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Who owns IP created by an employee?

According to the Copyright, Designs and Patents Act 1988, ‘Where a literary, dramatic, musical or artistic work, or a film, is made by an employee in the course of his employment, his employer is the first owner of any copyright in the work subject to any agreement to the contrary.’ Other legislation provides similar rules for other types of intellectual property (IP), for example, design rights.

This means that, as a general rule, any IP created by an employee in the course of their employment belongs to their employer. This is subject to any valid written agreement which states the contrary (eg that the employee retains IP or that any IP is automatically assigned to a third party, such as a client).

This rule applies to individuals who have legal employee status (ie not contractors or freelancers). Whether or not someone is an employee will normally be determined by the existence of a written contract of employment. As such, ensuring that you keep accurate and up-to-date records of all employment contracts is crucial for protecting business IP created by employees. Furthermore, including a clause dealing with IP ownership in employment contracts can help clarify ownership.

How do patents differ from other types of IP?

Employee inventions are generally owned by the employer upon successful application for a patent. However, if the invention is of ‘outstanding benefit’ to the employer, according to the Patents Act 1977, the employee may be able to claim compensation for the benefit the work has brought to the business.

What is the position of independent contractors and freelancers?

Any IP generated for a business is only automatically owned by the business if the people creating the IP are employees (ie they have legal employee status). Contractors, freelancers, and casual workers - essentially anyone who does not have an employment contract with the business - are the first owners of any IP that they create. 

The best way for businesses to ensure that ownership of IP created by any non-employee is successfully transferred to them is to ensure that, in contractors’ (etc) respective contracts (eg Consultancy agreements), any IP created is expressly transferred to the business. 

If someone who was previously working for a business as a contractor is later employed by the business, any intellectual property that they created before they officially became an employee will still belong to them. It can, therefore, be a good idea to ask such individuals to assign (ie transfer) any relevant IP rights to the business as a pre-condition of employment.

How can employers protect their IP assets?

Employers should:

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