Ownership of IP rights: Do your employment contracts make reference to IP?

5 mins

Although different conditions apply to different kinds of intellectual property (IP) rights, as a general rule in the UK, the employer owns by default the IP rights created by an employee as part of, or arising from, their normal duties. It should be noted that any IP produced outside of standard working hours could still be owned by the employer if the IP arises from the employee’s normal working duties. The existence of a contract of employment will normally determine whether a person is deemed an employee.

While it appears that the statutory presumption favours the employer, sometimes it can be complicated to determine if IP is created in the course of employment, especially when the normal working duties of an employee are vague and not confirmed in writing. Moreover, the increasing prevalence of hybrid working in the post-Covid era also blurs the line between conventional working hours and non-working hours, which could potentially lead to additional conflicts over IP rights ownership between employees and employers.

Accordingly, as an employer, it is important to incorporate IP clauses into employment contracts to safeguard your rights. In particular, there are some issues that should be covered in employment contracts:

• It is advisable to include appropriately drafted clauses confirming that any IP rights developed by the employee belong to the employer. Patent and non-patent IP rights should be handled differently. This could be useful in other jurisdictions where there is no statutory presumption of ownership.

• The contract should be crystal clear about what employees’ normal duties are. Furthermore, the contract should explicitly recite the types of IP to be protected, so that any potential work created by employees, arising from their standard responsibilities, will be captured. It is also important to keep track of employees’ actual duties and have a clear record of their responsibilities over time.

• There may also be additional clauses in the contract requiring employees to report any IP emerging from their job to the employer, as well as to help the employer with any associated information or paperwork while the employer is pursuing IP rights.

Disclosure of confidential information

In addition to the ownership of IP rights, it is also crucial to ensure that employees do not disclose confidential information about the business. As well as the commercial damage caused by loss of secrecy, any public disclosure of such information might jeopardise your ability to seek patent protection.

In the UK, employees automatically owe their employer an obligation of confidence, but an explicit clause should be included in the employment contract anyway. Employees should also be reminded of this obligation whenever they have access to secret information that should be kept confidential.

In addition, specific training should be provided to employees regarding their obligation of confidence and how secret information is to be handled.

Any particularly valuable confidential information (your ‘trade secrets’) should also be identified as such and recorded, plus reasonable steps should be taken to ensure they remain secret. For example, access to them should be limited, they should be stored securely (e.g. encrypted or password protected), and they should not be disclosed to any third party in the absence of a specific confidentiality agreement covering that disclosure.

When employees leave the company, it is also important to remind them of their obligation to keep any trade secrets confidential. You can read more about how trade secrets can be used here.

IP rights of third parties such as consultants and contractors

The aforementioned statutory presumption of ownership only applies when the IP is developed by employees. It does not apply to third parties who do not have an employment contract with the company, such as consultants, contractors, and casual workers. If no agreement exists to the contrary, the third parties own any IP created arising from their work. Accordingly, it is essential to ask the third parties to sign a contract that explicitly states that any IP created will be assigned to you (see here for more information). The signing of a non-disclosure agreement would not be sufficient for protecting your IP rights from a third party as soon as the relationship moves beyond discussion. 

Written by: Sean Leach and Rogen Leung