Patent attorneys are frequently instructed by employers who are seeking to obtain patent protection for inventions conceived by their employees. The employer often assumes that it is automatically entitled to such protection as a matter of law. This is, however, not necessarily the case.

Australian legislation is actually silent on the rights of employers to inventions conceived by their employees. In the absence of an express agreement, the Courts have held that, generally, the employer is only entitled if the invention is created in the ordinary course of the employment. When determining whether this is the case, all circumstances of the employment relationship must be considered. This includes, for example, whether the invention affects the employer’s business, is made during work hours using the employer’s resources and, more importantly, is conceived while the employee is doing what they are actually employed to do. For the latter requirement, it is necessary to consider whether the employee is under a ‘duty to invent’.

The types of employment relationships that have been considered in Australian cases broadly fall into two classes: commercial and academic.

Commercial employment

In the British High Court decision in Patchett v Sterling (1955) 72 RPC 50 (which is accepted as good law in Australia), the existence of implied terms relating to inventions in commercial employment contracts was considered. It was held that an employee who makes an invention while undertaking their employment duties holds the invention as trustee for their employer unless the employee can demonstrate a ‘beneficial interest that the law recognises’.

However, when an employee develops an invention outside of their regular duties (with or without using the employer’s resources) the employer is not necessarily entitled to it. Even express contractual terms in an employment contract relating to ownership of inventions may not be sufficient to affect this. For example, in Electrolux Ltd v Hudson [1977] FSR 312 the court decided that an assignment clause in an employment contract that was in the employer’s favour was too broad to be enforceable.

Academic employment

When an employee of an academic institution creates an invention while pursuing commercial endeavours, the employee may well be entitled to patent ownership. For example, in Victoria University [2004] 60 IPR 392 two academics employed by a university developed and patented an online computer system. The Court held that the patented subject matter fell substantially outside of the scope of academic activities ordinarily pursued by the university. This was the case even despite finding that the invention was ‘germane to and useful for the employer’s business’. The university was, therefore, not able to claim any contractual rights to the invention.

It is common for employees of academic institutions to undertake research in addition to their normal teaching responsibilities. This does not, however, necessarily imply that the employee is under a duty to invent. In University of Western Australia v Gray [2009] FCAFC 116, it was found that the university was not entitled to patents relating to inventions conceived by the respondent, Dr Gray, during his employment at the university. Dr Gray’s employment terms required him to teach, supervise work in his field, conduct research and stimulate research amongst staff and students. They did not, however, expressly require him to invent.

The university argued that a duty to research implies a duty to invent. This was, however, dismissed by the Court for several reasons. This included because the outcome of any research is new knowledge or discovery, which is not necessarily patentable. The university’s researchers also enjoyed the freedom to publish research outcomes, which potentially hinders the patentability of their research. Dr Gray was also expected to, and did, collaborate with and solicit funding from external bodies.

The university also argued that academic employment contracts should not be treated any differently to those of ordinary commercial enterprises. The Court, however, identified significant differences in the nature of operation of universities and other organisations. Particularly, it was noted that universities primarily serve a public purpose and provide an environment where academic staff enjoy considerable freedoms in respect to research topics pursued and the choice and manner of publication of research.

Conclusions

In the absence of express contractual terms, employers are not automatically entitled to inventions created by their employees. An employer considering patent protection should always carry out careful due diligence to confirm that they are so entitled and fix any issues as early as possible. This includes by requiring the relevant inventors to execute written assignments in the employer’s favour.