Employing intellectual property wisely

December 1st, 2013
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By Robyn-Leigh Merry and Muhammed Vally

Most of us have seen the standard catch-all clauses in an employment contract whereby all forms of intellectual property (IP) are assigned to the employer. These clauses exist in various forms. Most of these forms are, on the face of it, fairly straightforward and understandable. However, such clauses are occasionally unenforceable and void.

In South Africa various forms of IP are provided for and, as a result of the sheer breadth of this field, the scope of this article will be focused on the more common areas of registered intellectual property, including copyright, patents and registered designs.

Copyright

In South Africa, the Copyright Act 98 of 1978, governs various aspects of copyright law. Included in the Copyright Act is a clear description of the various works that are capable of protection under the Copyright Act. These various works, as set out in s 2 of the Copyright Act include literary, musical and artistic works, as well as cinematographic films, sound recordings, broadcasts, programme-carrying signals, published editions and computer programs.

Under each type of work subtle differences in the approach exist in determining questions relating to who the author or owner will be. In most instances the general approach would be that the author (as defined in s 1(1)) would be the first owner of the copyright that subsists in the respective work. However, as set out in s 21(1)(b) to (d) there are anomalies to the general approach. Of particular relevance to the content of this article is s 21(1)(d), which essentially states that all works (not falling within the categories of s 21(1)(b) or (c)), which are made in the course and scope of the author’s employment by another person under a contract of service or apprenticeship, the copyright will be owned by such other person.

In other words, unless there is an agreement to the contrary, a work created by an employee under a contract of service (an employment contract) in the course and scope of his or her employment will be automatically assigned to the employer. This was confirmed in the judgment of King v South African Weather Service 2009 (3) SA 13 (SCA); [2009] All SA 31 (SCA) wherein the issue of the ownership of the copyright in certain computer programs was questioned. These programs were found to have been written within the course and scope of King’s employment and in terms of a contract of service, thereby implying that the South African Weather Service owned the copyright therein.

Automatic assignment is peculiar to the employment context and does not apply to works created by independent contractors. Where an independent contractor is commissioned to create a work in terms of a contract of work (ie, the contractor is not an employee of the commissioner), the copyright contained within such work will be owned by the contractor. In this instance there is no automatic assignment of the copyright to the commissioner of that work.

There are a number of exceptions that are provided for in s 21(1)(c) as regards the commissioning of photographs, the painting or drawing of portraits, the making of a gravure, the making of a cinematograph film or the making of a sound recording wherein the commissioner, by virtue of such commission, is deemed to own the copyright associated with these specific types of work.

Patents and designs

As a result of the similarities in the wording of the Patents Act 57 of 1978 and the Designs Act 195 of 1993, it is simpler to consider these Acts side by side with respect to the various sections that make particular reference to clauses that influence employment contract clauses.

In this regard, both Acts provide for the transfer of ownership by way of an assignment, which should be in writing and recorded in the register at the patents or designs office, recordal being relevant for the purposes of constructive notice. As such, employment contracts can mandate the assignment of an invention (the invention forming the basis for a patent and/or design) to the employer in the event that the invention was made during the course and scope of the employment of an employee.

The position  originally set out in El du Pont de Nemours and Company v SA Nylon Spinners (Propriety) Limited 1987 BP 282 (CP) was confirmed in Firm Construction Co Ltd v PG Kusel 1997 BIP 25 (CP) where it was held that the employment contract can be submitted as proof with respect to ownership of the invention by the employer and lodged in place of a formal assignment of invention in the instance of a recalcitrant or absent employee. Where an employer/employee relationship exists, albeit only by way of an oral agreement, an assignment of the patent to the employer is possible, provided that the employee acted in the course and scope of his or her duties as confirmed in the Firm Construction case. In such instances, if any proof is needed it can be provided by the submission of an affidavit (if the agreement was an oral agreement).

Such assignment by operation of law is specifically provided for in s 59 of the Patents Act and s 29 of the Designs Act. However, one would be wise to note the restrictions placed on the scope of such assignment by operation of law.  Section 59(2) of the Patents Act states:

‘Any condition in a contract of employment which –

(a)     requires an employee to assign to his [or her] employer an invention made by him [or her] otherwise than within the course and scope of his [or her] employment; or

(b)     restricts the rights of an employee in an invention made by him [or her] more than one year after the termination of the contract of employment, shall be null and void’ (our italics).

The aforementioned restrictions define the ambit of a clause mandating assignment in a contract of employment and sets a time limit after the termination of employment within which such clause can operate. Commonly, for periods falling outside the time limit of one year, employers include clauses that bind the employee to license such inventions that, but for the termination of their employment, would have fallen within the scope of his or her employment to them in exchange for a notional royalty. The employer thereby avoids the restrictions associated with s 59(2) but allows for its continued use of the invention.

Section 29(2) of the Designs Act is almost identical to s 59(2) of the Patents Act, though the major difference is that s 29(2)(a) of the Designs Act is more restrictive in that it applies only to ‘a design made by him [or her] otherwise than within the course of his [or her] employment’. Hence, this section should apply in much the same manner as its sister section found in the Patents Act, save as regards the requirement for the design to be made only during the course of employment. This implies that employers shall have the right to take assignment of designs made during the course of an employee’s employment even though such design may be outside the scope of their employment, therefore making the obligations on employees under the Designs Act much broader.

Conclusion

Although specific instances of automatic assignment of IP are already provided for in the relevant Acts, it is still advisable to include a clause in the employee’s contract of employment as this will mitigate against a possible issue arising at a later stage as to the ownership of the particular IP. The signed employment contract may then also be relied on as being a written assignment in the event of a former employee being recalcitrant.

However, employers (and drafters of such employment contracts) must take special note of limitations for assignment of inventions and designs as set out in s 59 of the Patents Act and s 29 of the Designs Act and may consider including a clause that allows for the licensing of such invention or design after the one-year period has passed in an attempt to further protect their interests.

Robyn-Leigh Merry BSc (Hons) LLB (Wits) and Muhammed Vally BSc LLB (UJ) are attorneys at DM Kisch Inc in Johannesburg.

This article was first published in De Rebus in 2013 (Dec) DR 28.

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