Josephine Inge, Principal, 1Place Patent Attorneys + Solicitors, Sydney, Australia
On 3 September 2009, the Federal Court of Australia – Full Court (Full Federal Court) issued its decision in the appeal from the widely publicised decision of the Federal Court dealing with a claim by the University of Western Australia (UWA) against Professor Bruce Gray. UWA sought ownership of inventions made by Dr Gray while employed by UWA. The Full Federal Court has upheld the first instance decision and dismissed the appeal.
The decision in a snapshot:
- Dr Gray had a duty to research not a duty to invent.
- The invention was made by a university employee, during working hours, using university facilities and funding; in the absence of an express provision, there was no implied term that the IP in the invention was owned by UWA.
- The employment contract imported UWA’s patent regulations and in particular, an obligation to disclose his inventions to a patents committee. However, the university’s failure to maintain a committee excused Dr Gray from his performance of this obligation.
- The employment relationship in a university context may be different than the relationship in the private sector. This was a relevant consideration for the Court.
Background
- 1985 – Dr Gray was appointed as Professor of Surgery by UWA. He was a full time employee required to teach and to conduct and stimulate research. The terms of his contract incorporated various UWA policies, including its Patent Regulations.
- Dr Gray researched and developed technologies for use in the treatment of liver cancer, which included the injection of microspheres into liver tissue to deliver anti-cancer therapies to tumour cells.
- 1997 – Dr Gray assigned the IP rights in a number of inventions to Sirtex Medical Limited (Sirtex).
- 2000 – Dr Gray became a director of Sirtex and the company was floated to commercialise the technologies.
- 2004 – UWA initiated proceedings seeking a declaration that Dr Gray held his shares and options in Sirtex on trust for the university, that Sirtex held its patents and inventions on trust for the university, and that Dr Gray had breached his contract of employment.
Federal Court Decision – University of Western Australia v Gray (No 20) [2008] FCA 498
The Federal Court rejected all of the grounds asserted by the university. Justice French:
- found that Dr Gray was employed to research, and not to invent. The invention was not made “in the course of his duties”. Although the Court recognised that the research Dr Gray was employed to carry out meant there was a possibility that he would develop inventions capable of attracting patent protection, it did not necessarily result in an implied term in the employment contract that IP rights in the invention belonged to the university;
- considered that Dr Gray’s employment obligations differed from those of a person employed by a private commercial entity whose obligations include the advancement of the employer’s commercial purpose. In contrast, Dr Gray, was only obliged to undertake research;
- found there was no express agreement in the employment contract to the effect that inventions would be owned by the university. Although the employment contract referred to UWA regulations, the relevant policy documents were beyond the powers authorised by the UWA Act. The regulations were therefore unable to be imported into Dr Gray’s employment contract. Even if the regulations were valid, the Court rejected the university’s argument that Dr Gray had breached them because of the university’s failure to implement a process by which he could have complied with them; and
- rejected the university’s argument that Dr Gray had breached fiduciary obligations owed to the university, including a duty to protect and preserve the university’s rights and not derive a secret benefit from his position. In particular, the university has failed to establish that it had an interest in the inventions.
UWA appealed the Federal Court decision.
Full Federal Court Decision University of Western Australia v Gray [2009] FCAFC 116 (3 September 2009)
Notwithstanding express terms in Dr Gray’s contract to undertake research and such research being undertaken in the course of employment by Dr Gray, the Full Federal Court upheld the decision at first instance that there was no “duty to invent” imposed on Dr Gray and no common law implication of employer ownership of employee inventions in the circumstances that would give UWA proprietary rights in Dr Gray’s inventions.
Further, the Court held that in the absence of an implied term at common law, there was no independent fiduciary obligation of a kind and scope that would hold Dr Gray accountable to the university for his inventions, patents or patent applications. Dr Gray did not hold his inventions and patents in trust for the university by virtue of his duties as an employee of the university. Relevant considerations included: Dr Gray’s ability to determine and lead the direction of research, his need to act as an entrepreneur to attract funding to carry out the research and the freedom to publish his research findings and collaborate with researchers outside UWA.
The Court also looked at the significance of a term incorporating the university’s patents regulations into Dr Gray’s contract of employment. This term requires employees making an invention during and in the course of employment to notify the Vice-Chancellor who was then to refer matter to the university’s patents committee for recommendation whether university should assert rights in invention and apply for a patent. The university’s failure to maintain its patents committee mechanism (on which its rights were dependent) resulted in Dr Gray being unable to fulfil this term of his contract. Therefore, the university’s own failure excused Dr Gray from performance of his obligation to notify the university of his inventions.
The Full Court decision highlighted the unique position of both universities and academic staff, and the difference in the employment relationship in contrast with the employer / employee relationship in the private sector.
Some Issues to Consider
The decision is directly relevant to research institutions and universities as well as any businesses entering into contractual arrangements with those bodies. In particular, the decision sends a clear message to those who seek to rely on implied terms in contracts of employment to secure ownership of employee generated inventions. Even if the invention is made by an employee, during working hours, using work facilities and funding, it may be very difficult to imply a term as to ownership.
The decision confirms that the effective way to acquire IP generated by academic or research employees, is to include appropriate express provisions in individual employment contracts. Similarly, staff policies and internal regulations may be ineffective and express terms are desirable to acquire IP from employees.
The case was decided on its particular facts and as outlined by the Court there are special considerations in the context of universities and their employees. Notwithstanding that, the decision reinforces that carefully considered express contractual provisions are prudent.
The Full Federal Court decision University of Western Australia v Gray [2009] FCAFC 116 (3 September 2009) is available at http://www.austlii.edu.au/au/cases/cth/FCAFC/2009/116.html
For further information please contact:
Josephine Inge ( jo@1p.com.au )
1 Place Patent Attorneys + Solicitors ( www.1p.com.au )
Sydney, Australia