Who owns the intellectual property in a business?
IP is the lifeblood of modern business. Whether you're an employer, employee, freelancer or you're leaving a business, it's important to know your rights.
By Elizabeth Ward and Martin Douglas Hendry
Intellectual property is a key asset within contemporary businesses.
With many employees recently being furloughed or leaving businesses; many highly talented people are establishing new ventures or moving elsewhere. It is important that with the big changes that are currently happening, employers, freelancers, employees and ex-employees are aware of their intellectual property rights and when they can be enforced.
This post applies to trade marks, copyright, software, patents, trade secrets and confidential information, designs, circuits and plant breeders rights.
Being clear on who owns what ensures that unwarranted disputes are avoided, and that should a claim be brought it is done so correctly.
Who owns the intellectual property? Introduction
Companies hire employees to develop intellectual property in the form of new product and service innovations – which have become part of the thriving service economies.
The assumption from most employers, which is largely correct, is that they own intellectual property created by their employees. Despite this, there are some exceptions to this rule that all parties should be aware of.
By default, employers only own the right to intellectual property created by employees during the normal course of employment activities.
As such, IP created by an employee other than in the course of normal employment activities is owned by the employee and not the employer.
What does “course of normal employment mean”?
This term refers to the typical duties that an employee undertakes in the workplace. If intellectual property is created as a part of normal work – it is generally owned by the employer.
If the employee creates IP but this occurs outside of their normal duties – then the employee will own the intellectual property.
The normal duties of an employee are typically outlined within their employment contract or other documents.
Notably, the use of employer’s equipment in and of itself does not mean that the employer should own the IP created through its use. Nor does the creation of intellectual property outside of normal duties during working hours.
Employers: avoid assuming ownership
Assuming automatic ownership of all intellectual property created by employees is not recommended.
For employers of innovative businesses where employees are likely to be creative and are encouraged to develop new IP – actively securing the ownership of IP developed within the business is paramount.
Typically, this may be achieved within a well-drafted employment contract between employer and employee. Or, in addition to the employment contract itself, a dedicated agreement for the assignment of intellectual property from the employee to the employer can be drafted to effectively secure the rights of IP to the business.
It is best practice for this agreement to be entered into prior to the employee starting work – as this provides sufficient consideration for the agreement to be supported. Should this not be possible and the agreement is being entered into post-hoc – sufficient consideration may be required.
Whilst the general rule remains that employees creations during normal employment activities are typically assigned to the employer – the absence of such an agreement can make claims to this effect difficult.
Such agreements are as unique as the companies in which they are held and can be tailored to a business’ specific requirements.
If you are an employer at an innovative company and you are looking for some assistance in relation to IP agreements, contact our specialist team below to discuss more.
Ex-employers: enforcing IP rights post-hoc
COVID-19 has created a shift in the employment landscape, with many businesses furloughing and making redundant employees. These employees may then set up their own businesses or indeed work within their field for a different company.
It is important to make sure that in the course of doing this ex-employees do not make use of key IP assets upon leaving the business.
When employees leave a business they often work in adjacent fields of work.
In addition to this, oftentimes ex-employees may have negative feelings toward their previous employer because of the end of their employment.
Because of this, it is not uncommon that those who leave a business take advantage of information or intellectual property they have created or have had access to during their previous employment.
Ex-employers do have some recourse in relation to bringing a claim against an ex-employee.
For advice about this, get in touch with our team.
Employees: Know Your Value
If you are an employee and you are working within an innovative environment creating intellectual property you should first be aware that the IP you’re creating is valuable and is owned by someone.
In the absence of an employment agreement or policies to assign IP rights over to the employer – employees have some opportunity to own their ideas and creations.
Here, as above, the key is whether the IP in question was created “in the course of employment”. So, the IP must be a direct consequence of the established working relationship between employer and employee to be automatically owned by the employer.
Without an explicit agreement to this effect, the primary reason for which the employee was hired becomes important.
