Duty to Research Does Not Encompass Duty to Invent
(IPRinfo 2/2010)
Melanie Jose
Legal Counsel, CSIRO Legal (the Commonwealth Scientific and Industrial Research Organisation), Australia
A decision of the Federal Court has potential consequences for Australian universities and research organisations. They need to carefully consider the regimes concerning ownership of intellectual property.
Until recently, there was a commonly held presumption in Australia that, as an employer, a university may own the intellectual property of any invention developed by its employees by virtue of their employer/employee relationship. This presumption stems from common law principles regarding the concept of master/servant relationships.
In Australia, the Patents Act 1990 (Cth) differs from the Copyright Act 1964 (Cth) in that it does not expressly provide that intellectual property created or developed by an employee in the course of their employment will be owned by their employer.
Patent rights are assignable in Australia. An employment contract may contain express or implied contractual obligations on an employee to assign their rights in a patent relating to an invention of the employee made in the course of his or her employment.
The Copyright Act expressly provides for an employer to own the copyright created by an employee during the course of his or her employment. However, the operation of this provision of the Copyright Act may be excluded or modified by agreement.
Trepidation amongst research organisations
The decision of the Full Court of the Federal Court of Australia in the case of University of Western Australia v Gray, delivered on 3 September 2009, challenged this presumption generating a wave of trepidation amongst research organisations across Australia.
On 12 February 2010, the High Court of Australia dismissed an application for special leave to appeal the Federal Court’s decision, made by the University of Western Australia (UWA). Therefore, the decision of the Full Court of the Federal Court continues to stand as the binding word on the subject. It is important to note that the facts of this case were narrow and did not provide scope for the Full Court to consider the application of the legal issues more broadly.
This decision has potential consequences for Australian universities and research organisations alike. They all need to carefully consider the regimes concerning ownership of intellectual property.
Further, in the absence of any amendment to the Patents Act, universities and research institutions may need to adopt alternative measures to secure rights to the intellectual property/inventions created by academic staff in the course of their employment.
Specifically, universities and research organisations would be strongly advised to consider the scope of employees’ duty statements so as to ensure clarity around issues of ownership of inventions developed by employees.
Duty to invent?
The UWA v. Gray case at first instance, before the Federal Court of Australia, concerned the ownership of certain inventions said to have been developed by Dr Gray in the course of his employment with the University.
Patent applications were filed for these inventions in the name of Dr Gray and others. Dr Gray was also a director of a company called Sirtex Medical Limited. It was established primarily to commercialise the patent technologies. No patent applications were filed in the University’s name. There was no implied co-ownership arrangement between Dr Gray and the UWA. Nor had the university any entitlement to share in any resulting commercialisation profits.
The terms of Dr Gray’s employment required him to:
a) teach, conduct examinations and to direct and supervise the work in his field;
b) undertake research, to organise research and generally to stimulate research amongst staff and students.
The terms of Dr Gray’s employment did not require him to invent.
The crux of the University’s claim at first instance centred around the assertion that Dr Gray had, by reason of his employment, certain obligations to the University with respect to his inventions.
The University claimed that it had proprietary rights in Dr Gray’s inventions and related patents and patent applications and that consequently, it was entitled to seek redress. The UWA’s case hinged on the proposition that it was an implied term of Dr Gray’s employment that intellectual property developed by Dr Gray in the course of his employment belonged to the University.
The judge at first instance, Justice French, held that the duty to research did not encompass a duty to invent.
Breach of confidence was not mentioned in the appeal
On appeal to the Full Court of the Federal Court, the University asserted that Dr Gray had, in dealing with his inventions, breached his employment contract on several counts, including by:
* failing to comply with an implied term of the contract that stipulated that the University (as his employer) owned any inventions developed by Dr Gray in the course of his employment;
* failing to comply with the University’s policies which were incorporated by reference into Dr Gray’s employment contract; and
* misusing the University’s property rights and in doing so breached a fiduciary obligation that he owed to the University.
