Safeguarding business IP from internal threats

Woman with a hand covering her mouth

Intellectual Property (IP) protection is often regarded as a luxury by SMBs, with many SMBs unaware that they may be exposed to the same IP risks as their big business counterparts.

Business success can hinge upon differentiation of a product or service, and business owners need to be aware of how to safeguard their IP to ensure the longevity of their operations, and to avoid third party claims.

With industry competition at a high, threats to IP can start from within an organisation with inventions or content developed by employees.

Your invention or mine?

In a recent decision of the Australian Patent Office, the Royal Children’s Hospital argued it was entitled to two inventions created by one of its employees, Dr Robert Alexander, during his time as Head of Virology, on the basis of an employer-employee relationship.

Dr Alexander had created and applied to patent the two inventions in question. The Patent Office found that only one of these inventions was invented in the course of Dr Alexander’s employment and was owned by the hospital. It found the second invention belonged to Dr Alexander.

The result was not a great surprise. There was recently a high profile case in Australia case involving the University of Western Australia and Dr Gray, an employee of the University, where it was held Dr Gray owned the invention in question.

Employers can’t always rely on an implied term in employment contracts to guarantee IP ownership. A whole range of factors can come into play, including the scope of the employee’s duties, when and where the work was undertaken, the funding, resources and opportunities used, and the extent to which the work advances the interests of the employer’s business.

Avoiding disputes

It is likely these types of disputes will become more common.

People are becoming more aware of IP rights and their value, although sometimes the problem only comes to light when a business is looking to raise capital or sell and the other side’s lawyer starts to ask questions about chain of title.

To avoid uncertainty and expensive disputes, employment contracts need to specifically and properly address the issue. A provision that merely states the employer will own all IP created ‘in the course of employment’ is inadequate. It doesn’t really do anything more than what is already provided for under our law, and can provide a false sense of security.

Employers should also be aware that this issue isn’t limited to patentable inventions. Copyright ownership will be an issue for almost all businesses, particularly because it arises automatically for a wide range of works including software.  Where a business relies on software that has been developed in-house, IP ownership should be given close attention.

Lessons to take

Dr Alexander has filed an appeal with the Federal Court of Australia. Irrespective of the outcome:

  • Intellectual property ownership clauses in employment contracts should clearly identify employee’s duties and the circumstances in which intellectual property created by the employee will belong to the employer. Moral rights, confidentiality and non-compete provisions should also be included. There is less chance of a dispute and costly legal proceedings if the parties are certain from the outset.

Employers are advised to:

  • Revisit and update intellectual property ownership provisions regularly to ensure that they remain current.
  • Conduct an intellectual property audit for your business to identify the ‘chain of title’ for valuable inventions and other intellectual property assets.

Safeguarding your business’ IP now will help to avoid issues being raised at the 11th hour, at a time when it may well become a deal breaker or impact on the dollars paid.

- For more information and advice,  please contact Gadens Lawyers intellectual property partner Katrina Chambers on +61 7 3114 0115 or kchambers@qld.gadens.com.au.