Who is the Owner of Copyright – Employer or Employee?

At times, when employed at an organization, an individual may create something unique. This can be anything such as a product, software, etc. However, while the employee may be full of joy due to their creation, the question that might worry them soon would be ‘who owns this product/idea?’ It will further make them question if they can actually benefit from their creation by selling it or would that be controlled by their employer as well.

Read on as we state all the necessary aspects you must be aware of in such situations and familiarize you with the rights and regulations associated with Intellectual Properties (IP).

What is Intellectual Property?

Creations born out of one’s mind are referred to as intellectual properties. This may include creations such as inventions, literary and artistic works, designs, symbols, names, and images used for commercial purposes.

Such creations are protected by several legal provisions such as patents, trademarks, copyrights, etc., which allow the creators of such items to enjoy financial benefits and gain recognition for their invention/creation. The aim of protecting such assets under legal provisions is to create an apt balance between the interest of the creators and the interest of the rest of the public to develop and sustain an IP system where creativity and innovation can flourish.

As per the Indian Copyright Act, 1957, any work, product, including source code, if developed by an employee, the employer will be the first owner of the copyright in such work product, in the absence of any contract to the contrary.

Although inventors usually retain all the rights to their creation, this may not be applicable if the creation was discovered/developed when the individual was ‘on the clock’ for their employer. Therefore, if you are an employee – not an independent contractor – who developed something as part of your job, all the rights to such a creation, such as any patents for it, shall belong to your employer. This is known as the ‘work for hire’ doctrine.

If your role at the organization involves inventing, developing or designing, it is quite likely that you may have entered into a written agreement related to assets created during employment with your employer at the time of hiring. This agreement generally covers all patents, copyrights and other forms of IP rights and may be referred to in case of disputes. It is crucial to thoroughly go through such documents and, if needed, reviewed by a patent litigation attorney to learn of your rights when it comes to anything you develop.

However, if your invention does not fall under the ambit of your work and you are not bound by any written agreement, you may be able to assert IP rights in the patent even if you created it during your working hours on the job. This basically means that you would be the owner of the patent and have the right to enforce the patent against any kind of infringement.

It must be noted, however, that if your employer chooses to use your invention, they may have a valid defense against your infringement claims. The ‘Shop Rights’ doctrine states that an employer may use an invention that you own but invented when ‘on the clock’ without infringing any IP rights.

Note: This right is limited, as the employer cannot sell, assign or use your patented invention outside the scope of their business.

Employees’ Rights to Intellectual Property

The common understanding is that copyrights and patents grant IP rights to the creator of the asset in question. However, employees must understand that there are certain exceptions to this rule for assets invented/created during working hours.

The Copyright Act automatically grants ownership to employers instead of employee creators/inventors in two main scenarios.

• First, where an employee develops the patented asset within the scope of their employment.
• Second, when the employer specifically requests or commissions for the development of such work from the employee.

In both above-mentioned scenarios, the employer shall be considered as the rightful author and owner of the asset in question.
In a way, you can say that anything created by an employee when ‘on the clock’ shall be considered as part of their duties in the company and be owned by your employer. For example, if you are a software developer and create an effective solution for some tedious business process, creating such a solution would fall under the scope of your responsibilities at the company as well. Simply put, it would be considered as a part of your job to create something like that.

Protecting Intellectual Property

If an employee creates an IP that is not related to their job, the situation can become quite tricky. Say, if an accountant comes up with an engineering solution rather than an engineer, it may be argued that the asset developed does not fall under the scope of their role as an employee.

In cases where the invention proves to bring ‘outstanding benefits’ to the employer, the employees may attempt to claim some form of compensation. This exception is mainly used in situations where the invention generates huge profits for the employer.

Intellectual Property Rights and the Employment Agreement

Considering how copyright and patent legal frameworks work in workplace scenarios, it may often feel like you have very little authority over anything you create during your employment. However, this makes it imperative to keep in mind that all terms of your employment agreement affect your IP rights as well.

It is quite common for employment contracts to include some kind of IP ownership clause that declares the employer’s rights on the employee’s creations/inventions.

For most companies, it is non-negotiable when it comes to the ownership of any IP developed by its employees. However, for highly complex intellectual properties, employees may try to negotiate an increased salary in exchange for a complete IP ownership clause.

Agreements for Work Falling Outside the Scope of Employment

Employees must be careful when it comes to ideas that you wish to work on that do not fall under the ambit of your employment. If you have certain personal plans to work on and develop some intellectual property that is not related to your work, you must plan for it in advance. If you are asked to sign an agreement that deems all IP ownership to the employer, feel free to negotiate to exclude any IP that is not related to your job.

Although it is not always defined clearly, IP created within the workplace during ‘on the clock’ hours usually belong to the employer, even if the asset has been developed by an employee. An employee, however, may not be limited by the arrangement. The employment agreement gives you the chance to negotiate certain terms of employment and benefits in exchange for granting all IP rights for the developed product to the employer.

Conclusion

It can be quite confusing to identify the owner of an intellectual property if it has been created/invented by an employee when they are ‘on the clock’. While it usually means the employer shall be deemed as the owner of any IP right for assets created by employees during working hours, it would not be the same if the inventor’s employment agreement does not have a clause defining the right owner of such assets developed by employees.

Therefore, it is imperative to make sure you thoroughly review employment agreements and reach out to negotiate for certain benefits in exchange of giving up your IP rights to anything you develop.


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