Innovation At Work And At Home: Clarifying Employer And Employee IP Rights Under Maltese Law (Part 3 Of 3)

This article is the third and final part of a three-part series examining employer and employee IP rights under Maltese law. Previous instalments: Part 1 of 3 | Part 2 of 3

8. The Role of Employment Contracts and Internal IP Policies

As discussed in Parts 1 and 2 of this series, ownership of employee-created IP may depend on several factors. These include the type of IP created, the employee’s duties, the circumstances in which the work was created and the terms of the employment agreement.

The Maltese legal framework provides a starting point. Article 11 of the Copyright Act, Chapter 415 of the Laws of Malta, regulates the first ownership of copyright. It also deals specifically with computer programs and databases created in the course of employment. Article 11 of the Patents and Designs Act, Chapter 417 of the Laws of Malta, applies to inventions made in the execution of a commission or contract of employment.

However, clear employment terms remain important. They help employers and employees understand their respective rights from the outset and reduce the risk of a dispute after a work or invention acquires commercial value.

Employment agreements should therefore identify the types of IP covered and explain when ownership will vest in, or be assigned to, the employer. The scope of these provisions should reflect the employee’s role. For example, an employee engaged to develop software, technical solutions or creative material may require more detailed IP provisions than an employee whose duties do not involve creating IP.

Employment agreements may also require employees to disclose inventions or other works created during employment. This may be appropriate where the work relates to the employee’s duties or the employer’s business. Early disclosure allows the parties to consider ownership before the work is developed or commercialised further.

Pre-existing IP should also be considered. An employee may have created software, designs, written material or other works before joining the employer. Where such IP may be relevant to the employee’s role, it should be identified at the start of the employment relationship. The parties may then clarify whether it remains the employee’s property and whether the employer may use it.

Internal IP policies may support the employment agreement. These policies may explain:

1. when employees must disclose new inventions or works;
2. whether company equipment may be used for personal projects;
3. how confidential information and trade secrets should be handled;
4. how pre-existing IP should be identified; and
5. whom employees should contact where questions of ownership arise.

A policy is not necessarily contractually binding merely because it has been issued by the employer. Where the employer intends a policy to create contractual obligations, it should be incorporated into the employment agreement or otherwise acknowledged in writing by the employee.

Any monitoring of company equipment should also be handled carefully. Monitoring may involve the processing of employees’ personal data. It should therefore be transparent, necessary and proportionate to the purpose being pursued.

The aim is not to prevent employees from pursuing independent projects. Rather, it is to establish a clear distinction between IP created in the course of employment and IP created independently.

9. Managing IP When Employment Ends

Questions relating to IP may continue after the employment relationship ends.

Before the employee leaves, the employer should confirm that any relevant IP has been identified and properly documented, and that any necessary assignment has been completed. Under Article 24 of the Copyright Act, an assignment of copyright must be made through a written agreement. Under Article 31 of the Patents and Designs Act, a contract assigning a patent application or patent must be in writing and signed by the parties.

It is therefore preferable to address assignments in the employment agreement from the outset, as an assignment may be more difficult to obtain once the employee is leaving or has already left the organisation.

The employer should also ensure that relevant materials remain available to the organisation. These may include source code, designs, research files, technical documents or other work developed during employment.

The exit process should also address confidential information and trade secrets. As discussed in Part 2, IP ownership and the protection of confidential information are separate legal issues. An employee may own a work created independently but may still be prevented from using the employer’s confidential information in connection with that work.

The Trade Secrets Act, Chapter 589 of the Laws of Malta, protects against the unlawful acquisition, use and disclosure of trade secrets. Information must satisfy the requirements set out in Article 2 of the Trade Secrets Act to qualify for that protection. In broad terms, the information must not be generally known or readily accessible. Its secrecy must give it commercial value, and reasonable measures must have been taken to preserve that secrecy.

Employers should therefore remind departing employees of any confidentiality obligations which continue after termination. Employees may also be required to return or delete documents, data and other materials belonging to the employer. These requirements should be clearly documented, as general instructions to return company property may not be sufficient where the employee has worked with valuable IP or sensitive information.

Care should also be taken when requiring the deletion of material from a device which contains personal information or independently created work. Any review or monitoring of the device should respect applicable data protection requirements.

Employees should consider whether a personal project overlaps with work carried out during employment. The fact that employment has ended does not, by itself, determine ownership. Ownership will still depend on the applicable law, the employment agreement and the circumstances in which the work was created.

Where a personal project may overlap with work carried out during employment, the employee should consider obtaining legal advice before disclosing or commercialising the project. This may help clarify the parties’ respective rights at an early stage.

A clear exit process benefits both parties. It allows the employer to protect IP forming part of its business. It also gives the employee an opportunity to clarify the position regarding independent work which they intend to continue developing.

10. Practical Steps for Employers and Employees

Employers and employees can take practical steps to reduce uncertainty.

Employers should consider:

1. including clear IP ownership and assignment provisions in employment agreements;
2. ensuring that those provisions reflect the employee’s duties;
3. identifying relevant pre-existing IP when the employee joins the organisation;
4. introducing procedures for the disclosure of inventions and other works;
5. setting clear rules on the use of company equipment and systems;
6. protecting confidential information and trade secrets; and
7. addressing IP ownership and confidentiality as part of the employee exit process.

Employees should consider:

1. reviewing the IP and confidentiality provisions in their employment agreement;
2. keeping independent projects separate from company systems and equipment;
3. avoiding the use of the employer’s confidential information, trade secrets or proprietary material;
4. keeping records of when and how an independent project was developed;
5. obtaining advice where a project may overlap with their employment duties; and
6. clarifying ownership before commercialising a project where there may be an overlap with the employer’s business.

These steps may not prevent every dispute. They can, however, help the parties identify possible concerns at an early stage.

11. Conclusion

The distinction between innovation at work and innovation at home is not always straightforward.

The time and place at which IP is created may be relevant. However, these factors do not determine ownership on their own. The nature of the IP, the employee’s duties, the employment agreement and the use of employer resources may also need to be considered.

Confidential information and trade secrets must be assessed separately from IP ownership, and moral rights must be distinguished from economic rights. As discussed in Part 2, the assignment of copyright does not necessarily remove the author’s moral rights under Article 12 of the Copyright Act.

Ultimately, both employers and employees benefit from dealing with IP ownership before a dispute arises. Clear contractual terms, internal policies, appropriate records and open communication can provide greater certainty while allowing innovation to continue, both at work and at home.