UWA v Gray – Full Federal Court decision on IP and employment
I reported last year click here to view article on Justice French’s decision in the Federal Court on this matter in which the University of WA (UWA) sued a former professor, claiming that it owned the intellectual property (IP) rights that the professor had developed whilst he was at UWA and consequently the company shares in the spin-off company that was created around this IP and the commercial returns from the commercialisation of the IP.
Usual Practice of Policies and Procedures
It has long been a practice for universities in Australia to claim ownership of their employee’s IP and the rights to commercial returns, but this judgement puts some of these practices into doubt.
Both the original decision and this decision deal with a complex array of facts and law. The pith of the decision is that the universities do not employ their staff under specific direction to develop IP in order to make commercial returns. In both decisions it was said this means there is “no duty to invent”. The Court contrasted this with commercial companies in which scientists are employed and are specifically directed to invent. In the case of universities, they are usually employed with the dual role of teaching and research and they are free to publish the results of research (which potentially conflicts with the protection of IP and its commercialisation, but can in fact be managed).
What it means
Contracts of Employment
Following this case, universities’ employment contracts should specifically require a “duty to invent” in the contract and be clear about who owns the IP that results from this. This is also true of other research institutions and also companies employing researchers.
Analyse the usual practice and policies and procedures
In this particular case it was found that the usual university practice of claiming ownership of the IP of its employees was not allowed, because, although the university had regulations and policies in place, they were not consistently complied with and so as a result of this case, universities (and others) should ensure that they are not left in this position. Many universities (and other research institutions) may well find, as a matter of fact, that they are not in this position, as they have these regulations and policies in place and have complied with them.
Uncertainty about IP ownership
In the press, the CEO of the Australian Institute of Commercialisation, Dr Rowan Gilmore has said that this case has the effect of creating uncertainty around IP ownership, which would “undoubtedly scare away venture capital”. This may also be true with existing licences in cases where the university (or other research institutions) have not, as a matter of fact, had adequate policies or procedures in place to deal with IP ownership.
Rectifying the uncertainty
If parties analyse commercial deals and find themselves in this position, it could be rectified by assignment of IP, presuming the employees or former employees consent. In some cases this consent may well be difficult to obtain.
For future commercialisation from universities (or other research institutions) companies should be aware of this case, obtain warranties from the university about the IP, insist on seeing the legal basis on which the IP ownership is claimed, or contract separately with the employees, as well as the university.
‘Superhuman’ record – keepers or is legislation required?
Commentators have also said that this case shows the importance of keeping accurate records so that a party’s contribution to the development of IP can be proven. In this case, the IP concerned was a medical treatment which was developed over 20 years, with a variety of contributors (and a variety of employers) and it is not unusual for facts like this to be the basis of IP that is commercialised from universities and research institutions. I think reliance on accurate records over such a long time-frame is probably unrealistic. I think this case arguably supports the need for the kind of legislation that the United States has. In 1980, the Bayh-Dole Act, was brought in to make it clear that universities and institutions that are supported by Federal Government money have a “duty to invent” and to seek to obtain a commercial return from their research. If this was the case in Australia, this could only be exercised through the universities’ employees. It seems to me a better remedy to clarify this by legislation, than to leave this area uncertain as this case highlights. This is particularly important as a matter of policy in Australia as so much innovation comes from publicly-funded research.
Author: Marianne Dunham