Intellectual Property Rights are legal rights which are not limited to only the place / country of employment but can be registered and exercised in any of the 199 countries which are either WTO Member and bound by the TRIPS Agreement (166), and or PCT Contracting States (157). The intriguing question is whether an employer or an employee who invented an IP Asset, which is eligible for a patent or registered as an Industrial Design or commercially exploited under Copyrights laws, will reap the benefits? An employee may leave an enterprise, and an invention or creation of an intellect goes with the person.

In an enterprise there will always exist certain intangible assets in the form of Intellectual Property Assets (IPA) besides physical assets. Internally generated IPAs are created in an enterprise by combination of, intellect of its employees as the Human Resource Assets (HRA), with other tangible assets and intangible resources. The ownership of an invention if not vested in an enterprise, it is retained by or goes away with the departing employees. This can cause significant loss of revenue stream and valuation of an enterprise in the long run. The employer as an enterprise normally provides the conducive platform and remuneration during the course of their employment for creative activity to take place. Thus, an employer has a legitimate interest in ownership of such IPAs.
The identity of an inventor and owner of IPA is an essential requirement when filing for registration of an invention for a patent or industrial design, subject to the national laws of the State where an application is being made. The applicant for registration of a Patent or an industrial Design, may not be the inventor. According to Article 14 of the PCT Applicant’s Guide, “Indications concerning the inventor must be made where the national law of at least one of the designated States requires that the name of the inventor be furnished at the time of filing a national application (Rule 4.1(a)(iv)).” If the applicant is a legal entity, “it is to be noted that a legal entity cannot be an inventor. For persons named as inventors only, indications of nationality and/or residence are not required. Any such indication should be deleted ex officio by the receiving Office.” This implies that employee or a contracted inventor must be identified. However, if the applicant is not a legal entity, then inventor can submit an application under its own name.

This implies that employers must be cautious and fully aware of the consequences of not recognising internally generated intellectual property or failing to register it, even if it is not recognised in the Balance Sheet or for valuation purpose under the Accounting and Financial Reporting Standards.

In terms of ownership of IP Assets and IP Rights, the critical questions before an employer are:

1. Who owns the IP Rights, employer, or employee or both?
2. How to ensure that employer is the legitimate owner of all intellectual property rights generated during the employment of the employees?

In countries like Australia, Singapore, Malaysia, India, China etcetera the employers are protected by statute, as the deemed owners of the Industrial Designs and Patents. However, this is subject to any agreement to the contrary between the parties concerned. In other countries like Germany, there are procedural steps and time periods which must be followed for claiming ownership to avoid litigation. In US and some developed countries, multiple legislations like labour laws, Patent Law, Special Industrial Inventions and Public Policy etcetera will be taken into consideration in determining the ownership of IP Rights in disputed patents or industrial designs.

The alarming issue of growing concern is that how an employer can safeguard its interest overseas, outside the domicile of the legal entity? This requires a well-structured IP Policy at the corporate level and careful drafting of employment contracts, especially for key positions involved in R & D functions or management of intangible resources.

The first step is to conduct an initial IP Audit if it has never been done before. Thereafter, a periodic internal audit should be conducted, to keep the management informed about the appreciation or depreciation of enterprise value, and contribution by intangible assets like intellectual property rights. This can be undertaken by a designated team or department of an entity, depending on the size of an enterprise. External IP consultants can also conduct an audit. The IP Audit report will set the framework for seeking further legal advise and protection of IP Rights, if necessary.

To conduct an initial IP Audit or for consultancy on IP matters, contact customerdesk.tmc@tiberiasmc.com