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23 Dec 2010

The importance of being specific: IP ownership in employee contracts

by Jim FitzSimons, Alexandra Bridges

In general, an employer is taken to own any intellectual property (IP) that is created by an employee in the course of their employment. The recent case of Courier Pete Pty Ltd v Metroll Queensland Pty Ltd [2010] FCA 735 highlights the importance of ensuring that this is clearly stated in the employee's contract.

As will be seen, the fact that an employee works at a water tank manufacturing factory and creates new designs for water tanks does not automatically assign the IP rights to the employer. The question of who owns the IP comes down to what the employee was employed to do, or whether they were ever specifically asked to invent or create new designs during the course of their employment.

One man's job, horse, hose, and idea

Mr Mark Collymore was a factory foreman at the Metroll Queensland factory, which manufactures and supplies metal building products, such as fencing, roofing and rain water tanks.

During his period of employment, and while watching his horse play with a hose in a water trough on his property, Mr Collymore came up with the idea of modular water tanks which could be connected together to increase water storage capacity. Mr Collymore applied for registered design in his own name for the first tank design, and in the name of his company, Courier Pete Pty Ltd, for the other two tank designs.

A dispute then arose between Metroll and Mr Collymore over the ownership of the designs. Had he created these designs in the course of employment with Metroll (under section 13(b) of the Designs Act 2003), or outside the scope of his employment?

"In the course of employment"?

In considering this issue the judge stated that it was necessary to ask "what was the employee employed to do?". The judge summarised the relevant considerations:

"If the employee was employed to make or discover inventions of the type ultimately produced [by the company], then that is work for which the employer had paid and the employer is entitled to the benefit of the invention. If the employee does not have any general duty to invent... then the only basis upon which an invention can be said to have been created "in the course of employment" is if it had been created pursuant to a specific direction by the employee to undertake work which results in the creation of the invention."

Therefore, if Mr Collymore's contract required him to create new tank designs, then the design rights would vest in Metroll. However, in this case it was common ground that Mr Collymore's employment contract was of a very general nature and did not define the scope of his employment with any precision. For example, it did not say that his duties included creating inventions or new designs, nor did it address the issue of ownership of new designs.

What was the evidence?

Despite the fact that the contract was silent on the matter, Metroll argued that Mr Collymore's duties included creating new tank designs and thathe had been specifically instructed to create new water tank designs.

Metroll had one witness who was part of the "tank-making team", of which Mr Collymore was said to be a part, and who claimed to have been given instructions to create new tank designs. However, this evidence was not corroborated by anyone else who was said to be part of the team, which the judge inferred meant that the witnesses had nothing helpful to add to Metroll's case. Moreover, it transpired that the witness' ordinary work meant that he was away from the day-to-day activities of the tank making team. Consequently the judge gave little weight to this evidence as it was unlikely that, given these circumstances, he would have been personally aware of what instructions or directions might have been given.

In the face of this weak evidence from Metroll, Mr Collymore gave compelling evidence that he created the tank designs at home and in his own time. The judge also accepted his evidence that he had told Metroll that he owned the designs and that he proposed to charge Metroll a royalty fee for the use of his modular tank designs. Healso found it significant that any work that was done at Metroll on modular water tanks occurred after Mr Collymore had applied to register the first design.

Points to note

On the evidence, the judge was satisfied that Mr Collymore had designed the tanks in his own time and not in the course of his employment. He found in favour of Mr Collymore and his company, Courier Pete Pty Ltd.

This case illustrates the importance of making the scope of an employee's duties very clear. On the one hand, if an employee's duties are to include creating IP rights, then it is essential that the written employment contract states that the employee's duties include invention and creativity, and, importantly that all resulting IP rights will be owned by the employer.

Likewise, if the employer wants the employee to own any IP rights, especially if developed outside working hours and separately from the employment, then it is advisable to state this in the employment contract, or to have this understanding clearly documented.

 

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.