Intellectual property ownership in employment contexts

At a Glance

Generally, employers own IP created by employees in the course of their duties
Contractors usually own the IP they create unless a written agreement states otherwise
The "course of employment" is a legal test, not just a matter of office hours
Moral rights remain with the individual creator and cannot be transferred
Clear written contracts are the most effective way to prevent ownership disputes

The Default Position: Who Owns What?

In Australia, the ownership of intellectual property (IP) is primarily governed by statutes such as the Copyright Act 1968 (Cth) and the Patents Act 1990 (Cth), supplemented by common law principles.

The general rule is that if an employee creates IP—such as software code, marketing materials, or technical designs—as part of the duties they are paid to perform, the employer automatically owns that IP. However, this default position only applies to "employees" in the traditional sense. Independent contractors are treated differently; by default, a contractor owns the IP they create unless there is a specific written agreement that assigns that ownership to the client.

Defining the "Course of Employment"

The most common source of conflict is determining whether a specific piece of work was created "in the course of employment." This does not simply mean "during 9-to-5 hours" or "while using a company laptop." Instead, Australian courts look at the nature of the employee’s duties.

If a senior software developer writes code at home on a Sunday that relates to the company’s core product, a court is likely to find it belongs to the employer because it falls within the developer's job description. Conversely, if that same developer writes a cookbook on the weekend, the employer would have no claim to it, as it is entirely outside the scope of their professional duties.

Lessons from the Courts: Redrock Holdings Pty Ltd & Hotline Communications Ltd v Hinkley

In Redrock Holdings Pty Ltd & Hotline Communications Ltd v Hinkley, the Australian court considered the ownership of copyright in software developed by an employee during the course of employment. The court emphasised that the decisive question is not when the work was created or whose equipment was used, but whether the creation fell within the scope of the duties the employee was engaged to perform.

The court held that even where the work was completed outside standard working hours, or using the employee’s personal equipment, the intellectual property may still be regarded as having been created in the course of employment if it bears a substantial and close connection to the employee’s role and the employer’s business. In such circumstances, ownership may vest in the employer.

The case makes clear that the mere fact a work is produced in “non-working hours” does not, of itself, establish employee ownership. The central inquiry remains whether the creation forms part of the core activities the employee was employed to undertake.

Moral Rights: The Non-Transferable Interest

Even when an employer owns the copyright to a work, they do not own the "moral rights." Under Australian law, moral rights are personal to the individual creator and include:

The right to be attributed as the author
The right against false attribution
The right of integrity (to prevent derogatory treatment of the work)

While these rights cannot be sold or assigned, employers often require employees to sign "Moral Rights Consents," which allow the employer to use the work without attribution or to make changes that might otherwise infringe those rights.

The Problem with Side Hustles and Start-ups

With the rise of the "side hustle," many employees develop their own business ideas while still employed elsewhere. This creates significant risk. If an employee uses company confidential information or trade secrets to develop their own IP, the employer may not only claim ownership of the IP but also sue for breach of contract and fiduciary duties.

For employees, it is essential to ensure that any personal projects are clearly distinct from their professional obligations. For employers, having a robust "IP Assignment" clause in employment contracts ensures there is no ambiguity when an employee eventually moves on.

Key Takeaways

Employees and contractors have different default IP rights
The scope of "duties" defines ownership, not just location or time
Moral rights always stay with the creator but can be managed via consent
Written contracts should explicitly address IP assignment to avoid litigation
Use of company resources for personal projects can jeopardise ownership

Frequently Asked Questions

If I use my own laptop at home to create work for my boss, do I own it?

No. If the work is created as part of your job duties, the employer owns the IP regardless of whose equipment was used.

Does my employer own an invention I thought of while driving to work?

It is possible, but it depends on the specific circumstances. If the invention falls within the scope of the inventive or research duties you were engaged to perform as part of your employment, or if it was subsequently developed during the course of the employment relationship using the employer’s resources or in connection with the employer’s business, the employer may be entitled to assert ownership or other rights in that invention.

How do I ensure I own the IP created by a freelance graphic designer?

You must have a written contract that includes an "IP Assignment" clause. Without this, the freelancer typically retains ownership under Australian law.

Can an employer claim IP created after I leave the company?

Generally, no. However, if the IP was substantially developed during your employment using company secrets, they may have a claim or a basis for a breach of confidence action.

What are "Moral Rights" in a business context?

They are the rights of a creator to be identified and to protect the integrity of their work. They remain with the employee even if the company owns the copyright.