Interestingly, the UWA did not seek to assert a claim against Dr Gray for breach of confidence. Nor did the University seek to assert a claim against Dr Gray that he owed the University an implied or contractual or equitable duty of confidence.
It would be interesting to see whether the case might have played out differently had such assertions been made by the UWA.
No implied term into employment contract
The University argued that the Court should imply into its employment contract with Dr Gray such terms as would entitle the University to ownership of the inventions made by him. The Court considered at length general principles regarding the implication of a term by law into a contract as well as policy considerations.
The law in Australia is well established in that it is an implied term of employment that any invention made by an employee in the course of their employment belongs to their employer where the invention was the result of the employee ”doing that which he is engaged and instructed to do during the time of his employment, and during working hours, and using the materials of his employers.”1) However, the Court held that it could not imply such a term into Dr Gray’s contract of employment with the UWA on the basis that Dr Gray was not under any duty to invent.
The Full Court upheld the decision of Justice French that, a duty to research does not encompass to a duty to invent. The Court also held that Dr Gray had considerable freedom to choose the direction of his research and to decide how and when to publish the results of his research.
The Full Court distinguished this freedom within which Dr Gray was operating from the much narrower freedom afforded to employees in the private sector.
An interesting point to note is that the Full Court upheld the long standing principle of the doctrine of necessity in its discussion. In other words, the Court acknowledged that when terms are implied by law, this must occur in circumstances where such implication is for reasons of justice, fairness and policy.
In sum: Dr Gray was not employed to invent. Dr Gray had the freedom to publish the results of his research. He was not bound by an obligation to abstain from publication so as to protect the patentability of his inventions. The Full Court determined that if it implied the term as requested by the University, it would amount to permitting the University to benefit from the industry of others.
University’s Patent Regulations were invalid
The last bastion of the University’s case centred on the University’s Patent Regulations, which were incorporated by reference into Dr Gray’s contract of employment. The Patent Regulations provided that the University owned all intellectual property created by UWA employees.
Unfortunately for the University, the Full Court found that these regulations were outside the regulating making powers of the University and were consequently invalid.
The UWA also argued that Dr Gray had a duty under the Patent Regulations to inform the University of any patentable inventions. In failing to inform the University, Dr Gray had breached his contract of employment.
However, the Full Court found that the Patent Regulations had not been promulgated as required by the University’s enabling legislation during the time Dr Gray was employed by the University. Furthermore, the University had abandoned the Patents Committee, therefore removing the mechanism by which Dr Gray could reasonably notify the UWA.
The scope of UWA/Gray case was narrow
Where an employee has no contractual duty to invent, it does not follow that in every circumstance, an employer will own any invention developed or created by that employee as part of his or her employment. Each case will be decided on the facts relevant to the circumstances.
The traditional public purpose of universities has evolved over the last half of the 20th century and beyond, to the point where universities are increasingly engaging in more commercial activities to finance their operations.
The Full Court found, nevertheless, that engaging in such activities did not in itself displace the traditional public purpose of universities. For this reason, the Court did not deem it appropriate to imply into the University’s contract with Dr Gray the duty to invent.
Universities should clarify their employment terms
Whilst at first glance the decision may seem controversial, the practical consequences may not necessarily be as grave as first anticipated. The scope of the case was narrow and the decision of the Full Court was made on this narrow basis.
The extent to which this decision will impact upon universities and research organisations remains to be seen over the coming months.
In light of this case it would be strongly advisable for Australian universities and research organisations to take care when determining what their employees are employed to do. In particular, they may need to:
a) review and clarify employee duty statements;
b) review existing intellectual property arrangements;
c) if necessary, take measures to ensure that ownership of intellectual property rights are properly and adequately secured and;
d) ensure that contracts of employment contain express provisions regarding the ownership of intellectual property.
1) Victoria University of Technology v Wilson (2004) IPR 392, 104 (Nettle, J)
Federal Court of Australia, 17 April 2008; University of Western Australia v Gray (No 20) [2008] FCA 498
