What Employers and Employees Should Know about Workplace Intellectual Property
In Canada, the legal rules regarding ownership of intellectual property developed by employees are highly technical and will often depend on the type of property at issue. Is it an issue of copyright, trademark, patent, or something else?
The term “intellectual property” refers to the “intangible” (non-physical) things created by the mind or intellect, such as logos or designs. Although intellectual property is commonly associated with a physical object, its real value lies in the owner’s exclusive right to prevent others from copying it.
In every economy, employees play a key role in developing new ideas or advances in science and technology that drive growth and generating revenue. It is therefore crucial for governments to pass laws that, on the one hand, encourage innovation by offering a way for businesses protect the protects they develop, while on the other hand, a way to resolve disputes that arise as to ownership of those products. This means that all employees that are involved in creating products have a stake when it comes to intellectual property law, including inventors, authors, engineers and scientists.
In the area of employment law, courts that are asked to resolve an ownership dispute between an employer and employee apply, will apply a legal tests to the specific facts of each case to determine who actually owns any given property in which an employee had some involvement in creating. The reasons these disputes arise are multi-fold, but generally result from the fact that the employees have not signed an employment contract that legally transfers their intellectual property rights to the employer.
Types of Intellectual Property Rights
There are different types of laws that protect the different types of creations, including:
Copyright
exclusive right to use, reproduce, sell or perform an original work, and prohibits another person from copying or modifying that work (e.g., photocopying or translations). This applies to creative work, such as art, books, music, photographs, films, computer programs, architectural works, software source codes or electronic games. For example, an author owns the copyright in their book, a musician owns the copyright in an original sound recording, and a company owns the copyright in its product manuals.
In Canada, copyrights are governed by the Copyright Act and common law (or judge-made law from court decisions over time). To qualify, the creation must be original and in fixed form (e.g., in writing). If granted, the duration of a copyright is for the life of the creator plus 50 years (for music, 70 years).
Patent
– a government-issued exclusive right (usually a licence) to make, sell or use a novel, innovative and useful invention for a specific period of time, and prohibits other another person from using or manufacturing that creation. For example, Microsoft owns many patents for the unique functionality of its word-processing documents, spreadsheets, and presentations software, while a pharmaceutical company may have a patent for each drug.
In Canada, patents are governed by the Patent Act. To qualify, the creation must be new (first in the world), useful (functional and operative) and incentive (showing ingenuity and not obvious to someone of average skill who works in a related field of invention). If granted, the duration of a patent is 20 years from registration and is not renewable.
Trademark
– a unique symbol or word(s) used to represent and distinguish one company’s products or services from those of another company, and prohibits another person from using that trademark. For example, Nike’s stylized “swoosh” or “check mark” and Starbucks “golden arch” are trademarks that clearly identify their business and products from those of competitors.
In Canada, trademarks are governed by the Trademarks Act and common law. To qualify, the creation must be unique and capable of distinguishing the a business’s goods or services from those of others. If granted, the duration of a trademark is 10 years from registration and is renewable. Apart from government registration, trademarks can be protected under common law (“unregistered” or “common law” trademarks), which if violated, a business can sue for the tort of “passing off”.
Trade Secret
– a unique receipt, method, process, device, technique, data or know-how of a business that is kept strictly confidential and because it has actual or potential value in not being available to the general public. For example, Coca-Cola’s secret syrup formula used to create its soda, or KFC’s secret mix of herbs and spices are all trade secrets.
In Canada, trade secrets are governed by common law and commonly protected as “confidential business information”. To qualify as a trade secret, the confidential business information must: (a) not be generally known in the industry; (b) represent a business advantage or economic value; and (c) the company has made efforts to keep the information from becoming generally known in public. A trade secret is indefinite (no duration limit), and prohibits another person from disclosing or using that information (typically found in an employee’s “Confidentiality Agreement” or “Non-Disclosure Agreement”).
