How does a business protect its confidential proprietary information including intellectual property?
Confidential information including intellectual property plays a significant role in the long term financial success of a business. There was once a time when swipe cards and physical security of the workplace was a key to protecting proprietary information. That time is long gone and robust legal protections are needed now more than ever.
Intellectual property created during the course of employment
It is well settled by Courts that if an employee creates information, documents or inventions during the course of their employment and that is what they were actually employed to do, any intellectual property which arises will belong to the employer. In Courier Pete Pty Ltd v Metroll Queensland Pty Ltd  FCA 735, the Court stated:
“If the employee was employed to make or discover inventions of the type ultimately produced, then that is work for which the employer had paid and the employer is entitled to the benefit of the invention.”
This means that if an employee has been employed by a business to create inventions, documents or designs, any intellectual property rights that arise because of their employment will be owned by the employer. This will even be the case if an employee attempts to claim that they formulated the idea away from work and not during work hours. If the case were otherwise, employees would on each occasion simply state that they came up with the idea whilst they were at home and not engaged in work at all in order to avoid assigning intellectual property rights to their employer.
In many circumstances when an employee or ex-employee is accused of stealing or misusing intellectual property, the matter arises for one simple reason: the employee innocently believed that because they created or assisted in creating the intellectual property whilst they were working, they therefore owned it and could use it in whatever way they wanted.
Communication with employees is therefore, the first and most important step in protection an employer’s property and preventing future disputes. This includes statements in the contract of employment and workplace policies but also in simple assessable frequent communications. The message should include:
- That the employer owns all work products including all things done by employees in the course of their employment.
- Which information or material is confidential. Specifying with some particularity what is confidential (eg customer lists, research, pricing information) is critical as general statements that everything is confidential proprietary information carries little weight.
- Job descriptions of employees in key roles including product development, marketing and research should include statements to the effect that the position’s responsibilities include development of intellectual property on behalf of the business.
Inventions unrelated to employee’s job
What about intellectual property that is created during working hours and is unrelated to the employee’s job? For example, a sales manager whose job it is to manage a sales team, oversee client relations and manage budgets may, during working hours, create an electronic game which proves very popular with teenagers. In these circumstances, whilst the employer may be able to terminate the employee’s employment on the basis that they have misused company property and time, the employer is unlikely to be deemed the owner of the program that was created. The reason for this is that the employee was not employed, paid or directed to create the software program.
In University of Western Australia v Gray  FCAFC 116 Dr Gray was employed as a Professor of Surgery. As part of his appointment, he was required to teach, supervise, undertake, organise and stimulate research among the staff and students. There was no duty place upon him to make inventions. During his employment, Dr Gray carried out extensive research into liver and bowel cancer and as a result, he invented technologies which targeted treatment of cancerous tumours. Dr Gray subsequently patented his inventions in his own name. The University then sued him alleging that he had breached his contract of employment by failing to assign the intellectual property to the University. Importantly in this case, there was no clause in Dr Gray’s employment contract which required him to assign intellectual property to the University but it argued that there was an implied contractual obligation imposed on Dr Gray to do so. The Full Court of the Federal Court rejected this argument stating:
“unless the contract of employment expressly so provides, or an invention is the product of work which the employee was paid to perform, it is unlikely that any invention made by the employee will be held to belong to the employer.”
The Court therefore found that as there was no express term in Dr Gray’s contract requiring assignment of intellectual property, nor was he required to invent as part of his employment, Dr Gray was the owner of the proprietary rights in the inventions. Had the University correctly drafted Dr Gray’s employment contract and a position description, it is likely that the court would have come to a different conclusion.
Steps to protect intellectual property
Whilst courts have the power to order that an employee hand over any intellectual property to their employer, there are a number of steps that businesses can take to avoid the costs and time involved in drawn out litigation, where there is no guarantee that the business will succeed.
- Communicate with employees and contractors about the ownership and importance of confidential information and intellectual property.
- If possible, engage individuals in sensitive roles within an organisation as employees, not contractors. If the person must, for some reason, be a contractor, ensure a rigorous contractual framework is established to ensure assignment of intellectual property rights to the business, which may include a separate deed and the establishment of a process under which intellectual property rights can be assigned if a dispute arises in the future (such as agency or power of attorney).
- Ensure that in all contracts of employment there is a clause requiring employees to assign intellectual property rights to the business. This should be done even for employees who may not be strictly required to invent as part of their role, as these employees may create documents or precedents which will be used in the future and which the business wishes to copyright or otherwise protect.
- For senior employees, the contract of employment should include a provision that all inventions of any type created whilst the person remains employed belong to the company. If there is a need for an exception to this, that should only occur after the other work being done by the employee out of business hours has been fully disclosed to the employer and consent in writing has been obtained.
Intellectual property is a vital asset for many businesses and the investment undertaken by business to create the intellectual property is significant. By proactively taking steps to protect intellectual property created by employees, a business can avoid the need for protracted and expensive court proceedings when a dispute arises and decrease the possibility of intellectual property being deemed to belong to the employee.