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Intellectual Property Ownership Considerations for Employees and Independent Contractors
As an employee or contractor, you may wonder whether you have a legal interest in what you are creating at work, or whether your employer has a legal interest in what you are creating at home. The answer often depends on the type of intellectual property right created, the nature of the job you have been hired to do, and your agreement with your employer.
How ownership is determined
When starting a new job or freelance contract, you will likely be presented with a written agreement to review and sign. Such paperwork sometimes includes a provision regarding ownership of intellectual property. Such provisions may only address ownership of intellectual property created in the course of employment, but they may also address ownership of intellectual property created outside company time and without the use of company resources.
In the absence of agreements addressing ownership of intellectual property, a few default rules will apply. In the abstract, a patented invention is owned by its inventor, an industrial design is owned by its creator, and a copyrighted work is owned by its author. However, in the context of employee or contractual relationships, further rules, whether expressly provided for or by operation of common law, apply to the determination of ownership.
The Patent Act does not specifically address ownership of patent rights for inventions made in the course of employment, but case law has focused on whether an employee or contractor was hired to invent. While several factors have been considered by the courts, if you were hired to find or create solutions to technical problems or if you were asked in the course of your work to find a solution to a technical problem, your employer would likely be found to own any inventions related to the solutions found.
The Industrial Design Act does include a provision indicating that if a design was executed by a creator for someone else in exchange for good and valuable consideration, the one for whom it was executed owns the design. While few industrial design cases have been heard in Canada, receiving a salary or other payment for creating a design may well qualify as good and valuable consideration.
The Copyright Act too includes a provision regarding employer interests in copyrighted works. The Copyright Act indicates that if a work is created in the course of employment the employer owns the copyright in the work. However, case law indicates that express or even implied agreements that an employee will retain ownership of the copyright in their creations can vary the usual rules in some cases. In contrast, case law indicates that where a work is created by an independent consultant, the consultant will retain ownership in the absence of an agreement to the contrary.
Further, the moral rights held by the author of a work remain with that author irrespective of whether the work falls under the employment exception to copyright ownership set out above. Although these rights cannot be assigned, employees may waive them by agreement. Moral rights refer to the author’s right to the integrity of the work and to either be associated with the work as its author by name or under a pseudonym, or to remain anonymous.
In sum, the facts surrounding your relationship with your employer and your act of creating intellectual property are likely to be considered in determining ownership. Naturally, the default ownership rules can be varied by an agreement between employer and employee or contractor.
Protecting your intellectual property as an employee
Often the best time to address intellectual property ownership is when you are entering a new employee relationship with an employer or when you are beginning a significant new project for your employer. Be sure to review any contracts or other documentation presented to you to see what intellectual property obligations have been included.
Some things to look out for include:
- An obligation to assign ownership to your employer: Such obligations are often included in contracts for positions in which an employee is being hired to design marketing material, create literature, write papers, or find solutions to problems. Contracts may also address intellectual property creations you come up with in your own time, particularly when those creations are related to the work you are being asked to do.
- An obligation to assist your employer in seeking intellectual property rights: Particularly when seeking patent rights, an applicant is often asked to submit a declaration from the inventor. In some cases, employment agreements may impose an obligation to execute documentation that your employer may need when seeking intellectual property rights or may even impose a general and ongoing obligation to assist the owner of the intellectual property rights in obtaining or enforcing their rights. If your employer is asking you to commit to more than is reasonable, it is often best to negotiate a compromise before beginning a project.
- A non-compete clause: Such clauses are common in some industries and may prevent you from working for a competitor for a period of time after the conclusion of your employment. Consider whether the terms of the non-compete clause are enforceable in your jurisdiction, and if so, whether they are reasonable or excessive.
- A request to provide information regarding your existing intellectual property ownership or obligations: In some cases, an employer may ask you to provide them with a list of your pre-existing intellectual property assets or your obligations to others, such as obligations to previous employers to help in seeking intellectual property rights. Such lists may be needed in some industries to allow an employer to take note of potential conflicts or other issues.
In many cases, intellectual property-related clauses and obligations are just as negotiable as other terms of an employment contract.
It is also important to note that as an employee relationship evolves, you or your employer may seek to adjust intellectual property-related terms. In some circumstances if an employer varies the terms of employment without providing adequate consideration (for example, additional compensation), an employee may retain ownership of the IP and/or other rights despite assignments or other documentation indicating the contrary.
Protecting your intellectual property as an independent contractor
A contractual relationship generally imposes less obligations on the contractor to transfer intellectual property rights to an employer.
Typically, a contractor retains ownership of intellectual property rights arising during the contractual relationship, often even rights to works made at the employer's request. While there are exceptions, such as where a contractor is explicitly hired to produce a certain work, generally a contractor only gives up ownership rights to their intellectual property creations if the contract under which they are working obliges them to do so. In the case of patents, where there is no explicit agreement as to ownership, and a dispute arises, a Court will look to all the circumstances surrounding the relationship between an independent contractor and the other party and consider whether it is necessary to imply that a term of that relationship was that the other party would own the independent contractor’s invention.
Be sure to carefully evaluate your contract, particularly for provisions such as those listed above. Remember that in most cases contractual terms can be negotiated.
Transitioning to a new employer
When transitioning to a new employer or project it is often advisable to review the terms of any agreements made with previous employers. If you have accepted any non-compete agreements, check whether non-compete obligations are enforceable in your jurisdiction and if so that your new position does not violate its terms. If you have knowledge of any trade secrets, it may be necessary to inform your new employer if there are any limitations on which projects you can work on or what you can discuss from your past work.
Take stock of any intellectual property you have created, and review whether you retain any ownership rights. If you have not assigned rights to your employer, and particularly if they have been licensing your intellectual property, then the end of your employment may vary the terms under which they are able to use your intellectual property. If rights have been assigned, make sure you are not infringing their intellectual property by using something owned by your previous employer.
An exit interview may be a good time to clarify any obligations you are uncertain about.
Conclusion
In the absence of an agreement on intellectual property, employees and contractors may retain more intellectual property rights then they realize. When entering an employment or contractual relationship, be sure to review the documentation before signing and to negotiate terms that are acceptable to you. If your continued ownership of your creations is important to you, be aware of how new and existing relationships with employers may affect your ownership.
If you would like our help with IP ownership, contact us now for a complimentary and confidential initial telephone appointment with a member of our team.