For example: if the employee was hired as a designer, their resulting designs are created in the course of employment; whereas if they had made some music this would be seen as less so.
Many of these issues are made clearer should specific agreements be in place relating to intellectual property and your employment.
If you are an employee and you are creating valuable IP at work and are seeking to identify your rights, get in touch with our team and request an IP right review by clicking the button below.
Ex-employees: what to do next
COVID-19 has created a shift in the employment landscape, with many businesses furloughing and making redundant employees. These employees may then set up their own businesses or indeed work within their field for a different company.
It is important that ex-employees are safe in the knowledge that they are not in breach of any IP rights from their former employer and can focus on their new venture.
If you are an ex-employee and have left a business recently it is important to be aware of the restrictions that may be in place in the way you can operate having left employment.
The first creator of copyright work e.g. photos, text, music and similar creative works such as logos belong to their creator. It may be important to review your previous contract or agreements you had in place with your previous employer to identify what you can and can’t do. Intellectual property specialists can help you quickly get to the bottom of that.
If you are an inventor and have been developing new technology and then have left the company, you should find that your contract specifies the IP responsibilities in this situation. You may be named on the patents and upon leaving will be asked to assign some of these rights back to the company. This is a good opportunity to negotiate with the employer, especially if the invention will be very valuable to the company moving forward.
If you establish a new company during this time – it is also a good opportunity to establish all of the valuable assets you intend to use as a part of the company. This will ensure that key intangible assets are locked into the company from day 1.
If you have been furloughed and have not been engaged in innovation activity for your company – there is a good case that any IP you’ve created in your own time is yours, even if your contract includes an assignment of all IP you create.
If you are experiencing any issues in this area, or are seeking to identify the key opportunities upon leaving a business – get in touch with our team for tailored advice to put you in the best possible position.
Freelancers: the added value of IP
If you are a freelancer or independent contractor, you have a unique position when it comes to intellectual property created at work.
As you are not an employee of the employer who hires you – there is typically not an implicit employment relationship between the parties.
As such, freelancers and independent contractors who create IP for a business should be aware that they themselves are typically the de facto owners of that IP.
Because of this, contractual agreements that are made between freelancers and businesses for the work they create are important.
For freelancers, this can also add a lot of value to your work. Consider the following example:
An example: freelance artist
A freelance artist is instructed by a company to produce a piece of artwork for them. The artwork is a large mural which will be hung up in the office.
The work is finished, and the employer is very happy with it. In fact, they are so happy that they decide to sell prints of it as well as include it prominently in their marketing and branding materials.
However, the artist was not instructed to produce the work for those purposes – only for display in the office. Assignment of IP more broadly did not appear in the agreement between the freelance artist and the employer.
Because of this the artist is still the legal owner of the intellectual property in the work and can make a complaint or claim against the business for unlicensed use of their IP for commercial purposes.
As such, freelancers should be aware that the creation of intellectual property for their clients and customers offers a lot of value. Assignment of this can be sold as part of the value of the creation itself.
If you are a freelancer and are looking to monetise your creations or develop agreements between yourself and clients, get in touch with our team.
Conclusion: Who owns intellectual property: employers, freelancers, employees, ex-employees?
Whether you are an employer, employee, freelancer or ex-employee if you are unsure where you stand in relation to IP and employment, contact our team for a review and an idea of next steps.
Get in touch with our team by clicking the button below.
This Virtuoso Legal article should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own solicitor on any specific legal questions you may have concerning your situation.
ABOUT VIRTUOSO LEGAL?
Virtuoso Legal is a team of intellectual property specialists based in Leeds and London - operating worldwide.Virtuoso Legal's team of IP experts have successfully tried cases in the IPEC, High Court, Court of Appeals and United Kingdom Supreme Court. In addition, the team assist companies in creating, commercialising and protecting the big ideas that make their business unique. The firm and its professionals are ranked yearly in legal directories such as the Legal 500 and Chambers and Partners, cementing their status as a Top 2% law firm in the world.
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