30 October, 2017
The law recognises that employees may create valuable intellectual property during their employment, ownership of which should ordinarily rest with their employer. The recent case of Acron International Technology Ltd v Chan Yiu Wai[2017] 3 HKLRD 799 demonstrates how the law can protect an employer’s rights in respect of such intellectual property from misappropriation by an employee after the employment relationship ends.
Legal framework
This case involved a claim under section 57 of the Patents Ordinance (PO), which relevantly provides that an invention by an employee shall be taken to belong to his/her employer if it was made in the course of the normal duties of the employee and in circumstances where an invention might reasonably be expected to result from the carrying out of the employee’s duties.
Section 14 of the Copyright Ordinance and section 3(3) of the Registered Designs Ordinance similarly clarify that an employer will be treated as the first owner of the rights in work product of its employees created in the course of employment, unless otherwise agreed by the parties.
The background
Acron International Technology Ltd (Acron) brought proceedings against two former employees over a patent they had secured sometime after their employment ended (the PRC Patent). The invention which was the subject of the PRC Patent was very similar to an invention patented by Acron in 2002, albeit that it had been “fine-tuned” after the pair left their employment and applied for the PRC Patent.
The Court of Appeal agreed with the judge at first instance that the invention over which the PRC Patent had been granted did in fact belong to Acron pursuant to section 57 of the PO, as it was made in the normal course of the defendants’ duties when employed by Acron’s, in circumstances where an invention might reasonably be expected to result from the carrying out of their duties. The fact that it had been further developed by way of “fine-tuning” did not alter that fact.
Accordingly, the Court of Appeal upheld the orders requiring (among other things) that:
- the employees assign to Acron the PRC Patent; and
- Acron repay the employees the cost of applying for and maintaining the PRC Patent.
In doing so the Court clarified that, for section 57 of the PO to apply, it was not necessary for the employer to show that the particular invention might reasonably be expected to result from the carrying out of the employee’s duties, only that an invention might reasonably be expected. By way of comparison, the Court explained that the employer of a hypothetical research chemist who had been engaged for 10 years to work on a cancer cure but instead came up with a cure for arthritis would still be entitled to any intellectual property rights arising from that work, notwithstanding that the employee’s day to day work was to find a cancer cure. This is because his duty as a research chemist is broader than his day to day work.
Key takeaways
This decision demonstrates the extent to which the law will protect employers in respect of the misappropriation of intellectual property created by employees during the course of their employment, and the remedies that may be available. It also demonstrates the need for employers to anticipate the possibility of intellectual property being created and to take steps to ensure that employee’s duties are properly and accurately defined so as to come within the scope of such protection. Employers might also consider including provisions in the employment contract confirming their ownership of intellectual property created during the employment to avoid any argument that a contrary agreement had been made.
For further information, please contact:
Gareth Thomas, Partner, Herbert Smith Freehills
gareth.thomas@hsf.com
