what happens to intellectual property created by an employee

What Happens To Intellectual Property Created By An Employee?

Linkilaw Company Law, Startup Advice & Tips

Your company needs some help with its website; things aren’t going the way you intended in your first year as a startup and your initial site designer wasn’t up to snuff.

So you bring in a freelancer, sign a quick agreement about hours, wages, and expectations, and turn them loose in your system to clean up the mess and get you going in the right direction.

And…they’re brilliant. Solving problems left and right, keeping an open channel of communication with you, generally becoming indispensable.

A month of so in, they complete a mobile app that they’ve been tinkering with that funnels clients to your site like nothing has before. You whoop with glee over this masterful stroke of code creating, even while they celebrate their new invention, which they can sell to other clients and probably retire a few decades earlier than expected.

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Suddenly you realise the problem. The freelancer has created valuable Intellectual Property (IP) while working for you. But nowhere in your contract is the mention of IP brought up so now no one actually knows who owns the intellectual property created by an employee.

As this article by Kieron Johnson writing for Crunch points out, this is an important clause to include in freelancers contracts.

Who Owns Intellectual Property Created By An Employee?

IP is a huge deal in the UK business community. In 2014, 53% of knowledge investment in the UK market sector was protected by IP rights, with UK firms investing an estimated £133 billion in knowledge assets.

In general, the company for which the person is working for owns any IP produced by said person. This is a standard clause in typical employee contracts, but freelancers and consultants often have far more simplified agreements – and sometimes nothing more than a handshake agreement.

If you are going to be hiring freelancers and contract workers, ensure that there is a clause which clearly states that any IP belongs to the company. As this article by Louise Paull points out, it’s an important consideration you can’t do without. And considering there were 1.91 million freelance workers in the UK as of 2016, it’s likely you’ll be using one at some point.

So you really can’t afford to not take the issue of intellectual property created by an employee seriously in your startup.

According to the UK Government’s website, “When a person works under a ‘contract for services’ he will usually retain copyright in any works he produces, unless there is a contractual agreement to the contrary.”

Exceptions For Intellectual Property Created By An Employee

There is one exception to the IP rule, known as the patent exception. This refers to cases where the invention is something that is of “outstanding benefit” to the employer: translation, something that is going to make them a lot of money.

For instance, if you work for a company that makes chocolate-chip cookies and managed to concoct a recipe that had all of the taste with 25 per cent of the calories, that would qualify. In this instance, the inventor of the IP could claim some form of compensation.

Conclusion: Intellectual Property Created By An Employee

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The smartest things that both parties can agree to is drawing up a contract that firmly establishes who owns what and where a person’s role as an employee ends. IP is a powerful tool but also a profitable one.

Make sure your property is protected legally to ensure your best creation doesn’t end up leading you to the courtroom. Be honest with your freelancer and make sure they’re also honest with you. This way you can both end up creating a contract that is mutually beneficial.

Need to get customised advice relating to intellectual property created by an employee in your startup? Then book a free Startup Legal Session.

Don’t put this off and risk a legal dispute because you didn’t take the issue of intellectual property created by an employee in your startup seriously. Book your Startup Legal Session by clicking below.

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