Employees and intellectual property

Protecting your business's intellectual property can be simple - provided you have the correct agreements in place with your employees, contractors, service providers and any other casual workers. If you do not, you run the risk of having to purchase or licence IP created by these workers! Read this quick guide to find out how to protect some of your most important business assets - your intellectual property!
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As a general rule, any intellectual property (IP) created by an employee in the course of their employment belongs to their employer. This is subject to any written agreement which states the contrary (eg. that the employee retains IP or that it is automatically assigned to a third party such as a client).

According to section 11 (2) of 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.” 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 in order to protect company IP created by employees. Furthermore, including a clause in employment contracts, dealing with IP ownership, can be helpful.

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 section 40 of the Patent Act 1977, the employee can claim compensation for the benefit the work has brought to the company.

Any IP generated for a company is only automatically vested in the organisation if the people creating the IP are employees. Contractors, freelancers, casual workers - essentially anyone who does not have an employment contract with the company - are the first owners of any IP which they create. In order to ensure that IP created by any non-employees is successfully transferred to the company, it’s necessary to ensure that in their respective contracts any IP created is expressly transferred to the employer. Even if someone who was previously working for a company as a contractor is subsequently employed by the company, any intellectual property which they created before they officially became an employee will still belong to them. So it can be a good idea to ask them to assign any IP rights as a pre-condition of employment.

  • Ensure that all your employees have a written contract of employment.
  • Include an IP clause in your employment contracts, and any contracts employing consultants, freelancers or casual workers.
  • You can also ask any contractors or freelancers working on your IP to sign an Assignment of intellectual property agreement as a normal part of your contractual dealings.
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