Canada: When Does A Company Own An Invention Absent A Clear Agreement With The Inventor?

Last Updated: April 16 2015
Article by Tyler Nechiporenko

The recent decision by the Supreme Court of British Columbia in Nature-Control Technologies Inc v Li ("the Nature-Control decision"), 2014 BCSC 1868, illustrates that it is important for a company to have clear agreements for ownership of inventions made not only by its employees but also by individuals or entities with whom the company has a business relationship in which inventions may be made.

In this decision, the issue of patent ownership arose between the company Nature-Control Technologies Inc. ("Nature-Control") and Dr. Li, a fiduciary (i.e., a director) of the company. The Court, in addressing the issue of patent ownership, turned to the case law regarding ownership of inventions created in an employer-employee relationship, although the relationship between Dr. Li and Nature-Control was not one of employment.

Who owns an invention in an employer-employee relationship?

The general rule is that an inventor is entitled to ownership rights in his or her invention, even when the inventor is an employee. The employer nevertheless can benefit from two exceptions to that rule: the employer is entitled to the patent rights in the invention of an employee where there is an express contract to the contrary or where the person was "hired to invent". Absent an express contract, the courts will typically look at a number of factors to make a determination as to whether an employee was "hired to invent".

In particular, in determining if the employee was "hired to invent", the court will typically consider the following eight factors:

  • the employee was hired expressly for the purpose of inventing;
  • the employee had previously made inventions;
  • the employer put in place incentive plans to encourage inventions;
  • the conduct of the employee following the invention's creation suggests that the employer is the owner;
  • the invention is the product of the employee being instructed to solve a specific problem;
  • the employee sought help from the employer in the making of the invention;
  • the employee was dealing with confidential information; and
  • it was a term of the employee's employment that he could not use, to his advantage, ideas which he developed.

Ownership of the patents in the Nature-Control decision

In the Nature-Control decision, Nature-Control sought relief arising from the allegedly wrongful conduct of Dr. Li, a director of Nature-Control, and the issue of ownership of four patents arose. The four patents at issue identified Dr. Li as the owner and are listed below:

  • the "Compound A and Compound B" patents, which were two patents relating to waste water treatment compounds;
  • the "T-Bright" patent relating to bleaching products; and
  • the "FAS patent" relating to soil remediation technology.

The dispute over these patents was in part due to the blurred business relationship between Nature-Control and SouthMountain Trading Inc. ("SouthMountain"), a business owned indirectly by Dr. Li and his wife. Nature-Control sold chemicals (Compound A and Compound B) for the treatment of waste water generated in the production of pulp and paper. These chemicals were based on technology developed by Dr. Li and were imported into Canada by SouthMountain. SouthMountain also used Nature-Control's staff, premise and other assets in operating its business related to the sale of bleaching products for use in the pulp industry, as salespersons of Nature-Control often marketed the Compound A and Compound B chemicals and the bleaching products together. Although a "Letter of Intent" agreement between the various shareholders of Nature-Control was signed prior to incorporating Nature-Control, this agreement did not contemplate the blurred relationship that existed between Nature-Control and SouthMountain.

In addressing the ownership of the four patents at issue, the Court noted that, although the relationship between Dr. Li and Nature-Control was not one of employment, the factors for determining if an employee impliedly intended for the employer to own the invention (the aforementioned factors to determine if the employee was "hired to invent") are helpful in assessing the parties' intentions in this case.  In assessing the ownership of the patents, the Court made the following determinations:

  • the Court found that Dr. Li was to retain beneficial ownership of the Compound A and Compound B patents for a number of reasons, namely: (i) patents relating to the technology of Compound A and Compound B had already been obtained in China by Dr. Li prior to Dr. Li and Nature-Control entering into any agreement; (ii) the Letter of Intent agreement did not contemplate Dr. Li developing that technology; and (iii) Dr. Li had the right to terminate the Letter of Intent agreement and retain beneficial ownership of the Compound A and Compound B patents;
  • for the T-Bright patent, the Court found that the bleaching products were not a business opportunity belonging to Nature-Control and the ownership of the T-Bright patent would not transfer to Nature-Control. In particular, the bleaching products were developed by Dr. Li in China and the intent of the parties suggested that Nature-Control's staff, premises and other assets could be used by SouthMountain in the sale of the bleaching products; and
  • the Court transferred ownership of the FAS patent to Nature-Control, as the Court found that the parties impliedly intended for Nature-Control to own the FAS patent. In particular, the Court noted that: (i) the FAS Patent was the product of an opportunity identified by Mr. Chow (a director and shareholder of Nature-Control); (ii) Dr. Li was asked by Mr. Chow to attempt to come up with a solution; (iii) correspondence between Dr. Li and Mr. Chow suggested that the opportunity belongs to Nature-Control; and (iv) the subsequent conduct of Dr. Li and Nature-Control supports the conclusion that it was intended that Nature-Control own the FAS patent, as Nature-Control paid all costs associated with the procurement of the patent and that Dr. Li acknowledged that Nature-Control had an exclusive right to the patent.

Conclusion

The Nature-Control decision illustrates that, not only is it important for a business to have express agreements in place that address ownership of innovations realized by employees, but it is just as important to have express agreements in other commercial relationships where innovations may be created as part of those relationships.

For further information, please contact a member of Patents group.

The preceding is intended as a timely update on Canadian intellectual property and technology law. The content is informational only and does not constitute legal or professional advice. To obtain such advice, please communicate with our offices directly.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Tyler Nechiporenko
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions