Legal Q&A: Intellectual property clauses in employment contracts

Intellectual property (IP) clauses are used in employment contracts, as well as contracts with contractors and consultants, in order to protect the intellectual property of the employer and ensure that any IP created by the employee in the course of employment is owned by the employer.

Q Do I need to include an IP clause in my employment contracts?

A There is a statutory presumption in the UK that IP created by an employee during the course of his or her employment is generally owned by the employer. Some say that there is, therefore, no need to have an IP clause in an employment contract. While this may be the case in some situations, if IP is not expressly dealt with in the contract of employment, employers may find that they do not own the rights created by the employee, or worse, that the employee is entitled to extra payments.

Q What are the possible consequences of not including an IP clause in an employment contract?

A There are a number of possible consequences, including that, unless expressly excluded, the employee has the right: to be named as author on all reproductions of the work; to object to certain alterations to the work; and to object to any derogatory treatment.

Such rights could, at the very least, be an administrative inconvenience for the employer if every time the work is reproduced the employee has to be named as the author. At worst, such rights could prevent the employer from adapting the works where the employee considers such adaptation as derogatory treatment.

Another possible consequence is that if the employee creates something outside his or her terms of employment, he or she retains ownership of the IP. By way of illustration, if the employee is employed as a photographer for a fashion company but then creates a new design for a dress, the employee may be entitled to the IP rights in that design as creations of dress designs are unlikely to be within the terms of employment of a photographer.

Q Can an IP clause remove an inventor’s right to statutory compensation?

A No. Under patent law, if an invention is patented the employee may, in certain circumstances, be entitled to statutory compensation in respect of the invention. The employer cannot contract out of this right and therefore any terms in the employment contract that purport to remove this right will not be effective.

However, the employer can still successfully ensure that it owns the rights to any invention, in preference to the inventing employee, by specifying in the employee’s job description that his or her role includes one inventing or conceiving of new products and product development ideas.

Q What about consultants – do I need to include an IP clause in their retainers?

A Generally, there is no presumption in the UK that IP created by a consultant during the course of his or her retainer is owned by the employer. Therefore, in most situations the IP is owned by the consultant, unless the contract expressly provides otherwise.

However, this general rule varies between the different IP rights. By way of illustration, the commissioner of a design, rather than the designer, is automatically the person entitled to any subsequent registered design or unregistered design rights in the design. Whereas any copyright will by default be owned by the consultant who created the work during the consultancy.

Q What should be included in an IP clause?

A An employer should:

  • be clear about what the employee’s or consultant’s duties are, as this can have an impact on whether or not the work created is done so in the course of employment;
  • have a clear statement of ownership that covers all works or inventions created by an employee or consultant;
  • consider whether or not any obligations to disclose inventions are needed and whether or not records should be kept in order to prove that the work is original and/or its date of creation; and
  • ensure that any assignment or licence deals with existing rights and future rights.

Simon Bennett, Partner, and Jane Spiers, Solicitor, Fox Williams LLP

XpertHR FAQs on intellectual property rights

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