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Module 4: Intellectual property and commercialisation

1.3 Key issues in IP management

1.3.1 IP ownership (employees and students)

Intellectual property legislation generally provides that the creator of intellectual property is the owner of that property. However, the legislation generally provides that intellectual property created by an employee, in the course of their employment, is owned by the employer. It should be noted that the provisions in the legislation are generally default provisions, which apply only in the absence of any agreement to the contrary.

The practicalities of intellectual property ownership are usually determined by reference to contractual associations between the parties concerned, in addition to the provisions in the applicable legislation.

Where one or more people have been involved in generating IP, then the IP authorship may be shared; once again the specific allocation of shared ownership should be agreed by the parties and recorded in writing.

1.3.2 IP Ownership in a university context

All universities have policies regarding the ownership of intellectual property generated by their employees and students. As mentioned above, under Australian law, the IP generated by an employee is considered the property of the employer. This may also be true under a funding agreement, where the IP produced by the research resides with the funding body, not the original researcher; again this will be determined by the agreement between the funding body, the researchers, the university, and any other party involved. Such circumstances are often multi-party contract-based relationships that require specific legal advice, usually from the university solicitor’s office, to assist in fighting the inevitable “battle of the forms” that can arise.

In the case of postgraduate students, most, but not all, universities will recognise the student as the owner of the IP that they generate through their research. However, if the university is employing the student to work in the area of study for which they are enrolled, the IP ownership may be dealt with on the basis of the student being a staff member. In the case of co-authoring, the rights of other parties must be taken into account. Students are increasingly involved in research involving contractual obligations.

Such obligations arise in relation to other universities, government, and industry. Cooperative Research Centres (CRCs) and ARC Linkage grants are some examples. In these cases, it is not usually possible to leave issues of confidentiality and ownership unresolved, as they could adversely affect the student's research, jeopardise the project, and expose the university to contractual liability. Consequently, there may be a need to formally transfer the intellectual property created by the student.

Most Australian universities have policies to share the net commercial profits of IP with the authors of the IP.

When entering into contracts (such as a research contract) with third parties, the ability of the university and its staff to negotiate arrangements about the ownership and utilisation of intellectual property is constrained. Where the university does enter into a contract with third parties, the obligations accepted by this process must be observed by all staff involved. In particular, such obligations may affect intellectual property rights and the ability to publish.

Researchers must make themselves fully aware of their rights and responsibilities under funding arrangements with regard to publishing and presenting at conferences, as sometimes the funding body has the right to publish before the researcher/team.

The early involvement of the commercialisation office and solicitor’s office of the university can help ensure that these issues are managed and that the university retains ownership of the IP. Where possible, sharing of IP should be avoided as this complicates future attempts at commercialisation.

Cases

There are a number of recent cases involving IP in the context of the Australian university system, and these are summarised in the following pages.

Victoria University of Technology v Wilson [2004] VSC 33

Professor Wilson held a chair in Victoria University's Graduate School of Business, within the Faculty of Business and Law and was head of the School of Applied Economics. Dr Donald Feaver, a senior lecturer (who held an LLB and LLM), was the head of the Centre for International Business Research and Education (CIBRE), one of the units in the School.

The university had for some time undertaken teaching and research in the field of international trade. The Footscray Institute of Technology, the predecessor to Victoria University, was the first higher degree-conferring institution in Australia to offer a Bachelor of Business in International Trade. CIBRE was established in 1998 with the purpose of identifying relevant and practical research opportunities through industry and government linkages. When it was established, CIBRE’s main source of funding was envisaged to be the development and sale of online short courses.

Professor Wilson was contacted, in his capacity as an academic at the university, by a former student with a proposition that a company (of which the former student was a director) join with the university to develop the concept of an internet-based international trade exchange which would provide international traders and brokers with a way to transact their business through "a controlled electronic trading environment". The proposal included providing users of the on-line course in international trade to be trained and accredited to undertake trading transactions.

Professor Wilson and Dr Feaver responded positively to the proposal, and with the assistance of the former student, Mr Astill, commenced working on the project. Subsequently, the judge in the case found that this work was initially viewed by Professor Wilson and Dr Feaver as a university project. About 2 months into the project, Professor Wilson, Dr Feaver, and Mr Astill determined that they should personally, or via companies they controlled, assume ownership of the material generated and of associated opportunities. Patents were obtained for key elements of the package by a company owned by Professor Wilson, Dr Feaver, and Mr Astill.

The university took action based on a number of grounds, but mainly that the academics had breached their contract of employment under its intellectual property policy. The university claimed it was an express or implied term of the academics' terms of employment that all IP created in the course of their employment would be owned by the university.

This argument was not ultimately successful as:

  • whereas the academics were engaged by the university to undertake research in the fields of economics and international trade, the work undertaken in developing the invention was not the sort of research envisaged by their terms of employment
  • the university's IP policy had never been formally endorsed or brought to the attention of staff, so the policy was not considered to have been incorporated into the terms of employment and could not be relied on by the university.

The university also argued that the actions of the staff amounted to a breach of the general fiduciary obligations that employees owe to their employers. The court found that, in this case, the academics had indeed breached their fiduciary duty to the university. The academics had sought to profit from their position at the expense of their employer and their own commercial interests had come into conflict with the interests of the university.

University of Western Australia v Gray [2008] FCA 498

Professor Gray was an academic employed by the University of Western Australia, and terms of his appointment included a provision that he was “to teach, to conduct examinations” and “to undertake... and generally stimulate research among the staff and students”. His area of expertise was the treatment of liver cancer. During his time as an employee of the university he developed novel cancer treatments using microspheres.

In 1997, Sirtex Medical Ltd, a public company (co-founded by Professor Gray while he was employed by the university) acquired the intellectual property rights in Professor Gray’s novel therapies from him. Professor Gray subsequently became a director and substantial shareholder of Sirtex.
The university sued Professor Gray on a number of grounds. The university alleged that his transfer of the rights to Sirtex was in breach of an implied term in his employment contract. The university claimed this implied term had the effect of giving the university ownership of the rights to intellectual property in any inventions developed by Professor Gray in the course of his employment.

This claim by the university was rejected by the court. The court held that such a general implied term would not apply to academic staff performing research (even if they use university facilities) unless the staff have a specific duty under their contract to produce inventions. It was held that academic staff who are under a duty to do research do not necessarily have a duty to invent, as staff conducting research for a university have a choice as to whether or not they invent.

As in the Victoria University case, UWA also argued that their IP regulations, which allocate ownership of IP created by staff to the university, would be binding on Professor Gray. In this case, the court determined that these IP regulations were not within the power that the university had under its governing act, and so were invalid. The university only had the power under the University of Western Australia Act 1911 (WA) to make regulations concerning the control and management of its property. The court held that the university was not authorised by the Act to regulate the acquisition of property from (or interfere with the rights of) others.

Patents had been issued for the intellectual property in this case. The Patents Act, unlike some other intellectual property statutes that regard material created in the course of employment as owned by the employer (such as the Copyright Act), contains the general position that inventions belong to the inventor unless there is a contractual obligation on the inventor to produce inventions, separate from a duty to research.

The university’s argument that Professor Gray had breached his fiduciary duty to his employer, in transferring the rights to the invention to Sirtex, also failed, as the court held that the university had “failed to establish that it had any rights or interests in any of the inventions even if they were made by Dr Gray or others in the course of their employment as researchers with UWA”, so there was no breach of fiduciary duty by Professor Gray as the rights to the inventions were held to be his rights, not rights of the university.

The judge in this case, French J, also highlighted that universities have a unique status as employers, and made the observation that principles which apply in industrial settings have little application in an academic context.

1.3.3 Managing IP on a daily basis

As mentioned previously, the ability to protect your IP can be affected if you have made a disclosure before the IP is protected. This may be via publishing a paper, giving a talk at a conference, or potentially even by having a discussion with a person who is not part of your institution.

i. Confidentiality agreements

To avoid disclosing information via a conversation or discussion, it is always prudent to put confidentiality agreements in place for discussions of your research with other people from other organisations. A confidentiality agreement allows disclosure of confidential information without prejudicing the patenting process. Such agreements are often used to protect trade secrets and other confidential information; it gives a contractual right of control over your intellectual property. There are various issues regarding confidentiality agreements. Before issuing or signing a confidentiality agreement, consult with your commercialisation office. For example, some agreements are written in such a way that they require the discloser to keep his/her own information confidential, which is not desirable.

ii. Material transfer agreements (MTAs)

Material transfer agreements (MTAs) are contracts that allow the sharing of research materials between two organisations. The recipient can then use these materials for research purposes.

