"Do our employees own the inventions they make ...
Introduction
or, as their employer, do we?" This is a question often asked by employers when seeking legal advice. The Court of Appeal has recently handed down some useful guidance on this point, in the case of LIFFE Administration and Management -v- Pavel Pinkava and De Novo Markets Limited.
The Law
Section 39 (1) of the Patents Act provides:
"(1) Notwithstanding anything in any rule of law, an invention made by an employee shall, as between him and his employer, be taken to belong to his employer for the purposes of this Act and all other purposes if –
(a) it was made in the course of the normal duties of the employee or in the course of duties falling outside his normal duties, but specifically assigned to him, and the circumstances in either case were such that an invention might reasonably be expected to result in the carrying out of his duties..."
The Facts of the Case
Mr Pinkava was engaged by LIFFE, the operator of the London Futures Exchange. In July 2004 he created a system (and related inventions) that permitted the trading on an electronic exchange of new classes of derivatives, not previously traded.
In 2005, Dr Pinkava filed four US patent applications covering these inventions. LIFFE commenced legal proceedings asserting that, pursuant to s39 Patents Act 1997, they were the rightful owner of the inventions.
At first instance ,Mr Justice Kitchin agreed with LIFFE and gave judgment accordingly. Thus, Dr Pinkava appealed to the Court of Appeal, in an attempt to overturn Mr Justice Kitchin's decision.
Dr Pinkava asserted that his day-to-day primary duties did not require him to make the inventions for which patent protection had been sought. His contract of employment did not state that he was responsible for the development of inventions that would make available new classes of derivatives that could be traded on a futures exchange. He also asserted that such duties had not been specifically assigned to him.
The Decision of the Court of Appeal
The Court of Appeal held that LIFFE was the owner of the inventions the subject of the four US patent applications. It held that the inventions were made in the course of the normal duties of Dr Pinkava as an employee of LIFFE and that it was reasonably to be expected that inventions might result from the carrying out of those duties.
In coming to that decision, the Court had to construe the meaning and effect of s39 Patents Act 1997. The Court concluded that, whilst the source of an employee's duty is primarily contractual, a contract of employment "evolves in the course of time", such that "it is unsafe to have regard only to the terms contained in an initial written contract of employment. The actions of employee and employer in performance of the contract may give rise to an expansion or contraction of the duties initially undertaken, by a continuous process of subtle variation." Such extra and different duties should not "be regarded only as duties specifically assigned". It was quite possible for them, in the course of time, to have become normal duties.
On the facts, the Court felt that Dr Pinkava's duties had over time evolved beyond just those set out in the initial written contract of employment and that these evolved duties had become "normal" duties.
Further, if the Court were wrong on this point, it concluded that by the date the inventions had been created additional duties had been specifically assigned to him, such that his responsibilities then included developing an exchange trading derivative system.
The Court also held that an invention might reasonable be expected to result from the carrying out of Mr Pinkava's duties. This was an "objective test". The question was whether "an invention might reasonably be expected to result from the carrying out of Dr Pinkava's duties", even if the particular invention that he had created was not to be reasonably expected.
Conclusion/Tips for Best Practice
- Ownership of inventions between an employee and an employer is not governed by the terms of an employee's written contract of employment with their employer, but by s39 of the Patents Act.
- However, contracts of employment should be as detailed and as clear as possible in setting out what the employee's duties and obligations will be during their period of employment. They should say what the employee is employed to do, bearing in mind that this will assist in determining (pursuant to s39 of the Patents Act) whether any invention they create was made in the course of the normal duties of the employee and the circumstances were such that an invention might reasonably be expected to result from the carrying out of those duties.
- Nevertheless, the wording of the employee's contract of employment will not be the sole arbiter – the general nature of the employee's job will also call for examination. As LJ Jacob stated: " In the end, one is asking whether the employee is employed to try to innovate and, if he is, what general sort of areas his innovation duties cover."
- If, subsequently, an employer wishes to assign specific duties to an employee that are not listed in their contract of employment then it would be worth recording these in writing and giving a copy to the employee. Again, this will assist in determining (pursuant to s39 of the Patents Act) whether any invention they create was made in the course of duties falling outside of their normal duties, but within the scope of duties specifically assigned to them, and whether the circumstances were such that an invention might reasonably be expected to result from the carrying out of those specific duties.
- Contracts of employment should require employees to keep confidential any inventions that they create and that are to be owned by the employer – thus preserving the ability of an employer to obtain patent protection for the invention.
Ashfords is regulated by the Solicitors Regulation Authority. The information in this article is intended to be general information about English law only and not comprehensive. It is not to be relied on as legal advice nor as an alternative to taking professional advice relating to specific circumstances.
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