Industrial Design
– a government-issued exclusive right to make, sell and use a product with a unique or appealing feature, shape or configuration, and prohibits another person from using or manufacturing that industrial design. For example, the distinctive diminutive contours of a Mini Cooper, or the instantly recognizable Coca-Cola bottle were registered as industrial designs.
In Canada, industrial designs are governed by the Industrial Design Act. To qualify as as an industrial design, the creation must be original, novel and visually appealing. If granted, the duration of an industrial design is 10 years and not renewable.
Intellectual Property Disputes Between Employers and Employees
An important (and often overlooked) issue in Ontario employment law is intellectual property, specifically the question of who has ownership over inventions in the workplace. Generally speaking, most intellectual property developed by employees in the course of their employment is owned by their employers. However, occasionally disputes arise regarding ownership of intellectual property created by employees.
Copyright
Under the Copyright Act, the general rule is that the author (original creator) is the “first owner” of the copyright in their work, with one important exception: if the work was made by an employee in the course of their employment (i.e., as part of doing their job), the employer is deemed the first owner of the copyright in the work (unless the employer and employee have signed a written employment contract stating otherwise). In other words, any work created by an employee will generally be owned by the employer. For this exception to apply, the following conditions must be met:
(i) the author of the work must be employed by the business;
(ii) the work must be made by the author in the course of employment;
(iii) there must be no agreement to the contrary (e.g., an employment contract providing that the employee retains ownership of copyright in the works created in the course of their employment); and
(iv) the relationship is one of “contract of service” and not “contract for services” (i.e., master-servant relationship).
Additionally, it is important for employers to consider having employees also sign a written agreement that expressly states the employee is waiving their common law “moral rights” (since they cannot be assigned to anyone). In other words, an employee agrees not to enforce their moral rights. The term moral rights is separate from copyright, belong to the creator alone and consist of the following:
- the right to be cited as the author or creator (or even to remain remain anonymous)
- the right to prevent changes to the work that might dishonour the creator’s reputation
- the right to prevent the work from being used in association with a product, service, cause or institution where it might dishonour the creator’s reputation
Patent
While the Patent Act does not address ownership rights of intellectual property created during employment, the general rule is that (unlike with patents), employees will have ownership of inventions and any resulting patents for discoveries made during the course of their employment. However, there are two important exceptions where ownership over patent rights in an invention belongs to an employer:
(i) where there is an express agreement to the contrary (such as an “Intellectual Property Agreement” in an employment contract);
(ii) the employee was “hired to invent” – that is, the employee was hired specifically to invent something for the employer.
For the second exception to apply, the courts rely on the following test:
1. the employee was hired for the express purpose of inventing (e.g., research and development);
2. when hired, the employee had previously made inventions;
3. the employee was part of an employer’s incentive plan to encourage product development;
4. the employee’s conduct after the invention suggests that the employer is the owner;
5. the invention was created as a result of an employer’s instructions for the employee to solve a problem or invent a solution;
6. the invention arose following the employee’s consultation through normal company channels (i.e., did the employee seek help from other colleagues?);
7. the employee was dealing with highly confidential information or confidential work; and
8. it was a term of the employee’s employment that they could not use the ideas that they developed to their own advantage.
Contact Bune Law, Employment Lawyer in Toronto
For employers, it is always prudent for a business to have employees sign written agreements (especially employment contracts) to protect intellectual property rights when those employees will be involved in designing or creating valuable property. Given the uncertainty (and potential economic value) of intellectual property in employment law, it is critical for employers to protect their business by having employees sign formal employment contracts that expressly provide that all employee inventions belong to the employer. Among other important gains, this basic precaution would clarify to all parties involved that the employer owns the legal rights in inventions that are (or could eventually be) created as a result of employee work.
For employees with an interest in protecting their legal rights over future inventions, such as the right to keep copyrights or patent inventions made during their employment, it is critical to carefully review an employment contract with an experienced employment lawyer to ensure their intentions are clearly expressed and understood by an employer.
No matter which side you happen to land on, Bune Law, a leading employment lawyer in Toronto, is ready to assist with your case. Please feel free to reach out to Bune Law at 647-822-5492.
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