII of the Copyright Act 1968 (Cth) under which copyright in works made by, or under the direction of control of, the State, vests automatically in the State).
The ability of an employer (government department or otherwise) to take ownership of a patent is provided for by section 15(1)(b) of the Patents Act and requires that the employer be entitled to be assigned the patent. At common law whether an employer is entitled to an assignment of a patent from an employee is a question of whether the invention was made by the employee in the course of the employee's employment, ie. is it an invention that it was the employee's job to invent. This decision shows that a duty to invent is specific and distinct from a duty to research and where there is no duty to invent, an invention, though perhaps created using the employer's facilities or funding, will not be in the course of an employee's employment.
In the absence of an express provision assigning the intellectual property rights in patentable inventions made by an employee to the government department, the department is at risk of not being able to assert ownership over the invention.
What to do
Government departments involved with R&D should review employment contracts to ensure that they expressly provide that intellectual property, particularly patent rights, are to vest in the employer upon creation.
These terms should cover not only inventions made in the course of the performance of employment duties but any inventions which are made in the course of using department funding and resources.
The University is appealing the decision.
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