An MTA clearly outlines the rights and obligations of the provider and the recipient in regard to the materials. These can include obligations of confidentiality and appropriate warranties and indemnities, usually to protect the provider of the materials from any legal action by the recipient. MTAs can also cover the transportation of materials to or from the university, and transport costs are usually the only costs that would be considered reasonable in an MTA.

MTAs are applied to materials such as:

  • Biological materials (reagents, cell lines, plasmids, and vectors)
  • Chemical compounds
  • Other physical materials.

Each university will have its own process for managing the negotiation and signing of MTAs, but as a general point it is unusual for researchers to be able to sign them on behalf of their own university. This often takes place through legal or commercialisation offices.

iii. Keeping a laboratory notebook

Meticulous notes should be kept documenting the thought or discovery processes involved with your research. In most countries, including Australia, patents are granted to the first party to file a patent application. However, in the United States (which is one of the largest markets) patents are currently granted to the first party to invent, and a properly maintained laboratory notebook is vital for proving this. However, in a major change following new legislation, the US is moving to a ‘first to file’ system for all applications filed on or after 16 March 2013. This will help to harmonise patent systems across the world, and simplify the process of applying for patents internationally.

Even if research is not carried out in a laboratory, it is still essential to keep a detailed record of the work to provide the best evidence of the date of invention as well as corroborating evidence that the inventor was the first to invent. The intent of all entries is to prove in court facts such as conception of the idea and reduction to practice. Also, another researcher should be able to view the book and determine the nature of the project, the concepts considered and tested, test results, and the final conclusions. However, the notebook must comply with correct procedures to ensure a patent is granted. If lab book procedures are not followed properly, they may not be considered as proof when inventorship is being determined.

  • A notebook should record what was done on a project and what inventions were made and when. The book should be permanently bound, with pre-numbered pages
  • Entries should be permanent, complete, and continuous, and be signed, dated, and witnessed as soon as possible
  • Complete every page in ink and in sequence, and cross out extra space
  • Errors should be marked with a single strikethrough and initialled
  • All letters, sketches, photos, charts, and printouts should be placed permanently in the book and also signed and dated.

Some factors that reduce the credibility of a notebook are:

  • Illegible entries
  • Unsigned or undated pages
  • Unwitnessed entries or pages
  • Missing pages
  • Erasures and deletions.

With the advent of electronic notebooks, these general principles should still be adhered to, with respect of electronic signing and checking of records. For further details on this matter you should talk to your commercialisation office.

iv. Publishing

If research is published (either in a journal or a poster, in a presentation at a conference, or even in an annual report) before the IP is protected, it may not be possible to patent the IP; that is, the IP must be protected first. This can be done relatively quickly (within days or weeks) with a provisional patent. However, sometimes timing is an issue and a researcher may choose not to publish until the research is more progressed (to help secure a firmer patent and hence a better commercialisation position). Before publishing in any form, researchers are advised to discuss the issue with their commercialisation office to ensure they have their IP protected appropriately.

1.3.4 Costs associated with IP protection

Often in university research, a patent is sought to protect IP as it gives the highest level of protection in many markets. The cost of a patent, which grants the owner exclusive rights to the innovation for up to 20 years, is typically funded by the university, although most universities will be looking to find a commercial partner in the first couple of years to avoid paying very high patent costs. Patenting is the most expensive form of IP protection and can cost $500,000 or more over the 20-year lifespan (excluding any legal costs involved in contesting a patent infringement).

The typical patenting process:

Patenting stage

Timeframe from filing provisional

Cost

Provisional

0 months

$4–10,000

Patent cooperation treaty application

12 months

$10–20,000

Application published

18 months

$0

National phase filings

30 months

$20–$200,000

Patent prosecution

36–84 months

$5–500,000

Renewal of applications and granted patents

ongoing

$1–10,000 per country

Court challenge

years

$1M+

 

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