31 Oct 2019

Who owns the intellectual property rights ("IPR") when an employee comes up with an innovative idea or product? Does the answer differ if the work is carried during working hours or during the employee's own time, outside of work?

We have summarised below some possible measures to take in order to avoid disputes such as that in the High Court decision in Prosyscor Ltd v Netsweeper Inc & Ors [2019] EWHC 1302 (IPEC):

Bradley Kite was employed by Netsweeper as a Senior Systems Engineer, and stayed on afterwards as a contractor. Mr Kite's responsibilities included writing software to "create product capabilities for Netsweeper", and he was obliged under contract to disclose his ideas to his management team. For Mr Kite, part of the attraction of the job at Netsweeper was the chance to be involved in software development.

Mr Kite had developed, in his own time and using his personal computer, a system that could authenticate a user's access to online content without relying on a computer's Internet Protocol ("IP") address. This allowed different access restrictions for different users working on computers with the same IP address; eg students in a school and their teachers, or ensuring that only paying subscribers were accessing certain websites.  

Mr Kite had discussed his idea with a work colleague, who suggested amendments to the system which Mr Kite then implemented. Mr Kite was also posting updates on Netsweeper's intranet as his ideas developed. Netsweeper was otherwise fairly unenthusiastic about the system, and it was not until later discussions with a client (after Mr Kite had left Netsweeper's employment) that Netsweeper began work on a system using Mr Kite's concept. 

Mr Kite realised there was a way to commercialise his system through Netsweeper, and he entered into a confidentiality agreement with Netsweeper so that the parties might exchange information in the development of each party's iteration of the system. Netsweeper continued to work on the system after the exchange of information, and eventually filed a patent application for its version (named "Authenticate Override"). On becoming aware of this patent application, Mr Kite assigned all of his IPR in his own system (named "Authent") to a company he had previously founded (Prosyscor) in order to market Authent. Prosyscor subsequently issued proceedings against Netsweeper, claiming ownership of the IPR, and that Netsweeper had breached the confidentiality agreement by using the information shared by Mr Kite in order to progress its system.

Who owns the IPR?

The Court found in favour of Netsweeper:

  • Netsweeper had web-filtering software as part of its product offering (of which Mr Kite was aware even before he was employed there), and Mr Kite had been employed to "create product capabilities" for the company. It followed that Mr Kite was therefore employed to create concepts such as the one in dispute;
  • the above finding was regardless of whether Mr Kite was specifically employed to innovate, or what area his innovation duties were intended to cover. Mr Kite was employed to write software, which would (almost) inevitably give rise to patentable material, and which by his own admission was an element which had attracted him to the job. Furthermore, web-filtering was part of Netsweeper's core business. An analogy was made (quoting Jacob LJ in LIFFE Administration and Management v Pavel Pinkava [2007]) to the research scientist happening upon a cure for arthritis, when they were employed to cure cancer – the IPR to such a cure would still vest in the research scientist's employer;
  • supporting the conclusion that the creation of this concept fell within Mr Kite's normal duties as an employee was the fact that Mr Kite had posted the inventive concept on the Netsweeper intranet and discussed the concept with another colleague; and
  • the claim that Netsweeper had used confidential information gained from Mr Kite in breach of their confidentiality agreement to progress its system was not successful. It could not be established what exactly this confidential information was, and in any case the mere fact that Netsweeper had continued with the development of its system did not prove that any such confidential information had been used.  

What can I do to increase the chances that I will own the concept I have created (and not my employer)?

  • Consider whether this kind of innovation is expected of you during the normal course of your employment. Bear in mind that, under English law, 'normal' is not taken to mean 'day to day' or 'primary', and the actions of you and your employer (eg with subtle growth of additional duties) can show a gradual variation of the terms of your employment. Checking the terms of your employment contract (and any variations/extensions) is a starting point, but also consider any verbal variations and/or any special duties requested of you. 
  • Make sure the time you spend on your idea is entirely separate to the time spent on your job, and do not use company materials, infrastructure or space to work on it.
  • Think carefully about sharing your ideas with other employees of the business and asking for/accepting their input, and do not (as Mr Kite did) post the idea on any company intranet pages; whilst making your employer aware of a concept you have devised in your own time does not automatically transfer the ownership of that concept to your employer, it may not help your case (and may assist theirs).
     

What can I do as a company engaging innovators and developers to avoid future conflict?

  • Make sure your employment contracts clearly describe an employee's obligations regarding original input, and include relevant IPR provisions in your favour ('standard' or 'template' IPR provisions may not be appropriate for all employees).
  • Make your company's aims and objectives clear in respect of new product/service development, and ensure all your employees are aware of these (whether or not they are involved in such development for you).
  • Cultivate the concept of collaboration and sharing of ideas within the company, either formally (eg forums or regular meetings) or informally.
  • Encourage employees to discuss their inventive concepts internally, by using the message that it can accelerate development and bring the idea into reality sooner.
  • Where an inventive concept becomes registrable IPR, wherever possible and appropriate, give the inventor(s) credit, eg by listing them as an inventor on a patent application. This can help to promote an atmosphere of appreciation and joint purpose within an organisation.
  • Bear in mind that not everyone engaged by your company will necessarily be an "employee" and, if they are not, UK legislative provisions regarding an employer's ownership of IPR may not apply. Special consideration needs to be given to these categories of staff, eg interns, secondees, part-time staff, consultants, agency workers, and even directors in some cases.