The end has finally come in this extraordinarily long-running dispute between the University of Western Australia and its former employee Professor Bruce Gray. On 12 February 2010, the High Court refused the University of Western Australia's application for special leave to appeal from the Full Federal Court's decision that Professor Gray owned the intellectual property rights in inventions that occurred while he was employed by the University.
Professor Gray's employment at the University and his inventions
Professor Gray was a full-time professor of surgery at the University of Western Australia, and had signed a standard university employment contract setting out his duties and responsibilities, which included:
to teach, to conduct examinations and to direct and supervise the work in his field in accordance with the Statutes and regulations of the University and the directions of the Senate;
to undertake research and to organise and generally stimulate research among the staff and students; and
to perform such other appropriate work as the Senate from time to time determined.
In addition to the terms of the employment contract, the University imposed obligations on academics through its Patents Regulation and its Intellectual Property Regulations.
While at the University, Professor Gray undertook extensive research into metastatic liver and bowel cancers. He developed technologies for the production and use of microspheres for the targeted treatment of tumours, and filed several patents in his and others' names relating to those technologies.
Professor Gray ceased to be a full-time University employee in 1997. He then assigned various property rights to Sirtex Medical Ltd, a company created for the purpose of commercialising and marketing the microspheres technologies which went public in 2000, by which time Professor Gray was a director with a considerable number of shares in that company.
The basis of the University's action against Professor Gray
UWA argued that:
Professor Gray had breached his contract of employment by failing to comply with an implied term of the contract that provided that UWA owned the inventions developed by him in the course of his employment; and
Professor Gray had breached his fiduciary obligations to the University of Western Australia on the grounds that he should have dealt with his inventions in a way that preserved the benefit of the of the rights in the inventions for the university.
An implied duty to invent
The general position at common law is that the employer will have no automatic rights over the inventions of an employee without an express or implied term in the contract of employment. One exception to this is where is there is an “implied duty to invent”.
Justice French at first instance held that a duty to research does not carry with it a duty to invent. On appeal, this was a particular point of contention. The Full Federal Court determined that the law did not imply any term into Professor Gray’s contract of employment that Dr Gray was under a duty to provide the University with the benefit of his inventions, even though the nature of Professor Gray’s research meant that it was likely that inventions could quite likely result. The Full Court found that Professor Gray:
was free to chose the subject matter and direction of his research;
was not under an obligation to secrecy and was free to publish, even where that may have been to the detriment of potential patent applications;
had collaborated with researchers at other institutions; and
had acted to a significant degree as an entrepreneur in securing funding for his research.
The Full Court also observed the distinction between universities and private entities, noting that Justice French’s regard to more general issues of policy, such as the nature and public purposes of universities and to the distinctiveness of academic employment in universities and the importance of “academic freedom”, was appropriate.
Breach of fiduciary duties
UWA submitted that Professor Gray had a fiduciary obligation to the University, which derived from his employment. The University argued that this meant that Professor Gray had to protect and preserve UWA’s property rights and not make any secret profit or payment from any third party.
Justice French determined that the fiduciary argument was dependent on the success of the alleged implied term that UWA owned the intellectual property and held that there had been no breach of fiduciary duty, given that the university did not have any ownership interests in Professor Gray's inventions and therefore no rights in them that Professor Gray would be obligated to preserve. This part of Justice French's decision was also upheld on appeal, where it was similarly determined that since UWA could not establish that it had property rights in the inventions, the claims of fiduciary obligations had to fail.
Patent and IP Regulations
UWA argued that the Patent Regulations and the later IP Regulations were relevant, suggesting that the terms of Professor Gray’s employment made him subject to the University of Western Australia Act and regulations. UWA claimed that Dr Gray had breached his employment contract by failing to disclose the inventions in accordance with the Regulations. Justice French held that Professor Gray’s disclosure obligation was contingent upon UWA satisfying its own obligation to maintain a patents committee, and it was found that the patents committee had ceased to exist in 1988 and accordingly, this obligation to disclose was removed.
