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Wednesday February 24, 2021

Who Owns the IP? Is it the Employer or the Employee?

Posted in: Business Law

Intellectual Property (IP) ownership rules determine whether an Employer or an Employee holds rights to the creation at hand. Although IP covers a broad range of federal laws and statutory rights, the three most relevant to Employers in Canada are Patents, Copyright and Trademarks.

Disputes between Employees and Employers often involve inventions and original works of copyright, primarily because the employment relationship is typically unclear whether the Employee must develop or create such inventions or works as part of their formal job description.

Inventions and Patents

The Patent Act (Canada) contains no specific provision regulating the ownership of an invention or potential patents in an employment relationship. Judicially developed common law tests are applied to assess patent ownership.

The general rule is that an Employee will own his or her own invention unless there is a contractual duty to transfer the invention to the Employer.

If there are no specific provisions in a written employment agreement, one asks whether the duties and responsibilities assigned to the Employee include an obligation to invent things. If so, the Employer is deemed to own it.

On the other hand, if the invention has no rational connection to the Employee’s terms of employment, or is otherwise outside the established employment duties, the invention will be deemed to be owned by the Employee.

Generally, the more senior the Employee, or if a fiduciary relationship exists, the Employer will own the invention. The jurisprudence however is very fact-specific and the law less settled when the inventor is a low-level Employee, as opposed to a manager or senior executive.

Employers should ensure written employment contracts contain the following three provisions:

  1. A description of the relevant inventive or creative responsibilities and duties;
  2. A statement that any invention will be owned by the Employer; and
  3. A commitment to execute any required forms and agreements.

Employers should ensure that these patent-related employment contracts are duly executed. The contract should expressly assign any inventions created during the Employee’s tenure.

The agreements should also include clauses addressing confidentiality and the non-disclosure of corporate trade secrets, proprietary or sensitive information in addition to the standard employment terms and conditions.

Works of Copyright

The Copyright Act (Canada) contains one important employment-related provision to help assess ownership of an original work of copyright, whether the work is literary, artistic, musical, or dramatic (a “Work”).

The general rule is that the “author” of a Work is the first owner of the copyright. Section 13(3) of the Act carves an exception to that general rule by stipulating that any Works made by Employees in the course of their employment are automatically deemed to be owned by the Employer.

Generally, for the Employer to prevail in a copyright ownership dispute involving an Employee:

  1. The Work is authored by an Employee, not an independent contractor or consultant; and
  2. The Work is authored in the course of the Employee’s employment.

Employment agreements should stipulate that any Works (including software) developed or created during the Employee’s tenure, whether at the Employer’s premises or at the Employee’s residence, which fall within the job description, are deemed assigned and owned by the Employer.

The employment agreement should also require the Employee to sign documents to transfer title to any Work to the Employer and to register copyright, if necessary, and include an express waiver of any potential moral rights that an Employee may have in or to a Work.

The agreement should recognize that the Employee’s job responsibilities may change from time to time, but that regardless of such changes, copyright ownership always vests in the Employer.

As noted above for Patents, the agreement should provide that confidential information regarding the Employer’s business, products and services is strictly confidential and owned by the Employer.

Employers frequently retain outside marketing and advertising consultants, or independent software developers, to work with Employees on corporate projects. The ownership rules that apply to Employees do not apply to independent contractors or consultants.

In these circumstances, unless there is an agreement to the contrary, the Work will be owned by the independent contractor or consultant, not the Employer. Contracts with outside contractors should state that if an Employer pays for a Work, it obtains ownership and not a mere license.

Trademarks

The Trademarks Act (Canada) does not contain any employment rules regulating the ownership of a trademark. Trademark ownership arises only from its use in association with goods and services.

Therefore, it is unlikely that an Employee could claim ownership of the Employer’s trademark.

Typically, trademark ownership issues arise between the Employer and the outside marketing expert, advertising consultant, graphic designer or other independent contractor retained to develop the new brand, ad campaign, packaging or related visuals or jingles. This is where trademarks and copyright ownership overlap: when the trademark itself includes copyrightable content.

Now that trademarks also include any sounds, 3-D shapes, moving images and computer-generated holograms, which may be costly to develop and produce, an outside contractor may be tempted to recycle copyrightable subject matter with other clients. That could lead to ownership issues.

If a trademark includes any third-party artwork or source code, it is always prudent to obtain a written assignment from the outside creator and an express waiver of moral rights.

Common Sense

Whether for an invention, a sales brochure or a computer program, it makes sense to have a comprehensive employment agreement to protect the Employer’s IP ownership rights.

A major reason for consistently confirming Employer IP ownership is “business certainty”.

The last thing any organization wants to deal with when launching a new business venture or product, or when seeking venture capital or bank financing to provide for further growth, is a costly or embarrassing dispute with a disgruntled Employee claiming ownership to (or moral rights in) a key piece of technology, corporate branding or other mission-critical asset.

Most employment-related IP ownership problems can be avoided by consistently using comprehensive employment agreements containing these simple contractual IP protections.

For information about trademarks and copyright, please contact our Trademark Agent, Marc Belliveau.

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