Can your employees own intellectual property? Here’s what you need to know

By: Christopher Heer and Dominic Cerilli

What is Intellectual Property?

Intellectual property refers to the intangible products of human intellectual labour. These may include inventions, creative works, distinguishing logos or slogans, aesthetic designs, or confidential or trade secret information.

Consequently, intellectual property rights are the legal rights that attach to intellectual property. Unlike many other legal rights which specifically authorize an owner to do something, intellectual property rights typically instead allow the owner to exclude others from using their intellectual property.

Intellectual Property Ownership in the Workplace

Businesses may develop and incorporate intellectual property into the products or services they offer to improve their overall quality or desirability. However, businesses also must avoid infringing the intellectual property of other parties, since infringement can result in the award of legal remedies that greatly outweigh the perceived gains arising from infringement.

Intellectual property ownership is an especially important consideration for employers since employees or contractors working for the business may regularly create new intellectual property. If an employee or contractor retains ownership rights in the intellectual property they create, that ownership interest can in some case prevent an employer from unrestricted use of that intellectual property absent the employee’s or contractor’s authorization.

How is Ownership Determined for Intellectual Property Created by an Employee?

Whether an employee owns the intellectual property they create generally depends on the circumstances of creation and whether there is specific language in an employment contract or other agreement that assigns intellectual property rights to the employer.

Copyright in a creative work made in the course of employment will automatically be owned by an employer in Canada (and many other countries), absent any agreement to the contrary. However, employees may argue that a creative work, and the copyright arising therefrom, was not actually created in the course of employment. These disputes can be addressed proactively by incorporating language into an employment agreement that makes it unequivocally clear when copyright is assigned to the employer.

Ownership of trademark rights depends on trademark use, although copyright in logos, slogans, or other distinguishing guises might be subject to the same above-mentioned issues regarding copyright ownership. Nonetheless, registering a trademark is crucial in ensuring the market reputation of a business is protected in a way that allows for ease of enforcement, especially where ex-employees may want to benefit from association with a former employer.

Patent rights in an invention are initially owned by the inventors but are automatically assigned to the employer if the employee was hired for the express purpose of inventing. However, employees may assert that an invention was not created in the course of employment and, instead, that the employee retains ownership of patent rights in an invention they allege to be created outside the scope of their employment. These sorts of disputes can be especially troubling because patents generally carry great commercial value. Thus, an employer can lose the benefits derived therefrom if they do not have a clear assignment of the patent rights from each employee.

How Can I Manage Intellectual Property Ownership?

The most useful tool in managing the ownership of intellectual property is a written assignment agreement that unequivocally transfers the intellectual property rights of an employee to an employer. An assignment of intellectual property can be incorporated into an employment agreement as a provision that provides for the assignment of intellectual property rights created by an employee or as a separate intellectual property assignment agreement between employee or contractor and employer. 

It is also prudent to use non-disclosure agreements to protect any confidential information owned by the employer associated with an employee’s or contractor’s work. Similar to an intellectual property assignment, non-disclosure obligations can be incorporated into an employment agreement or may be part of a separate agreement with an employee or contractor.

Practically speaking, employers should acquire as much of an ownership interest as possible in the intellectual property their employees or contractors create in the workplace. However, having an overly stringent intellectual property assignment clause in an employment agreement can dissuade prospective employees from accepting a job offer if they feel such an assignment will interfere with their ability to work on their own independent projects in their own time. These matters can become especially complex if employees use knowledge and skills acquired in the workplace to create what they allege to be their independently developed intellectual property. Thus, employers must clearly define the scope of what intellectual property is assigned, what rights (if any) employees retain in work-related intellectual property, and to what extent employees can independently develop their own intellectual property in the same or a related field.

If you are an employer whose business generates or uses a great deal of intellectual property in its regular operations, it is prudent to speak to legal counsel to determine whether the value of these intangible assets is being properly captured by the business. Furthermore, employers should watch for any unauthorized use of their intellectual property by employees, especially where employees may try to incorporate employer-owned intellectual property into allegedly independent products or services.

About the Author:
Christopher Heer is the owner and founder of Heer Law. He is an intellectual property lawyer, registered patent agent, registered trademark agent, and is also certified as a specialist in intellectual property law (patent) by the Law Society of Ontario. He believes that intellectual property rights add tremendous value to businesses by enabling them to raise capital, build asset value, and grow faster under the protection that these exclusive rights give them.

Dominic pursued a career in law to help innovators protect and commercialize their IP business assets in an increasingly knowledge-based economy. As a former scientist, Dominic understands the importance of not only generating new and innovative creations, but also identifying value-generating IP and leveraging a business’s assets to attract investors, generate revenue, and grow one’s business.


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