Rights to an Employee’s Invention – UWA v Gray two years on

The decision of the Full Federal Court in University of Western Australia v Gray sent ripples (if not shockwaves) through academia and its research partners (see our earlier article here).

A little over two years on, the Gray decision has often been cited but has infrequently been subject to further consideration. Although of limited value as an authority (and may still be the subject of an appeal), the Australian Patent Office decision in The Royal Children’s Hospital v Robert Alexander [2011] APO 94 offers one of the first examinations of the Gray decision.

The APO considered an application from RCH under sections 32 and 36 of the Patents Act 1990 (Cth), seeking a direction that two patent applications should proceed in the name of RCH, as opposed to that of its employee, Dr Alexander.

By way of brief background, Dr Alexander commenced employment with the Women’s Children’s Health Network in 1996, and his employment was transferred to RCH in 2004 when W&CH was split into two separate entities (one of which being RCH). Throughout, Dr Alexander was employed as a Senior Scientist, and at RCH was specifically in charge of the Virology Laboratory.

Dr Alexander accepted that the inventions claimed in the two disputed applications were conceived during the time he was employed by RCH, and RCH also accepted that Dr Alexander was the sole inventor of the applications.

The only issue which the parties could not agree on was whether Dr Alexander made those inventions in the course of his employment with RCH, where there was an express and/or implied condition of his contract that transferred the rights to the inventions to RCH.

In its decision, the APO considered whether Dr Alexander held a senior managerial position which might attract an additional “duty of fidelity” to forward the interests of his employer, even if the position itself did not specifically contain a “duty to invent”. Despite being engaged as a Senior Scientist and holding the position of ‘Head of Virology’, it was held that in reality Dr Alexander’s was not a senior role given the extensive reporting chain above him. As in Gray, the indication remains that factual circumstances will be closely examined when determining such matters, and little will be taken at face value.

The application of Gray to the current case was considered in detail by the APO, with the APO specifically posing the question, “Is the current case analogous with UWA v Gray?”

In answering this question in the negative, the APO found:

Research Freedom

Dr Gray sought and used external funds to conduct his research, his inventions were unrelated to the primary purpose of the university, and Dr Gray had academic freedom to select his research and was not required to advance a commercial purpose of UWA. In contrast, Dr Alexander was not expected to (and did not) obtain external funding, and whilst he had some discretion in selecting his research, Dr Alexander’s research was related to the primary purpose of the hospital and would directly benefit RCH.

Confidentiality

In Gray, the lack of a duty of confidentiality to hold the details of the invention secret was held to negate against UWA’s claim to proprietary rights, with universities’ primary purpose stated to be to generate and disseminate knowledge. This was contrasted with an industrial setting where an employer would wish to commercialise the inventions and it would be essential to prevent the destruction of future patent rights through publication. However, in the RCH v Alexander case, Gray was distinguished on the basis that in the context of a public hospital, the public interest would be “served by disclosing and sharing new methods and techniques with other pathology laboratories so that the best techniques are widely available to the public”. As such, the hospital would still benefit from the invention.

The APO consequently held that the negative implications against an implied term of a duty to invent in Gray did not apply here. However, the issue remained of whether Dr Alexander had a duty to invent and created his inventions in the course of his employment at RCH.

Dr Alexander sought to rely on Gray where the court held that if the employee was not engaged to use his inventive capacity at all or was only engaged to do so when specifically asked or for an agreed purpose, the employer would have no rights to the employee’s invention, except where it resulted from a specific task requested by the employer or was to effect the agreed purpose.

The APO noted that Dr Alexander’s job specification included a requirement to identify “potential areas for improvement in the diagnostic service”, as well as a broad responsibility as Head of Virology to ensure that the diagnostic techniques used at the hospital were as effective as possible. From this, the APO found that prima facie, there was a duty to invent and an agreed purpose but this was limited to circumstances where there was a clear motivation which arose in the course of his employment:

“In that context, the specific job requirement to identify ‘potential areas of improvement’ seems to be limited to improvements which clearly have potential rather than encompassing original research where an invention might possibly result.”

Two broad circumstances were set out in which Dr Alexander would be clearly motivated to identify an improvement in the course of his employment:

• where there was a recognised problem which he would have reasonably be expected to resolve; and
• where he was otherwise motivated to pursue a particular avenue of research in the reasonable expectation of identifying potential improvements.

Applying these circumstances to the two inventions concerned, the APO found that one was the product of “an avenue of research which Dr Alexander would be expected to investigate further in the reasonable expectation of identifying potential improvements”, and was therefore conceived in course of Dr Alexander’s employment. However, the second invention related to a potential improvement to a device where the existing design was effective and a substantial improvement was neither likely or needed. As a result, there was no clear motivation for Dr Alexander to pursue this avenue of research in the reasonable expectation of identifying improvements, and the invention was therefore not created during the course of his employment and belonged to Dr Alexander.

As a side issue, the APO was asked to consider whether the existence of an IP Policy would affect the outcome of the decision. However, as it was held that the wording of the IP Policy did nothing more than restate the common law position, the IP Policy was immaterial.

It would be foolhardy, indeed, to take the APO decision as the first signs of backpedalling from Gray. It seems clear that the principles governing the ownership of an employee’s inventions set out in Gray are here to stay. Employers should therefore continue to ensure that employment contracts (and to an extent, IP Policies) make express provision for the assignment of IP rights to inventions in terms which go beyond a mere restatement of the common law principle (inventions developed by employees during the course of employment belong to the employer).

That said, the APO decision in RCH v Alexander does indicate that nothing is black and white, that factual circumstances will be taken into account, and that even the seemingly decisive ruling in Gray is itself not without a touch of grey.