Check for intellectual property provisions in your employment contracts

Although a business may create intellectual property (IP) during the course of its operations, in reality this IP is created by individuals.

This may be by commissioning a third party to produce the intellectual property rights for it, or through the efforts of its own employees. It is vital that a business is aware of the rights which such individuals have in relation to this IP and adequately deal with this issue in any proposed employment or consultancy agreement.

Employees

 Many types of IP rights created by an employee during the course of his employment will vest in the employer automatically without a need for a formal assignment to be signed by both parties. However, there are some exceptions to this general rule and employers should ensure that when drafting employment contracts an IP provision is included. For example, when registering domain names of a business, it is very common for an employee mistakenly to register the domain name in his own name rather than that of his employer. The owner of the domain name is then listed at the registry as being the employee and not the business.

Furthermore, where a business is very IP intensive and employees are engaged in research and development, it would be sensible to incorporate a more elaborate IP clause in their employment contracts. In particular, a business should take advice where patents are created by its employees, because certain statutory rights to compensation arise in favour of employees, if the patent created by them is of “outstanding benefit” to the business.

Consultancy

If the contract with a consultancy firm, or any other service provider, is silent in relation to ownership of the IP, the legal title will vest in the developer.  It does not matter if a business has paid for the developer to create the work. It is therefore crucial that any contract with a consultant, who is creating IP on behalf of the business, deals with the question of the ownership of any resulting intellectual property rights.

Formalities

It is important to remember that any provisions dealing with an assignment of IP will only be valid if the agreement has actually been signed by the relevant individual. The business must always obtain the signatures of those involved.