Owning what you pay for
Imagine you are the CEO of a leading fashion company. Sales have been fantastic over a number of years particularly because you have "developed" a new process for the manufacture of a new textile - let's call it for argument's sake "surftex", a quick dry fabric dominating the surfwear market. To your excitement you have been approached by a major multi-national wishing to take an equity interest in your company. Of particular interest to them is the manufacturing process for the creation of surftex. As a result, you imagine yourself on a banana lounge in the Caribbean toasting your share options.
On the back of that interest the investor undertakes a due diligence. To its horror it sees the surftex process has been created by a third party contractor used by you and may not be owned by you. Suddenly negotiations grind to an embarrassing halt. The investor confirms it will only move forward until you can ensure that you actually own the surftex process.
In response you do what you hate doing - you call your lawyer.
This is an issue that often crops up as IP processes and other IP rights become more valuable. Generating designs, processes or creative works can be highly lucrative for fashion industry employers, provided they own the rights.
Many employers believe that simply managing and financing creative projects entitles them to the IP in the finished products. However, as a general rule, the IP rights in works created will in most cases remain the property of the original "author" of the work. This means that where an employee or contractor has created the work, they may be entitled to take their design or process they created to a rival, causing significant financial detriment to the original employer.
So how can employers safeguard IP ownership and how do employers ensure the IP they pay for remains their property?
The basic solution is to draft contracts of employment in a way which clearly assigns the copyright in works created to the employer, no matter when or where they created the IP. Alternatively, ensure that in any contracting agreement the IP is assigned to them.
However, there are some circumstances in which a court will rule the copyright in a work created by an employee or contractor should become the property of the employer. These include:
* Where an employee is engaged under a "contract of service" and creates the work in the course of the duties for which she was engaged by the employer;
* Where an invention is created by an employee during the ordinary course of their employment;
* Where an independent contractor is engaged by an agreement with the employer and receives payment for a design and the design is then registered by the employer.
As you can imagine, these scenarios ensure there are some "grey areas". The safest way therefore to protect IP ownership is to make sure there is an express term in the contract of engagement for both employees and contractors ensuring all IP rights in works created during the term of the engagement and for the purposes of the engagement are assigned to you. That way you can zip up what you paid for.