The IP Regulations made by UWA were declared invalid, with Justice French noting, "UWA was authorised by the UWA Act to make regulations relating to the control and management of its own property. It was not authorised by the Act to make regulations acquiring property from others or interfering with their rights." It was further noted that the only secure way for UWA to acquire rights from its academic staff in respect of intellectual property developed in the course of employment would be by express provision in their contracts of employment.
In considering the allegation that Professor Gray had breached his employment contract by failing to disclose the inventions to the UWA, the Full Court agreed with the Justice French that the patents committee had ceased to exist in 1988 and that Professor Gray was not under an obligation to disclose. The Full Court also confirmed Justice French’s finding that to the extent that the IP Regulations sought to mandate the assignment of an individual employee’s rights, the Regulations were invalid as they exceeded UWA’s regulation-making power.
Invention and inventive concept
Another issue was when the inventions were made and whether they were in fact made by Professor Gray or by other UWA staff. UWA contended that Dr Gray's ideas, although formed prior to his employment at UWA, were not sufficiently developed and tested to constitute an invention at that point. The invention only became complete once a person skilled in the art could perform the invention without further research and experimentation. On this basis, the inventions were not complete until Professor Gray’s appointment at UWA where he conducted further research and experimentation. Justice French rejected this, holding that the invention is complete once the inventor has arrived at the final definitive idea or concept.
To determine this, the court had to consider when the inventive concepts underlying the inventions were created. Justice French relied on the approach taken in Polwood Pty Ltd v Foxworth Pty Ltd  FCAFC 9, which was to identify the inventive concept of a patent or patent application from the whole of the specification, rather than the narrowest claims.
Justice French determined that the inventive contribution to the patents was complete before Professor Gray started at UWA, and as the work done at the university was of testing and experimentation, it formed part of a continuing process of invention or was mere verification or reduction to practice, and so for this reason the work done at the university was not relevant to the identification of the inventor. So except for one invention (which UWA was not entitled to in any event), Professor Gray had conceived the inventions before he was employed by UWA.
On appeal, the Full Court held that Justice French had adopted the correct approach of discerning that the inventive concept from the whole of the patent specification, as was set out in Polwood. It also rejected UWA’s argument that an invention is only complete when a person of ordinary skill and art can perform it, suggesting this “confuses invention or inventive concept with the requirement for a valid patent”.
Special leave application to the High Court
On 1 October 2009, UWA filed an application seeking special leave to appeal to the High Court and made submissions that:
that employment contracts between universities and academics should not be distinguished from other employment contracts;
that the duty to invent cannot be seen as distinct from a duty to research which carries with it the possibility of invention; and
it would be unfair if someone was not named as an inventor because their contribution had come after the inventive step.
UWA's application for special leave to appeal was refused and this matter is now, finally, at an end. In rejecting the application Justice Gummow noted that the Federal Court's finding did not give rise to any special leave ground and that it was not appropriate to re-examine the facts of the case or the questions of law that have already been determined by the Federal Court (University of Western Australia v Gray  HCA Trans 11 (12 February 2010)).
This decision is a timely reminder that all employers, not just universities, should monitor the contracts they have with both employees and independent contractors to ensure that the question of who is to own the rights to inventions made during the term of the contract is clearly dealt with. This decision also suggests that there may be some uncertainty as to the effectiveness of university regulations which purport to assign to the university rights in intellectual property created by academics. So, a unilateral declaration by an employer of a IP ownership policy may not automatically bind employees.
If universities want to ensure ownership of intellectual property developed by academic staff in the course of their employment, they cannot seek to rely on implied terms in employment contracts. Instead, universities need to secure their rights by including express terms relating to the assignment or ownership of IP. This has flow-on effects for private sector organisations who rely on intellectual property created by universities or academics as they must be satisfied that the issue of intellectual property ownership cannot be the subject of any challenge.