HOW TO PROTECT YOUR IP

In Part 1 of this series, we looked at the types of intellectual property which an employee might create during the course of their employment. Of course, IP may also be created by consultants (individuals or service companies) engaged to perform specific roles for a company. If you missed Part 1, you can catch up here.

When it comes to ownership of IP, the position of consultants is very different to that of employees. This note highlights the key differences, and offers suggestions to ensure that IP created by contractors working in inventive and creative roles is adequately protected.

The position of ownership of consultants and the main types of IP which may arise can be summarised as follows:

Patents

Section 39 of the Patents Act 1977 provides that where an employee creates an invention in the course of their normal or specifically assigned duties, the invention will automatically belong to the employer. The final note in our series will provide more information on this point.

Where the invention is created by a consultant, the default rule is that the invention belongs to that person. Therefore, getting the consultant’s contract terms right, to ensure that any inventions which arise out of the contractor carrying out their work will belong to the company, is crucial.

Registered Designs and Design Rights

As discussed in our first note, registered designs are owned by the person who has those designs registered. When dealing with a consultant, a company should ensure the registered design application is made in the name of the company.

The company should also ensure that the consultant signs any forms or other papers to allow them to register the design, preferably whilst they are still working with the company. If that is not possible, the consultancy agreement should contain clear and unambiguous wording placing an obligation on the consultant to sign any forms/papers which are needed in the future. It would be even better if the contract empowers the company to sign such IP related documents on the consultant’s behalf.

Following a fairly recent change in the law, if a design is commissioned (eg to a consultant) the consultant will be the owner of the unregistered design right.  Previously, the commissioning company would have been first owner of it.

The commissioner of a design should ensure that the design right is assigned or licensed, as appropriate, so that the company can exploit the design as intended.

Copyright

Section 11(2) of the Copyright, Designs and Patents Act 1988 regulates ownership of copyright works. When made by an employee “during the course of their employment”, the work will vest automatically in the employer unless there is agreement to the contrary.

Where the work is created by a consultant, the default rule is that the work belongs to that person. Again, this position should be covered off in their engagement terms.

Confidential information, trade secrets and know-how

Similar to an employee, a consultant should be required to keep confidential information private. Again, making clear in the statement of work or other terms that any information which the consultant comes into contact with shall not be disclosed to any unauthorised third parties, either during or after the period of work, is important.

The main difference with consultants is that it may be more difficult to imply a duty of confidentiality into this relationship, increasing the importance of having this locked down in a contract.

In summary, the risk to businesses is clear: a consultant will be treated as the owner of IP which he has been commissioned to create, unless the hiring company provides otherwise in the appointment contract or other terms which the consultant signs up to.

Transferring ownership to the company

The best way for a company to protect its interests is, at the outset, to include an IP clause in the terms of engagement constituting the consultancy agreement. An effective clause will ensure that new IP is brought to the attention of and transferred to the company, and will also ensure that the company’s IP is protected going forward. Some general considerations include:

• Disclosure and assistance: The consultant should be required to disclose any IP as soon as it is created. There should also be the requirement, even after the consultancy agreement has ended, to assist the company in capitalising on its IP. This will, as an example, involve an obligation to provide all documentation necessary to progress a patent application and co-operate in the registration process;
• Confidentiality: To be patentable, an invention must be “novel”, and this novelty will be lost where an invention is disclosed to a third party. A confidentiality clause is crucial to ensure that patentable inventions are not disclosed without the company’s permission. This will be in addition to a general clause restricting disclosure of confidential information;
• Moral Rights: Even where ownership is a copyrighted work is transferred, “moral rights” will subsist with the author. These include the right to be identified as author, and the protection of the work from “derogatory treatment”. The consultant should be required to waive all present and future moral rights in the consultancy agreement.

Here are our top tips for your company to maximise the chances of IP, created by your employees and belonging to you:

• Include a broad IP clause in the consultancy agreement, ensuring that the company’s ownership expectations are fulfilled and ensuring that different types of IP are covered;
• Consider how to protect IP after it is created. Ensure that the obligation to keep confidential patentable inventions and confidential information subsists after the consultant’s contract with the company ends. This is especially important with consultants who move frequently between competitors;
• Future employees have some continuing obligations but contractors may not. It is important to tie in consultants after the consultancy contract ends, ensuring that they will assist with all steps involved in progressing patent applications or provide such other assistance as is necessary.