Who owns the copyright in work created by an employee?

Copyright is a recognised form of intellectual property right subsisting in original works.  It may attach to written materials, drawings and plans, artistic and dramatic works, music and computer software.  Importantly, copyright protects expression – it does not protect ideas, concepts, styles or techniques. Broadly speaking, copyright provides the owner with the exclusive right to reproduce, publish, perform or communicate the subject work.

Copyright protection arises automatically when a work is put into material form.  There is no requirement for registration.  A copyright owner may sell, license or otherwise transfer their rights in the copyright.

In Australia, copyright law is governed by the Copyright Act 1968 (Cth) (Act).

As a starting point, the ‘author’ of an original work is generally the initial owner of any copyright in the work.  However, the Act provides that this principle may be excluded or modified by agreement and also sets out a number of specific exceptions to the default principle.  Relevantly, the Act provides that copyright in original work created by a person in pursuance of the terms of their employment by another person under a contract of service or apprenticeship is owned by the employer.

Significantly, for an employer to receive the benefit of ownership of the copyright under this exception:

• the author must be an employee (rather than an independent contractor); and
• the work must be created as part of the duties that the employee was employed to carry out.

In the case of a work created by an independent contractor, initial copyright will vest in the contractor unless the parties have otherwise agreed.

There are a number of factors that a court will take into consideration to determine if a worker is an employee including, the level of control over the worker, the provision and maintenance of equipment, the deduction of income tax and the ability to delegate performance of the work.  In many cases, the classification will be reasonably obvious and is unlikely to be controversial, but the issue is not always clear-cut.

It is not sufficient that an employment relationship exists.  The original work must also be created within the scope of the employee’s duties or because the contract of employment explicitly or implicitly required the work to be undertaken.  This will usually require a close examination of the terms of the employment contract.  The fact that the work was created during the employee’s normal working hours or using the employer’s equipment or materials may not be enough to characterise the work as having been created in the course of the employee’s employment.  Similarly, copyright in a work created at home or outside the employee’s usual working hours may still belong to the person’s employer.

This issue has been considered in a number of Australian cases in the context of the ownership of copyright, as well as intellectual property rights subsisting in designs and inventions (which apply the same principles regarding ownership). We have summarised some particularly useful cases below:

• EdSonic Pty Ltd v Cassidy

Edsonic approached Cassidy to develop online educational materials (Edsonic Materials).  Cassidy received shares in Edsonic and royalties from any sale of the Edsonic Materials in consideration for performing this work.  During this same period, Cassidy was separately offered a contract with Property Council of Australia to write material for its courses (PCA Materials).  Cassidy requested Edsonic to enter the contract with PCA on her behalf.  Edsonic agreed to do so and employed Cassidy to develop the PCA Materials. In 2002, the relationship between Edsonic and Cassidy deteriorated and subsequently Edsonic claimed ownership of the Edsonic Materials.

Edsonic claimed that Cassidy was an employee of the company when she developed the Edsonic Materials and relied on section 35(6) of the Act. The Court distinguished the agreement to create the Edsonic Materials with the employment contract to develop the PCA Materials. The Court determined that Cassidy’s employment with Edsonic was limited to the development of the PCA Materials only and did not include the Edsonic Materials.  The Court held that Cassidy was not an employee of Edsonic in relation to her creation of the Edsonic Materials, and accordingly she remained the owner of the copyright in those materials.

• Courier Pete Pty Ltd v Metroll Queensland Pty Ltd

Collymore was an employee of Metroll Queensland Pty Ltd (Metroll).  Collymore’s position was not clear in his employment contract.  The Court reviewed the factual circumstances and determined that Collymore was employed mainly as a salesperson; although did occasionally contribute to the design of products which fell outside of his normal role. Collymore developed a design for a modular rainwater tank outside of his working hours. Metroll claimed that it owned the design as designing rainwater tanks was one of the roles Collymore held within the company.  The Court dismissed the claim, holding that inventing was not within the scope of a salesperson’s role, regardless of the fact that Collymore would occasionally contribute to the design of rainwater tanks.

• University of Western Australia v Gray

Dr Gray was employed as a Professor of Surgery at the University of Western Australia (University).  His contract of employment required him, among other things, to undertake research and organise research. Whether Dr Gray’s inventions were made during the course of his employment came down to whether there was an ‘obligation to invent’.  The Court held that Dr Gray had no duty to invent under his employment contract and ultimately found that Dr Gray owned the intellectual property rights in the invention.

The case was notable for its length and complexity.  The trial before the primary judge lasted some 50 days, there were 4,568 pages of transcript and more than 1,000 documentary exhibits, and the judge’s reasons extended to 1,619 paragraphs. It then went to an appeal.

Moral rights are another form of rights that protect the relationship between an individual creator and their work, even if the creator no longer owns the copyright in the work.  Moral rights are distinct from copyright under the Act.  There are three types of moral rights:

• right of attribution;
• right against false attribution; and
• right of integrity of authorship (i.e. for an author to ensure his/her work is not subjected to derogatory treatment which may harm the author’s honour or reputation).

Unlike copyright, moral rights cannot be transferred, waived or assigned.  However, there is no infringement of moral rights to the extent the author has consented to the act or omission that would otherwise infringe their moral rights.

In summary, businesses wishing to ensure they own the intellectual property rights (including copyright) in works created for their business should ensure that they have appropriate agreements in place with their employees and any independent contractors, dealing with ownership of intellectual property rights.

In the case of an employee, it is usually convenient and sufficient to include appropriate provisions in an employment agreement, while for an independent contractor, we recommend that intellectual property rights are addressed in the terms of engagement of the contractor or an independent contractor agreement.  Of course, an independent contractor may be less willing to agree to the client (employer) owning the intellectual property rights in the work produced or to the waiver of moral rights, and these issues are ultimately matters for negotiation.

An employment agreement should include:

• a clear and detailed description of the employee’s duties, which will assist in establishing works have been created in the course of the person’s employment;
• an acknowledgement that the employer will own all intellectual property rights in work created by the employee in performing their duties under the agreement;
• an express requirement for the employee to transfer such intellectual property rights to the employer upon creation, and to do anything that may be reasonably required to perfect ownership by the employer; and
• express consent from the employee that the employer may use such work without attribution of authorship and may attribute the work to another person.

Subject to negotiation, an independent contractor agreement should contain similar terms:

• setting out a clear scope of work for the engagement;
• providing that the client (employer) will own all intellectual property rights in work created in the performance of the agreed scope of work;
• requiring the contractor to do anything that may be reasonably required to perfect ownership of the intellectual property rights (and to procure any employees of the contractor to do the same); and
• if the contractor is an individual, confirming the contractor’s express consent that the client may use such work without attribution of authorship and may attribute the work to another person, or if the contractor is a corporate entity, requiring the contractor to procure the consent of the relevant individuals.

This article was co-written by Lawyer, Laura Bain.