How to avoid IP issues with employees and contractors

In running your business, employees and contractors will create IP for you every day. However, ownership rights can be questioned if you haven’t taken precautions to contractually determine who has exclusive access to this IP. Follow this guide to avoid conflict with employees and contractors.

There are two ways you can come to own Intellectual Property (IP). You can either create it, to the Australian requirements for patent, trade mark or design protection, or you can acquire it from a previous owner or creator. Employees or contractors working on behalf of your business create IP for you every day.

However, it can get complicated when it comes to deciding who the owner of a piece of IP is, with conflicts often resulting in costly legal disputes. Let's take a look at how you can avoid IP issues with employees and contractors.

Different IP laws for employees and contractors

The same rules don't apply to both groups due to their differing relationship with businesses:

  • Employees are considered de facto members of the business. As such, any IP created by an employee is considered property of the business. There are exceptions, however, including in academia (where a researcher can be the sole IP holder depending on the institution's IP policy) and if alternative IP rights are agreed upon in the contract of employment.
  • Contractors (including advisors and consultants) are considered business entities in their own right. As such, all IP is property of the contractor unless stated otherwise.
The laws that dictate ownership of IP in business are determined by whether your workers are employees or contracted. The laws that dictate ownership of IP in business are determined by whether your workers are employees or contractors.

How to avoid IP conflict

There are a few tips you can follow to ensure you don't run into any IP issues with your employees or contractors:

Create a detailed contract

Make sure all questions of IP ownership are dealt with before any work is done. Contracts should include confidentiality agreements and non-compete clauses. The former ensures any developmental details of your IP are kept secret, while the latter means employees or contractors can't use the IP to compete with your business later on. Contracts should be witnessed and signed by both parties.

Take care with outsourcing

If you are undertaking a major project that requires input from a number of parties, you need to ensure every aspect of your research and development has been planned out with consideration to IP ownership. Even the most minor details of the project you outsource can be claimed as unique pieces of IP in and of themselves, so ensuring all work is undertaken with consideration to this is vital to ensure your whole project doesn't get derailed.

Detailing IP ownership rights can be simplified by including them in a contract of employment. IP ownership rights can be simplified by including them in a contract of employment. 

Create a clear internal policy for employees

Employees should be aware of their IP rights in your business. Provisions in their contract of employment should cover categories of IP that fall under your business' ownership, obligations between the employee and your business around the creation of new IP and fair remuneration terms for creators. 

Even if you follow this guide, it still helps to seek the expertise of an IP legal professional. This way you can ensure your business' IP stays under your control and you avoid unnecessary conflict. Contact Alder IP for more information.