Employee's Inventions

Corporate employers invest and expend significant sums in research, experimentation, and mind resources (employees) in their attempts to develop inventions to address a particular problem, many of which end in vain. It is, thus, only natural that such employers would want to monetise a successful invention in their own right.

Assignment of present and future inventions and allied rights by employees are often a common feature in employment agreements with corporate employers. Sometimes, assignments of present and future inventions are separately executed by employees at the insistence of their employers. While the subject of assignment of present inventions is dealt with under the Patents Act, 1970 (IPA), there are no provisions which deal with cases (i) of assignments in the future or agreements to assignor; and (ii) where no such assignments or agreements to assign are executed, in the context of employee-employer relationships.

The challenge is made no less difficult by the provision which stipulates who can make an application to patent an invention. It is only a “true and first inventor” or his “assignee” who can make an application. The employer must, therefore, qualify as either to sustain an application for the grant of a patent. The expression “true and first inventor” is not defined in positive terms under the IPA. The term has been judicially interpreted to mean a person who contributes to the formulation of the inventive concept. Under the IPA, it appears that such a person must be a natural person and cannot be a juristic person such as a corporation.

Thus, the only manner in which a corporate employer may assert a right to apply for a patent is if such employer is an assignee. That an assignee of a present existing invention may apply for a patent is beyond dispute and applies universally, whether or not there is an employer-employee relationship between the parties. An assignee of an existing invention under an agreement to assign or of a future invention under an assignment already executed may also apply for a patent as an assignee in equity, perhaps with more difficulty than in the case of an assignment in present.

However, in the absence of any such assignments in the future or agreements to assign, how can a corporate employee assert his right to apply for a patent? In the UK, it was long settled that in employer-employee contracts, the right to patent the invention vests with the employer. This perhaps rests on the principle that it is implicit in employer-employee relationships as in the case of other contracts of personal service such as master-servant relationships, that rights in the works executed by the employee vest in the employer. It may be summarised as follows:

(i) In the case of employer-employee relationships, if an invention is made in the course of employment or specifically assigned duties, the invention is the property of the employer only.

(ii) Law shall imply a term in the contract of service or employment that such inventions shall belong to the employer. Such a term can only be displaced by an express covenant to the contrary.

These principles are, however, difficult to reconcile with the provisions of the IPA which, as seen above, only entitle a “true and first inventor” or his “assignee” to make an application. That a corporate employer cannot be a “true and first inventor” appears to be fairly clear. But can a corporate employer, in whom arguably the invention vests, apply as an “assignee” of the employee? There is no transfer of the invention from the employee to the employer. The invention supposedly directly vests with the employer similar to vesting of other commissioned intellectual properties with the Commissioner.

Thus, while ownership of the invention may vest with the employer, he may still not be entitled to make an application for the grant of a patent under the IPA in the absence of an assignment. This seems rather a technical conundrum not contemplated by the legislature but nevertheless must be dealt with within the corners of the provisions of the IPA. A consequent conundrum is that the employee as a natural person remains the “true and first inventor” of the invention, though not the owner. How must these conundrums be reconciled? One possible argument could be that the provisions of the IPA are wide enough to include an assignee of the mere right to apply as opposed to an assignee of the invention. Since the “true and first inventor” remains to be the employee, and the owner of the invention is the employer, a transfer of the right to apply for the patent from the employer to the employee may be implied in such cases. This may entitle an employer to apply as an assignee.

The Patents Act, 1949 and the IPA contained similar provisions relating to persons who could apply for the grant of patent. This gave rise to the common law principles discussed above, which are sought to be applied in the Indian context. However, realising the above conundrums, the UK Patents Act, 1977 (UKPA) introduced specific provisions to address the same. Under the UKPA, a patent may be granted to a person who (i) by virtue of any enactment or rule of law; or (ii) by virtue of an enforceable term of any agreement entered with the inventor before the making of the invention, was at the time of the making of the invention entitled to the whole of the property in it.

The enactment referred to in point (i) above qua employer-employee relationships is contained in the UKPA itself and states that an invention made by an employee shall, as between him and his employer, be taken to belong to his employer if (a) it was made in the course of the normal duties of the employee or in the course of duties falling outside his normal duties, but specifically assigned to him, and the circumstances in either case were such that an invention might reasonably be expected to result from the carrying out of his duties; or (b) the invention was made in the course of the duties of the employee and, at the time of making the invention, because of the nature of his duties and the particular responsibilities arising from the nature of his duties he had a special obligation to further the interests of the employer’s undertaking.

Thus, both contingencies of agreements to assign future inventions, whether in the context of employment agreements or otherwise, and employee inventions absent any agreement or assignment have been adequately addressed, leaving no room for ambiguity. Resultantly, litigation on questions of ownership of inventions and the right to apply for the grant of patents in the context of employer-employee relationships has significantly reduced.

It is suggested that the IPA be suitably amended to introduce similar provisions to that of the UKPA to set to rest the conundrums arising out of employee inventions.

† Executive Partner, Lakshmikumaran and Sridharan Attorneys.

†† Counsel., Lakshmikumaran and Sridharan Attorneys.

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