Executive Summary
To increase the likelihood that employers can claim title to any inventions created by their employees, their employment contracts should expressly state:
- the role of the employee includes a duty to invent;
- that any existing and future intellectual property rights in inventions are assigned to the employer; and
- that the employee must do all things reasonably necessary to give effect to the assignments.
The decision of
University of Western Australia v Gray (No 20)1, by the Federal Court of Australia, clarifies the scope for universities to rely on implied terms in employment contracts to enable ownership over any inventions created by employees.
Absent express contractual provisions, in determining whether an employer will own the intellectual property instead of an employee, the court will closely examine the role of the employee.
Only when an employee is engaged or instructed to invent can it be implied into their employment contract that its inventions or discoveries become the property of the employer. In this case it was determined that Dr Gray was employed to research rather than invent and despite that he used the facilities of the University of Western Australia (UWA), there was no implied term in his employment contract to the effect that any patent rights in his inventions belonged to UWA.
Background facts
Dr Gray was a full-time employee of the UWA for the purpose of stimulating research relating to the treatment of liver cancer. Dr Gray developed various discoveries as a result of this research, including the ability to inject anti-cancer cells into tumours.
Dr Gray developed these ideas further with the help of Sirtex Medical Limited (Sirtex), a publicly listed company, of which Dr Gray was a major shareholder and director. Patents for these inventions were filed in the names of Dr Gray and other related parties. No patent was filed in the name of UWA. UWA initiated legal proceedings, arguing that, as the patents had not been filed in the name of UWA, Dr Gray breached:
- his employment contract;
- UWA regulations; and
- his fiduciary duties to UWA.
The decision - summary of legal issues
The Court found against UWA for the following reasons:
- The Court was not prepared to imply a term into Dr Gray’s employment contract that UWA was the owner of inventions which Dr Gray was not obliged to create under that contract. Dr Gray’s employment contract obliged him to organise and stimulate research rather than to invent. Therefore, there was no implied term that any inventions Dr Gray created within his employment belonged to UWA. Relevantly, Dr Gray was also expected to secure funding for his research from external sources to UWA.
- UWA’s regulations (which directed employees to make patent applications in UWA’s name) invalidly authorised UWA to unilaterally acquire its employees’ property rights.
- Dr Gray was found not to have breached any fiduciary duties owed to UWA to protect and preserve UWA’s rights, as the invention or discovery did not belong to UWA in the first place.
Implications
This ruling illustrates the point that a court will be unlikely to imply a term into an employment contract to secure property rights over an employee’s invention in favour of the employer if the employee’s duty does not include the duty to invent.
UWA has filed a notice to appeal. Hall & Wilcox will provide an update once the decision is handed down.
1 [2008] FCA 498
For further information, please contact: