In Canada, there are a few basic intellectual property ownership rules which must be considered in determining whether the employer or the employee has certain rights to the subject matter in question. Intellectual property covers a broad range of subject matter and corresponding rights, but the main categories relevant to most employers in Canada are patents, copyright and trade-marks.
The most common disputes between employees and employers involve inventions (and related patents) and works which are the subject matter of copyright, primarily because the employment relationship is unclear whether the employee is responsible to develop or create such inventions or works as part of their formal job description.
Inventions and patents
The Patent Act (Canada) does not contain any specific provisions regulating the ownership of an invention or potential patents in an employment relationship. Accordingly, one must resort to judicially developed common law tests to assess ownership. The general rule in Canada is that an employee will own his or her own invention unless there is a contractual duty to transfer the invention to the employer. Ultimately, the key variable to determine the issue, if there are no specific provisions in a written employment agreement, is whether the particular duties and responsibilities assigned to the employee include an obligation to invent things. If so, the employer is deemed to own it. On the other hand, if the invention has no rational connection to the employee's terms of employment, or is otherwise outside the established employment duties, the invention will be deemed to be owned by the employee.
Generally, the more senior the employee, or if a fiduciary relationships exists, the employer will own the invention. The jurisprudence however is fact-specific and the law is much less clear when the inventor is a lower level employee, as opposed to a manager or senior executive.
At a minimum, employers should ensure that the employee executes a written employment contract, which contains the following basic provisions:
- Description of the employee's development or inventive responsibilities and duties;
- Statement stipulating that any work or invention developed will be owned by the employer; and
- Requirement that the employee execute any patent documents and transfer agreements, as required, fully implementing the employer's ownership.
Employers should always ensure that comprehensive employment contracts are entered into with their new employees. The agreements should not only contain the usual terms and conditions of employment, but also address such issues as confidentiality and the non-disclosure of corporate trade secrets and other proprietary or sensitive information. The employment contract should include assignment provisions of any inventions created during the employee's tenure with the employer.
The Copyright Act (Canada) contains a specific provision regulating the ownership of a work of copyright, whether the work is literary, artistic, musical, dramatic or computer code, in the context of an employment relationship.
Section 13(1) of the Copyright Act provides that, in general, the "author" of a work is the first owner of the copyright. Section 13(3) of the Act clarifies the general rule by stipulating that works made by employees under a "contract of service" in the course of their employment are deemed to be owned by the employer.
Generally, two factual circumstances must exist for the employer to prevail in a copyright ownership dispute involving an employee:
- The work must be authored by an employee, as opposed to an independent contractor or consultant; and
- The work must be authored in the course of the employee's employment.
Many employers retain outside marketing and advertising consultants to work with employees in the development of products and services, and sometimes external software developers are hired to develop code for accounting or other internal uses. The ownership rules that apply to employees are different when applied to independent contractors or consultants. In these circumstances, unless there is an agreement to the contrary, the work will be owned by the contractor or consultant, and not the employer. Clearly written contracts should be entered into with outside contractors to ensure that if an employer pays for the work, it retains ownership.
Again, for employers, the practical advice is to make sure at the beginning of the relationship that all contracts of employment expressly stipulate that any works (including software) developed or created during the employee's tenure will be deemed to be assigned to and owned by the employer. Moreover, the employment contract should state that all works created or developed, whether at the employer's premises or at the employee's residence, which falls within the employee's job description, is owned by the employer.
The agreement should also require the employee to sign any further documents to transfer title to the work to the employer and register copyright, if necessary, and include an express waiver of any potential moral rights that an employee may have to a particular work. The agreement should also recognize that the employee's job description or responsibilities may change from time to time, but that notwithstanding such changes, ownership always vests in the employer.
As indicated above for inventions and patents, the agreement should also provide that all confidential information regarding the employer's business, products and services remain strictly confidential and is owned by the employer. The agreement should specify that the employer retains the right to enforce the confidential nature of the information by civil action, including injunctive relief. In addition, any device or media that stores confidential information, such as hard copy documents, hard drives, flash drives, compact disks, master tapes, printers or source code, are also owned by the employer.
The Trade-marks Act (Canada) does not contain any employment specific provisions regulating the ownership of a trade-mark, whether the mark is a word, logo, slogan or trade dress. Trade-mark ownership arises from its use in association with goods and services. Accordingly, it is extremely unlikely that an employee would have a legal basis to claim ownership of the employer's trade-mark. More typically, the ownership issue arises between the employer and the outside marketing consultant, graphic designer or other contractor retained to develop the brand and related visuals. If the trade-mark includes an artistic or other work, a written assignment is needed from the outside creator. If any literary, artistic or musical work is created internally, the written employment contract will cover off the employer's ownership.
What this means for employers
Whether an employer is dealing with an invention, a sales brochure or a computer program, it is critical to have a well written, comprehensive employment agreement that will protect the employer's rights in and to all inventions or works used in the business. A good reason for doing so is that the employer pays the employee's compensation; the employer should accordingly own what it paid for. Another key reason is business certainty. The last thing a company wants to deal with when launching a new business venture or product, or when it is seeking venture capital or bank financing to provide for its further growth, is to deal with a costly or embarrassing dispute arising from a disgruntled employee claiming ownership to (or moral rights in) a particular piece of technology or other mission-critical corporate asset. Most employment-related intellectual property complications can be easily avoided by consistently using formal, comprehensive employment agreements with simple provisions like those described above.
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.