Employers don't automatically own employee inventions: Lessons from UWA v Gray

It might come as a surprise to laypersons that employers don't own employee intellectual property (such as inventions), even if the invention was created in the course of employment. The Patents Act 1990 (Cth) sets out ownership of an invention in s 13, and details who is entitled to a patent in s 15. Neither section expressly states that employees inventions are owned by employers, or entitle employers to patent these inventions. It appears from the Act that the owner of the invention is the person or team of people who performed the intellectual and practical work involved in the development of the invention (see this article for more on patent ownership).

Employers can expressly stipulate in their employee contracts that inventions are owned by the employer. However, employers must be careful not to limit employee activities and freedoms in a way which is considered illegal restraints on trade. Employers can sometimes rely on an implied term giving employers ownership of employee inventions. In Patchett v Sterling Engineering (1955) RPC 21 the House of Lords did imply such a term when the employee was employed to invent, and creating inventions was part of the employees role. This can be interpreted quite narrowly, as it must be an invention for which the employee was paid to invent.

Some employers have argued that a fiduciary duty arises in the course of employment. In VUT v Wilson (2004) 60 IPR 392 the court held that a fiduciary relationship can arise between an employer and an employee. The court found that professional employees, such as professors, do owe a fiduciary duty to the university. Therefore although the university were only partially successful in arguing that the invention was within the scope of the professors' employment, breach of a fiduciary duty meant that the professors held the intellectual property on trust for the university.

In UWA v Gray (No 20) [2008] FCA 49, Gray patented a method for treating liver cancer in his own name, and later transferred these rights to a patent company, and later to a medical company which he later publicly floated. The University of WA where Gray was employed argued that they owned these patents, and therefore were entitled to shares in the Medical company. There was no provision in the employment contract between Gray and UWA regarding intellectual property. University policy was that inventions were to be reported to a 'patents committee', however even if this policy was binding on Gray, the patents committee had long been abandoned.

The UWA then tried to argue that a term was implied into the employment contract that inventions of employees belong to the employer, however they failed to get up on this argument. The court did not accept this argument on the basis that Gray was hired to research, not invent. The court also found that a duty to invent was not congruent with the duty of an academic to publish their work (as this would destroy the patentability of any invention). Furthermore, Gray funded most of his work on the invention in question himself.

The court also did not accept the fiduciary relationship argument. The fiduciary argument was put that Gray had a duty to deal with the property in a way consistent with UWA’s interests. This supposes that UWA is owner of the property. As the court found that UWA does not own the intellectual property, this argument failed.

The university have applied for special leave to appeal to the High Court. It will be interesting to see if leave is granted or not, considering the appointment of French CJ to the High Court (who gave the judgement in the Federal Court before his Honours appointment to the High Court).

I think Gray is a good illustration that employers need to expressly state in employee contracts that IP of employees in the course of their employment belongs to the employer. Employers should also revisit employee contracts regularly to ensure that their IP rights in employee inventions are adequately protected.

Are judges wary of new trade marks? Guylian, Nestle shape marks not distinctive enough

Following Guylian's loss in the Federal court regarding a 'seahorse' trade mark, Nestle have now lodged an appeal against the decision that the 'four finger' shape of a Kit Kat is not distinctive. The judge thought that the shape was the functional shape of the goods (see Phillips v Remington - here the Australian court found that the shape had to be conceptually different to the goods. Burchett J referred to the judgement of Lord Templeman in Re the Coca-Cola Company (1986) 6 IPR 275, in which he stated 'The word `mark' both in its normal meaning and in its statutory definition is apt only to describe something which distinguishes goods rather than the goods themselves.')

Despite surveys which show that consumers associate the four bars shape to a Kit Kat bar, with Guylian taking similar efforts to show consumer association between the shape and their brand, the court has nevertheless found that these marks are not distinctive enough for consumers to see the link between these shapes and the respective brands.

But these decisions are hard to reconcile with the decision in Kenman Kandy Australia Pty Ltd v Registrar of Trade Marks [2002] FCAFC 273, where it was held that it was allowable to register the shape of the good. In essence, the trade mark did not have to be separate from the good.


Kenman Kandy shape

Is it that judges are wary about conferring monopolies to well known companies like Nestle and Guylian (effectively stopping competitors from using attractive and desirable shapes and colours in their marketing), while less concerned about doing the same for less well known companies, like Kenman Kandy.

