Disputes over IP ownership with independent contractors can be avoided

September 10th, 2012 by Meliha Waddell

A common source of dispute between companies and employees or companies and independent contractors is the determination of who owns the rights to intellectual property (“IP”) developed during the course of their working relationship. Whether you are an employer, an employee or an independent contractor, knowing and clarifying your rights from the onset of a working relationship is a good way to avoid costly disputes in the future.
In Canada, there is no presumption in favour of an employer when it comes to ownership of IP. To retain ownership over IP generated by their employees, Canadian employers must indicate with an explicit clause in the employment contract that IP developed while working at the company is the company’s property. In the absence of such a clause, the determination of IP ownership will depend on a variety of factors, such as: Was the IP created in the course of regular employment? Was the employee hired for the express purpose of creating the intellectual property in question? Did the conduct of the employee once the invention was created suggest ownership was held by the employer? Was the IP the product of a problem the employee was instructed to solve? Did the creation of the IP stem from confidential information or confidential work that the employee was privy to as a result of their employment?

The issue becomes more complex when the worker in question is not an employee, but an independent contractor. Determining whether someone is an independent contractor or an employee is a factor of how much control the employer has over the person. A worker who can refuse assignments, sets his or her own hours, uses his or her own equipment, and only gets paid for the actual work performed, is very likely to be a contractor. By contrast, someone who has no discretion to accept or reject assigned tasks, works on a fixed schedule, is provided equipment and supplies by the company, and is paid a regular salary, is very likely an employee. While a company may be entitled to more rights to materials created by employees, simply calling someone an employee doesn’t make it so. As the Supreme Court of Canada put it, “it is the true nature of the relationship” that matters as opposed to the label given to the relationship by the parties.

Disputes over IP ownership can be avoided by defining the working relationship with an independent contractor in a written agreement. A well-defined non-disclosure agreement, as well as a later agreement to grant intellectual property rights should be considered to solidify each party’s rights.

As a company matures, the value to the business of its IP may grow, and the need to put in place employee and contractor agreements that address IP ownership and treatment of confidential information becomes critical. Businesses that believe that they own the IP rights to inventions or other works created by employees and contractors by virtue of paying for their services could be in for a costly, business-disrupting surprise. Potential problems of this nature can be mitigated through the implementation of an effective intellectual asset management program, and by having appropriate legal input in the development and implementation of suitable employee and contractor agreements from the start.

If you have any questions regarding trade-mark registration, please do not hesitate to contact a lawyer or trade-mark agent in the Intellectual Property department at Devry Smith Frank LLP. We have been assisting our clients grow and prosper since 1964.

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