Do You Own Your Intellectual Property?

In relation to Patents: as we know, patents give their owner a complete monopoly to use and exploit a particular inventive product or process. A patent may be invented by one or more people and may be invented by one person and owned by another. The inventor is the deviser of the invention and has a statutory right to be referred to in the patent. However, the inventor's right is second to whoever owns the invention.

If the inventor is an employee, the owner of the invention will usually be the inventor's employer. In fact, section 39 of the Patents Act 1977, provides that, an invention (whether or not patentable) belongs to an employer if:

It was made in the course of the employee's normal or specifically assigned duties, when in either case, an invention might be reasonably expected to result; or
It was made in the course of the employee's duties (as they may develop overtime) and the employee has, because of the nature of the duties and the particular responsibilities arising from them, a special obligation to further the employer's interest or it might reasonably be expected that, an invention could result from carrying out such duties.

However, be careful, in all other circumstances, the invention belongs to the employee, working under a contract of employment. So, particular attention must be given when defining the above circumstances especially in the event of employees that are allowed to work from home, on part-time basis or on secondment since reference to the usual " work from the employer premises" or "during the hours of employment" may cause uncertainty as to when the invention was created and therefore who owns it.

So, it is important to ensure that the contract of employment contains the necessary provisions to address when and how an invention is made. In fact, since future assignment of patent rights in inventions made by the employee is unenforceable, the contract of employment must include a job description that specifically address notification of invention and ownership of patents, if inventing is likely to form part of the employee's job. If there is any doubt about ownership, the employer should seek a written assignment from the employee, soon after the invention has been made. This may require some sort of payment in addition to the employee salary and of course an obligation on the employee to disclose the invention to the employer, as soon as the invention is devised.

An employee is entitled to compensation for the invention created, if the employee can show that the invention described in the patent is of outstanding benefit to the employer (in accordance with amended section 40 of the Patent Act 2004).

The compensation is in addition to whatever salary the employee was paid for the performance of the duties, which gave rise to the invention or to whatever consideration was paid by the employer, for the assignment of the invention by the employee. The right to compensation cannot be contracted out and the employee is not bound by any terms, that purport to remove this right.

Circumstances, in which a claim for compensation might succeed, include where an employer:
1) Manufactures and sells the patented invention itself and, after manufacturing, marketing and selling costs are removed, makes outstanding profits from the sales of the product;
2) Embarks on an outstandingly lucrative licensing programme under the patent; and
3) Has acquired an outstanding, financially ascertainable, advantage, because the patent has barred competitors from exploiting the invention.

One thing to consider when drafting contract of employment is the ancillary rights that, arise depending on the location of the employees (for example employees of a foreign subsidiary of a UK company) or the nationality of the patents (for example the rights of UK employees on non-UK patents). The contract of employment must address these issues accordingly.

When considering the provisions addressing creation of intellectual property/patent it is important also to carefully consider other issues such as confidentiality and how to notify and who will assess when an invention is patentable and if it is worth patenting. In both cases, the employer must have in place specific policies addressing the confidentiality and notification issues.

Another important factor is the level of seniority and specialisation of the employee in question. The provisions dealing with intellectual property will be different for a receptionist contract and different again for a director in a technology company.