University loses claim to employee inventions

A university's claim on patents for inventions made by its employees may be under threat following the decision in University of Western Australia v Gray (No 20) [2008] FCA 498.  In this case, the University brought an action against a former academic to retain ownership of the academic's inventions  made while he had been employed by the University to conduct research. The decision shows that having a properly and carefully drafted employment contract dealing with intellectual property among other things, may make all the difference in determining University entitlements and ownership.

Background

The case began in December 2004, when the University of Western Australia (UWA) instituted proceedings in the Federal Court against its former employee, Professor of Surgery, Dr Bruce Gray (Dr Gray). Two other parties, Sirtex Medical Ltd (Sirtex) and the Cancer Research Institute Incorporated (CRI) were also joined in the proceedings.

Dr Gray invented a number of cancer treatments involving the use of microscopic radiation infused ceramic particles and the devices associated with their delivery (inventions). While still an employee of UWA, Dr Gray co-founded Sirtex and transferred the rights to the inventions to Sirtex. In 2000, Sirtex became a publicly listed company and as a result Dr Gray became a major shareholder in the company. CRI, a charitable organisation established by Dr Gray, were also issued a substantial number of shares.

UWA claimed that Dr Gray was in breach of his contractual and fiduciary duties to the University. UWA claimed that the rights to the inventions and the benefits from those inventions belonged to UWA because they were invented while Dr Gray was employed by UWA.

UWA sought to recover the shares Dr Gray and CRI held in Sirtex in compensation. UWA argued that damages would not have been an adequate compensation as it would lose the benefit of any increase in the value of the shares resulting from the exploitation of the inventions.

The Court's 600 page decision on these points, clarifies the rights of university research staff to inventions invented in the course of their employment. It also serves as a warning to universities wanting to claim rights to, and the commercial benefits of, those inventions.  Universities and research organisations would be advised to carefully consider the wording of intellectual property clauses in their employment contracts, the purposes of a research appointment (and rights to any invention) and intellectual property regulations and procedures in light of this decision.

Duty to research versus duty to invent

Justice French held that a member of academic staff of a university, employed to do research is not necessarily under a duty to invent, even where that research could lead to an invention.

Further it was held that even if a researcher was working in an area likely to lead to an invention, the rights to that invention did not, as a matter of course, belong to the university.

His Honour held that where a person is employed by a university to specifically produce an invention, there would be a presumption of a term implied by law that the rights to an invention will belong to the university.

However, in its evidence, UWA suggested that its research staff were under no duty to produce inventions. Accordingly, it was held that there was no presumption at law that a university is entitled to the rights to inventions developed by academic staff in the course of their research.

Universities distinguished from other organisations

His Honour held that the principles that generally operate in industrial settings have a limited application in academic settings. The principles that operate in industrial settings imply obligations which 'sit uncomfortably with the notions of academic freedom, shared ownership and free exchange of research results'. His Honour stated that the 'differences in relation to persons engaged to undertake research at universities [compared to other organisations] are of critical importance'.

Given the role of universities as disseminators of knowledge, there could be no basis for implying into the employment contracts of academic staff, a duty not to disclose the results of research, even if such disclosure could destroy the patentability of an invention.

Terms in employment contracts

There was no express provision in Dr Gray's employment contract that if Dr Gray produced an invention that the rights to that invention would belong to UWA.

When deciding whether to imply into Dr Gray's employment contract a term which would vest in UWA rights to the inventions, His Honour stated that 'the question… really reduces to a consideration of the nature of the particular contract by reference to the business or activity of its employer and the scope of the employee's employment in relation to that business or activity'.

His Honour said that '[w]hile each case involving a university and its academic staff must be assessed by reference to its particular circumstances and the terms and conditions of employment of its staff, I do not consider 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'.

His Honour was of the opinion that the circumstances of Dr Gray's employment at UWA, as a researcher, cancelled any implied term under which UWA acquired rights to the inventions. Those circumstances included, an absence of any duty to invent, freedom to publish research results, the expectation placed on researchers to source funding, and UWA's endorsement of collaboration between its researchers and organisations external to UWA.

UWA is considering an appeal.

What are the implications?

Universities and other education and research organisations should review their current approach to intellectual property rights in light of the decision. In particular, they need to consider:

• Whether its staff are employed in a research or invention capacity.
• Whether any intellectual property regulations or acquisition mechanisms are up to date and functioning, and the legality of such regulations and mechanisms.
• Whether there are express terms in contracts of employment under which an employee agrees to assign any inventions that he or she produces in the performance of employment duties or any related duties, to the university, whether funded by the university or other sources.
• The costs associated with the enforcement of contractual terms where legal rights to intellectual property are unlikely to be capable of precise definition.
• The obligation on a university to exploit an invention by participating in the development, registration and protection of rights in the invention and the obligation to absorb a proportion of any associated costs if the university wishes to assert a right to the invention.
• The benefits of providing funding and mechanisms to assist in the commercialisation of inventions, in return for an interest in the invention.

For further information, please contact:

Nick Ruskin, Partner
Practice Group Leader, Workplace Relations & Employment
Tel:+61 3 9274 5831
nick.ruskin@dlaphillipsfox.com

Matthew Jan, Solicitor
Tel: +61 8 6467 6078
matthew.jan@dlaphillipsfox.com