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Focus: Universities and their employees: who owns developed IP?

4 September 2009

In brief: The Full Court of the Federal Court has confirmed that intellectual property rights in inventions made by a university professor in the course of his employment were owned by the professor – and not the university – because, while he was under a duty to conduct research, he was not under a duty to invent.1 Partner Richard Hamer (view CV), Patent Attorney Dr Daniel Wadsworth and Lawyer Katherine McMahon report on the case.

How does it affect you?

  • Universities should ensure that employment contracts with academic staff contain provisions that deal with intellectual property developed by the academic.
  • Universities should also ensure that their intellectual property regulations are valid. In addition, universities should ensure that any obligations that they have under those regulations which enliven employee responsibilities are fulfilled, as a failure to do so may relieve the employees of their contingent obligations.
  • Organisations involved in research projects with universities, where the organisation expects to own or license rights in developed intellectual property, should take one or more of the following steps:
    • require academics involved in the development of those rights to be parties to the research contract;
    • make enquiries to confirm that the university has taken adequate steps to ensure that it will be in a position to meet its obligations with respect to the assignment or licensing of those rights; and
    • at a minimum, obtain robust warranties from the university.
  • This case also highlights the benefits of ensuring that adequate records are established and accurately maintained, which can readily elucidate the nature and timing of contributions made from all persons involved in any commercially focused research project.

Background

Dr Bruce Gray was appointed as Professor of Surgery at the University of Western Australia (UWA) in 1985. The terms of Dr Gray's employment required him to teach, conduct examinations, direct and supervise work in his field, and undertake, organise and stimulate research by students and staff.

In the course of undertaking that research, Dr Gray developed a number of cancer treatment technologies (the inventions).

Dr Gray ceased to be a full-time employee of UWA on 3 March 1997.

Between May and December 1997, Dr Gray assigned the intellectual property rights in the inventions to a third party, Sirtex Medical Limited, for commercial purposes.

UWA's claim against Dr Gray was essentially that, by reason of his employment, Dr Gray owed certain obligations to UWA in respect of the inventions, and UWA was entitled to ownership of the intellectual property rights in the inventions. UWA's claim was unsuccessful at first instance and on appeal.

Claims and cross-claims were also made against other parties, including Sirtex Medical Limited, but UWA's claim against Dr Gray was the only claim pursued on appeal.

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Ownership of developed IP

Significantly, there was no express term in Dr Gray's employment contract that provided UWA would own the intellectual property rights subsisting in any inventions that he made in the course of his employment. UWA's case therefore hinged upon the argument that such a term could be implied.

At first instance2, Justice French found that the requirements for implying the necessary term in law were not satisfied, as the circumstances of Dr Gray's employment were against the implication. In particular, Justice French found that Dr Gray:

  • was not under a duty to invent;
  • was free to publish the results of his research and any inventions that he made, notwithstanding that such publication might destroy patentability;
  • was required to solicit external funding for his research; and
  • needed to enter into collaborative arrangements with external organisations, such as the CSIRO.

More broadly, his Honour observed that, although each case will turn on its facts, the distinctive nature of the university/academic relationship is such that it is inappropriate to accept 'as a general proposition that there is a presumption at law that the university will be entitled to the rights to inventions developed by such staff in the course of their research.'3 His Honour noted that '[t]he position is different if staff have a contractual duty to produce inventions.'4 Dr Gray was under a duty to research; however, Justice French found that 'a duty to research does not carry with it a duty to invent.'5

On appeal, the Justices Lindgren, Finn and Bennett upheld Justice French's findings in relation to the implied term.

The 'distinctiveness of a university such as UWA and of academic employment in it'6 was likewise central to the Full Court's reasons. However, although their Honours' conclusion recognised a distinction between employee inventions in universities and private sector businesses, the Full Court highlighted that this 'should not be taken as suggesting that the solution reached by use of the implied term in law is necessarily a desirable one in either case.'7

Unsurprisingly, Justice French's conclusion that 'a duty to research does not carry with it a duty to invent' was a point of particular contention on appeal. UWA argued that, at least in the context of applied sciences, a duty to research involves a duty to make advances in the art, and as such is, in fact, a duty to invent. However, the Full Court observed in that submission an 'insuperable difficulty', insofar as 'Dr Gray's employment duties did not even require him to perform tasks from which inventions might result. The subject matter and the manner of discharge of his duty to research were in his discretion.'8 Although the Full Court and the trial judge acknowledged that the 'contemporary reality' is that most, if not all, universities engage in commercial activities, their Honours emphasised that Dr Gray was not required to advance the commercial interests of UWA.

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A distraction

A separate aspect of UWA's claim was the allegation that Dr Gray had breached his employment contract by failing to disclose the inventions to UWA.

The claim arose by reason of the fact that Dr Gray's employment contract required him to comply with UWA's regulations and, during the term of his full-time employment at UWA, there were regulations in force that imposed disclosure obligations on employees in relation to patentable inventions made during their employment or through the use of UWA's facilities (the Regulations). A UWA patents committee would then consider whether and how UWA should exercise its rights in those inventions.

UWA claimed that, by failing to disclose the inventions in accordance with the Regulations, Dr Gray had breached his employment contract. At first instance, Justice French held that Dr Gray's disclosure obligation was contingent upon UWA satisfying its own obligation to maintain the patents committee. His Honour found that the patents committee ceased to exist in 1988 and, accordingly, 'a necessary condition of the existence of the inventor's obligations was removed.'9 The Full Court again upheld Justice French's finding on appeal.

In any event, Justice French had found, and the Full Court agreed, that to the extent that the Regulations sought to mandate the assignment of an individual employee's rights in his or her inventions to UWA, those Regulations were beyond UWA's regulation-making power and were therefore invalid. The Regulations were in that sense 'a distraction'.10

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Determining the inventive concept

In light of the findings that Justice French made in relation to the implied term, his Honour did not strictly need to consider when the inventions were made and whether they were in fact made by Dr Gray, or by other UWA staff.

However, his Honour chose to do so, and ultimately was satisfied that only one of the inventions was made by UWA staff in the course of their employment. This conclusion involved a consideration of the times at which the inventive concepts underlying the inventions were created. In this regard, Justice French favoured the approach taken in Polwood,11 which was to identify the inventive concept of a patent or patent application from the whole of the specification, rather than from the narrowest claims.

On appeal, the Full Court affirmed Justice French's selection of the Polwood test and confirmed that, contrary to UWA's submissions, the test had been correctly applied.

Published 4 September 2009

Footnotes
  1. University of Western Australia v Gray [2009] FCAFC 116
  2. See our article on the case, Focus: Intellectual Property – July 2008: Are contracts with universities in disarray?
  3. University of Western Australia v Gray (No 20) [2008] FCA 498 at [164].
  4. [2008] FCA 498 at [12].
  5. [2008] FCA 498 at [12].
  6. [2009] FCAFC 116 at [96].
  7. [2009] FCAFC 116 at [211].
  8. [2009] FCAFC 116 at [195].
  9. [2008] FCA 498 at [257].
  10. [2009] FCAFC 116 at [119].
  11. Polwood Pty Ltd v Foxworth Pty Ltd [2008] FCAFC 9 at [61].

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