Copy­right and employ­ees: Who owns what? 

In brief — Employ­ment con­tracts and intel­lec­tu­al prop­er­ty rights

A recent Fed­er­al Court deci­sion high­lights the need for employ­ers to ensure that as well as clear­ly set­ting out the duties of employ­ment, employ­ment con­tracts also include a com­pre­hen­sive assign­ment of all intel­lec­tu­al prop­er­ty rights, if the employ­er is to be assured that all rights in the intel­lec­tu­al prop­er­ty in mate­ri­als cre­at­ed by employ­ees are owned by the employer.

Edson­ic v Cassidy

In the recent deci­sion of Edson­ic v Cas­sidy, the court reaf­firmed the prin­ci­ple that, even if an employee/​employer rela­tion­ship exists, the terms on which an employ­ee is employed are crit­i­cal in deter­min­ing whether copy­right in mate­r­i­al pro­duced by the employ­ee is owned by the employ­er. Sec­tion 35 of the Copy­right Act 1968 (Cth) makes it clear that copy­right in work pro­duced in pur­suance of the terms of the employee’s employ­ment” is owned by the employer.

If an employ­ee cre­ates some­thing that is valu­able or use­ful to the employ­er (or, poten­tial­ly, com­peti­tors), then, absent an agree­ment to the con­trary, the employ­er will only own the rights in that cre­ation (and will, there­fore, be able to ben­e­fit from it), if the employ­ee made the work pur­suant to terms of employment.

Busi­ness rela­tion­ship or employ­ment relationship?

The case con­cerns copy­right own­er­ship of online voca­tion­al and edu­ca­tion­al train­ing (VET) mate­r­i­al. In late 2000, Edson­ic approached Ms Cas­sidy to devel­op VET mate­ri­als in con­sid­er­a­tion for a salary and roy­al­ty pay­ments. While it was estab­lished that Ms Cas­sidy did have a busi­ness rela­tion­ship with Edson­ic (she was offered and she accept­ed 5% of the total share cap­i­tal of Edson­ic for a nom­i­nal fee), there was no employ­ment rela­tion­ship at that time.

Edson­ic was not in a finan­cial posi­tion to employ Ms Cas­sidy and nei­ther par­ty entered into any employ­ment rela­tion­ship. There was also no agree­ment about own­er­ship or trans­fer of the intel­lec­tu­al prop­er­ty rights in the VET mate­r­i­al that was to be developed.

Since Ms Cas­sidy was not receiv­ing any income from Edson­ic, she also worked as a con­trac­tor for an unre­lat­ed organ­i­sa­tion (the Prop­er­ty Coun­cil Aus­tralia) from 2001 to 2002. She was specif­i­cal­ly engaged to assist in obtain­ing accred­i­ta­tion for its cours­es, as well as writ­ing teach­ing and assess­ment mate­ri­als for res­i­den­tial work­shops for a vari­ety of cours­es includ­ing shop­ping cen­tre man­age­ment, cor­po­rate real estate, prop­er­ty devel­op­ment and prop­er­ty invest­ment and finance. To avoid GST, Ms Cas­sidy arranged for Edson­ic to enter the con­tract with the Prop­er­ty Coun­cil on her behalf and to pay her 85% of the Prop­er­ty Council’s fees. Edson­ic also paid her super­an­nu­a­tion and worker’s com­pen­sa­tion and made tax deduc­tions, while retain­ing a small fee for itself. While this rela­tion­ship had char­ac­ter­is­tics of an employ­ment rela­tion­ship, it was only direct­ed to her employ­ment on a par­tic­u­lar project or task, name­ly pro­vid­ing mate­r­i­al as required by the Prop­er­ty Coun­cil, not devel­op­ing VET materials.

Mate­ri­als cre­at­ed out­side the terms of employment

Ms Cas­sidy claimed that she com­menced writ­ing the VET mate­ri­als in 1998 and con­tin­ued to devel­op and refine the VET mate­ri­als between 2000 and 2002. Edson­ic claimed that Ms Cas­sidy cre­at­ed VET mate­ri­als while being employed by Edson­ic dur­ing 2001 and 2002. While favour­ing Ms Cassidy’s ver­sion of events, the court nev­er­the­less found that, even if the VET mate­ri­als were cre­at­ed dur­ing Ms Cassidy’s employ­ment with Edson­ic, as a result of the nar­row terms on which she was employed (i.e. cre­at­ing mate­r­i­al for the Prop­er­ty Coun­cil), the VET mate­ri­als were out­side her terms of employment.

Ms Cas­sidy suc­ceed­ed in estab­lish­ing own­er­ship and con­trol of the VET mate­ri­als (and the right to licence those mate­ri­als to oth­ers), includ­ing the right to receive pay­ment for use of the VET mate­ri­als by Edsonic.

Clear­ly defin­ing the terms of employment

Gen­er­al­ly speak­ing, if an employ­ee cre­ates mate­r­i­al in the course of his or her employ­ment that he or she is engaged and instruct­ed to do dur­ing the time of employ­ment, dur­ing work­ing hours, and using mate­r­i­al pro­vid­ed by the employ­er, the copy­right in the mate­r­i­al cre­at­ed will be owned by the employer.

How­ev­er, what is crit­i­cal is deter­min­ing the duties of employ­ment and what is meant by in the course of employ­ment”. When the employ­ee is request­ed to step out­side the terms of employ­ment, the copy­right in that new work cre­at­ed will vest with the employ­ee. These issues can be avoid­ed if the employ­ment terms are clear­ly and broad­ly defined and if the employ­ment con­tract includes a com­plete author assign­ment of rights to the employer.

If you have any ques­tions regard­ing employ­ee cre­at­ed mate­r­i­al or copy­right in gen­er­al, please con­tact Swaab Attor­neys for advice on the best and most effi­cient way to avoid any prob­lems arising.