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Working remotely, working more flexibly, working on personal devices, greater use of contractors, increased automation.  All these changes to how we work are picking up in pace, and these trends increasingly challenge business’ assumptions about the ownership of intellectual property created by their employees and contractors.  Are you confident that your business actually owns its intellectual property?

The risk to businesses which generate intellectual property is not being in control of the output when it counts.  Employees may try to monetise their content on the side, or take it with them to new employment.  

There is even the threat of them using it to leave and start up in competition with you.  

And if there has been a misstep in managing your business’ intellectual property, there is even the risk of infringing something that you thought was yours, but actually isn’t.

Who owns what?

Intellectual property is not a single thing, but a term used for a range of legal rights that protect creative output, each with its own purpose and function.  Generally, the main types include copyright (eg. documents, photos, artwork, images, music), patents (inventions), designs (shape of manufactured products) and trade marks (branding).  The term is often used to also include trade secrets and confidential information. 

The default legal positions in relation to ownership of employee and contractor creations can surprise and catch out many businesses.  Let’s take a quick look.

Employees

While each type of intellectual property has differing rules and needs to be assessed individually, generally speaking, an employer owns the intellectual property created by an employee within the scope of that person’s employment.  This is potentially narrower in scope than intellectual property relating to the overall nature or operations of the business.

Contractors

External contractors are not employees, and therefore own their own creations, even if they are working for, or within, your business.  This is a common trap.  Just because you commissioned it doesn’t mean you own it.

Creating intellectual property using an employer’s tools, equipment or resources is not enough, by itself, to grant ownership to the business under Australian law.  Conversely, employees working from home do not automatically own what they create because they’re not in the office.

All of the above default settings can often be changed by agreement, depending on what the right settings are for your business.  The best way to do this is upfront – in employment or contractor agreements.  It may be too late (or expensive) to ask for an assignment after the fact if the person concerned doesn’t want to.

Practical steps 

  • IP audit 
  • A good first step is to undertake a review to identify what intellectual property is being created in the business, and what might need to be done to fix any ownership gaps.  

    Sometimes it’s not necessary to actually own the intellectual property, so long as you have the legal right to use it for the particular required purpose.  A review can help you be confident this is actually the case.

    Important is a review of employment and contractor agreements to ensure they contain provisions that allow your business to own and control all its own intellectual property, both during employment and afterwards.  These provisions should deal with ownership of employee/contractor creations, and ongoing respect for confidential information.

    • Culture

    Create a culture of compliance and respect for intellectual property so that employees know that you take the obligations seriously and expect the same in return.  

    Manage where documents and records are stored, and don’t allow intellectual property to be exported to personal email addresses or off your IT system.

    • Safeguards

    For confidential information, put safeguards in place so that only those with a need to know the information to undertake their job have access, with no hard copies left lying around and digital copies being access-protected.  Label genuinely confidential information as such (both digital and hard copies).

    You can’t prevent employees taking their general skill and expertise – their know-how – with them.  After all, everyone develops and grows during their career.  But you can protect trade secrets – things that your business has specifically developed.  Therefore, put some systems and processes in place: 

  • During employment (and particularly pre-departure) – monitor IT systems to check whether key materials are being accessed, to assess risk.  Obviously this means the top-secret formula or recipe, but also things like client lists/databases, manuals, policies, template documents, etc, that can be used by another business are most at risk; and
  • Departure – introduce checklists and written acknowledgements to ensure intellectual property stays within the business.
  • Conclusion

    You work hard to create your business’ intellectual property and it can help to set your business apart.  The steps above can help reduce the risk that your business’ intellectual property will be misused, and allows your business to concentrate on utilising it to prosper.  

    A final note – this article doesn’t look at the risks of your employees and contractors misusing third parties’ intellectual property.  That’s another important topic for another time. ☁︎

    This article is for general informational purposes only and is not legal advice.  Stratocumulus Legal does not accept any liability for any reliance on the content of this article. Legal advice should be sought based on your specific circumstances.

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