Colour is also a new comer to the trade mark world, and is just as controversial as shape trade marks. Cadbury and Darrell Lea have only recently ended a long time battle over a shade of purple, settling out of court (Cadbury has allowed Darrell Lea to use purple in their stores). BP had similar troubles trade marking the colour 'green' as the 'predominant' colour for their petrol stations, with opposition from Woolworths supermarkets.

McDonald's loses trademark appeal after 8 year battle for the 'Mc' prefix

Malaysia's Federal Court has dismissed an appeal from McDonalds from the Court of Appeal's decision that the use of the prefix 'Mc' by a Malaysian chicken curry chain, McCurry did not amount to infringement (overturning the previous decision of the High Court in favour of McDonalds).

Chief Judge Ariffin Zakaria found that the court had to dismiss the appeal with costs as McDonald's failed to properly frame its questions when challenging the Appeals court's prior decision.

Under the Australian Trademark law, it would be interesting to see how an Australian court would have approached the issue, in light of the decision in McDonalds v Macri Fruit distributors
(2000) AIPC 91-583, where the trade mark office found that the use of 'Mc' was deceptively similar to the family of 'Mc' marks owned by McDonald's (the opponent was attempting to use McSalad and McFresh).

Sony Music raided for 'stolen' songs: Unauthorised use may lead to mammoth damages

Sony music entertainment Mexico has been raided after one of their ex-artist's complained that Sony's use of their music was unauthorised. Alejandro Fernandez signed with Sony in 1998, before leaving in 2008, in which time he recorded 7 albums. During this time, he recorded numerous songs which were never included in the 7 authorised albums, which Sony then sold on an 8th 'unauthorised' album. The Feds seized 6,397 music, videos and photos following the artist's complaint. Fernadez's attorney is claiming that what Sony did was illegal, as they contractually had the rights to the songs contained on the 7 albums but not the 8th album, while Sony is claiming that their use of the music on the 8th album was lawful.

If Sony is unsuccessful, I will be interested to know how damages are calculated. Considering in the previous RIAA cases, infringement and distribution by Jammie Thomas was worth $80,000 per song and in Sony vs. Joel Tenenbaum, the damage calculated was $22,500 per song. Sony might get a taste of their own medicine.

Myspace conviction overturned: ToS violation too broad for prosecution

A conviction of a woman who allegedly 'cyber-bullied' a 13 year to girl, who subsequently committed suicide, has been overturned. The conviction was based on the Computer Fraud and Abuse Act, which is aimed at computer hackers, and the judge found that it could not be stretched to include mere violations of a terms of service.

However, judge Wu did not rule out the possibility of a ToS violation resulting in conviction, just that the ToS violation here was not a circumstance in which conviction under the Act was appropriate.

Evony is trying to sue UK blogger in NSW: Can a plaintiff successfully sue a foreign defendant?

Almost everyone has come across the Evony adverts, most of them showing scantily clad women and promising that you can 'play discretely'. One gaming blogger, Bruce Everiss has taken a stand against Evony, mostly for allegedly spamming his forum and using unethical business practices.

The question is whether a NSW plaintiff can sue a UK defendant. The Supreme court in NSW can have jurisdiction to hear a matter concerning a defendant from a foreign jurisdiction. Gutnick v Dow Jones is on point here. Basically the High Court held that Gutnick (an Australian citizen) could sue Dow Jones (based in NY I believe) in Victoria, Australia as the damage to Gutnick’s reputation occurred in Victoria when subscribers in Victoria to the online magazine published by Dow Jones read a defamatory article about Gutnick. Here, the court had jurisdiction to hear the matter as the tort occurred in Victoria.

In NSW, the court have a 'submit and see what happens' approach to service on an overseas defendant. If the defendant fails to appear, the plaintiff then needs to seek the leave of the court to proceed with the litigation, where the court will decide if they are a 'clearly inappropriate forum' to hear the matter and that the claim has some success. There is also a lot of doubt surrounding the enforceability of the judgement (which the court does not take into account here). Without the defendant having assets in the jurisdiction, it may be difficult to enforce any judgement against them.

It will be interesting to see if this progresses, or whether this is simply a scare tactic.

Cyber bully jailed over Facebook death threats

While bullying and harassment has always been traditionally recognised offline, it is interesting to see how bullying online is being dealt with by the law. It appears that in the UK, death threats made using the social networking site Facebook are serious enough to impose imprisonment.

Although it is questionable as to whether the defendants offline actions against the plaintiff were the main contributory factor in the courts decision, along with prior convictions against the defendant, it could be showing that the court is beginning the recognise that traditionally personal, offline offences can also occur online.

It will be interesting to see what the outcome would be should the threats occur entirely online.