What does this case mean for universities and others in the public and non-profit sectors?
This is a decision based on the circumstances surrounding university based research that may lead to inventions capable of being patented and commercialised. It may extend to other employers as well, such as research institutes funded by government grants and charitable donations, particularly where a researcher has freedom to publish and the research has a collaborative nature. In these cases the employee will be considered the owner of IP rights in any inventions resulting from their research, in the absence of any express contractual provision to the contrary.
Universities and research institutes should therefore review their IP policies and/or standard contract terms for academic staff as regards ownership of IP developed during the term of employment. They must be clear, and fair, and effectively incorporated into the relevant contracts if these employers require to share in IP that may be developed during the term of employment. Collaborators should understand and document from the outset of their collaboration the precise terms of these agreements, and indeed where the collaborator fits in to the picture in the event that an invention is assisted by their collaboration.
On 3 September 2009 the Full Federal Court unanimously confirmed the decision of French, J in April 2008 when he drew a clear distinction between the employees of universities and other employers. It was decided that Professor Gray's inventions were not to be considered the property of his employer, the University of Western Australia ("UWA"). As a consequence, Dr Gray and his assignee Sirtex Medical Limited are free to enjoy the full commercial benefits of the technology he developed over many years, in the area of targeted delivery of oncology treatments through the use of microspheres.
Dr Gray was appointed Professor of Surgery at the UWA in 1985, was full time until 1997, and resigned in 1999. He assigned his rights to his inventions to Sirtex in 1997, before it floated on the ASX, and today has a holding in Sirtex reported as being worth around $75 million.
Sirtex was floated in 2000, but UWA apparently sat on its hands until 2004, when it commenced proceedings in the Federal Court, claiming it was the beneficial owner of Dr Gray's shares and that they should be transferred to it, and for Sirtex to transfer the patents over the technology to it as well.
UWA lost at first instance and has lost its appeal. It had tried to address the issue of IP rights over the years since 1971 in the inventions of its staff by passing regulations, but the earlier ones were held to be invalid and the later ones were not promulgated effectively until 1997, after Dr Gray had transferred his IP rights in these inventions to Sirtex.
UWA therefore relied heavily on its argument that a term should be implied into Dr Gray's contract that the inventions that he had developed whilst carrying out his duty to research belong to it. This term will be implied by law into many contracts, but the court has refused to imply it into contracts of this type.
Unlike employees of private enterprises who are fully funded, obliged to observe the utmost confidentiality concerning their work, and often given access to trade secrets and confidential information to use in their work, Dr Gray was expected to solicit funding from other sources to facilitate his research, had freedom to publish his results, and to further his research it was necessary for him to enter into collaborative agreements with external organisations (like CSIRO). Importantly also, his duties were expressed in his contract as:
- To teach, to conduct examinations and to direct and supervise the work in his field; and
- To undertake research, to organise research, and generally to stimulate research among the staff and students.
Put simply, the court held that "the duty to research did not signify a duty to invent" so the term could not be implied into the contract on that basis.
The court stated that it was not suggesting that the application of implied terms would produce desirable outcomes in these cases, and that crude outcomes and unfairness in matters involving universities and their academic staff could be avoided by appropriate legislation or by the introduction of an "express contractual regime appropriate to the circumstances of the particular case".
The court ordered UWA to pay Dr Gray's costs of the appeal.
On 1 October the University filed an application for leave to appeal in the High Court of Australia. The judge who found against the University at first instance, French, J has since become the Chief Justice of that Court. Vice-Chancellor Professor Alan Robson stated that 'this course of action is a matter of principle ... the judgment has important ramifications for all university-initiated research. It could stem the potential flow on benefits of intellectual property resulting from such research to the broader community. Research and innovation undertaken within universities, by their very nature, build on the work of those who have gone before. We must ensure that this research -which will almost always be done for the benefit of the broader community - is recognised as university IP.''
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