Who owns my employee’s ideas?

As a business owner, you know that your skilled employees are one of your company’s greatest assets. You’re likely to have invested time and money in recruiting, training and supporting them. The intellectual property they create can be integral to your business’ success. But who actually owns that intellectual property and what can you do to ensure that the ideas being developed stay where they should?

What is ‘intellectual property’?

Intellectual property (IP) refers to rights that protect creations of the mind, such as inventions, literary and artistic works, designs, symbols, names, music and images. IP is protected in law by patents, trade marks and copyrights, ensuring that people can derive fair recognition or financial benefit from what they create.

In addition, certain related rights, such as moral rights, may be relevant – these cannot be assigned so you will need your employee to waive them in your favour to ensure you are not prevented from dealing effectively with developments.

During the course of employment

The general rule that governs IP is that if IP is created by an employee during the course of their employment, the employer is the owner of that IP.

There are a number of factors to consider when deciding whether the IP in question has indeed been created ‘during the course of employment’. Is the work directly covered by the employee’s job description? Was the work created during work hours or in the employee’s free time? Were your business’ resources and facilities used? Could the employee have been reasonably expected to create the work?

The answers to these questions build a picture but do not lead to a foregone conclusion. It’s possible that work produced during working hours and using an employer’s resources may be found to be so far removed from the usual nature of an employee’s engagement that the employer is not considered to be the owner of the resultant IP. Conversely, an employee producing work outside of work hours but very much within the remit of their job description may find that it is their employer who owns the IP, irrespective of when the work was produced. For example, a caretaker who comes up with a revolutionary way to maximise profits might be found to be the owner of that idea, whereas the same idea from a managing director with clear obligations to the company could be found to instead belong to the company, even if he/she came up with the cost-saving discovery outside working hours.

To help ascertain whether an employee has created the IP in question during the course of their employment and to avoid any potential disputes, you should clearly define the scope of the employee’s role in their employment contract. You should specifically state whether their job description includes functions such as R&D to reduce the possibility of disputes further down the line. Employees should also be obliged to disclose any IP to you as soon as it is created, to ensure you are able to effectively protect and utilise that IP.

But what about consultants?

The nature of your business and the industry in which you operate may lead you to work regularly with consultants. As independent parties rather than employees, consultants may own any IP that they create.

It is worth confirming whether the person in question is in fact a consultant rather than an employee. For example, do they have a contract of employment with your company? Does their contract, statement of terms and conditions or offer letter use terms like ‘employer’ and ‘employee’ or are they referred to as a ‘contractor’? Does your business deduct tax and National Insurance contributions from their wages? Are they entitled to statutory sick pay and maternity/paternity leave?

Prior to engaging a consultant, ensure that you enter into an appropriate consultancy agreement with them. As with a contract of employment, it’s important to state clearly that any IP created by that individual pursuant to their engagement belongs to your company as soon as it is created. Ensure that the scope of the project is clearly defined along with other key terms such as remuneration and timeframes.

Don’t wait until you have a problem on your hands

Ensuring that you have a contract of employment or consultancy agreement with the appropriate provisions and protections for your business is key to minimising the risk of a dispute further down the line.

Thrings’ experienced team can offer tailored advice and support to your business, whether that’s helping you to get the appropriate agreements in place or advising you on enforcement.

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