Australia: Copyright and employees: Who owns what?

In brief - Employment contracts and intellectual property rights

A recent Federal Court decision highlights the need for employers to ensure that as well as clearly setting out the duties of employment, employment contracts also include a comprehensive assignment of all intellectual property rights, if the employer is to be assured that all rights in the intellectual property in materials created by employees are owned by the employer.

Edsonic v Cassidy

In the recent decision of Edsonic v Cassidy, the court reaffirmed the principle that, even if an employee/employer relationship exists, the terms on which an employee is employed are critical in determining whether copyright in material produced by the employee is owned by the employer. Section 35 of the Copyright Act 1968 (Cth) makes it clear that copyright in work produced "in pursuance of the terms of the employee's employment" is owned by the employer.

If an employee creates something that is valuable or useful to the employer (or, potentially, competitors), then, absent an agreement to the contrary, the employer will only own the rights in that creation (and will, therefore, be able to benefit from it), if the employee made the work pursuant to terms of employment.

Business relationship or employment relationship?

The case concerns copyright ownership of online vocational and educational training (VET) material. In late 2000, Edsonic approached Ms Cassidy to develop VET materials in consideration for a salary and royalty payments. While it was established that Ms Cassidy did have a business relationship with Edsonic (she was offered and she accepted 5% of the total share capital of Edsonic for a nominal fee), there was no employment relationship at that time.

Edsonic was not in a financial position to employ Ms Cassidy and neither party entered into any employment relationship. There was also no agreement about ownership or transfer of the intellectual property rights in the VET material that was to be developed.

Since Ms Cassidy was not receiving any income from Edsonic, she also worked as a contractor for an unrelated organisation (the Property Council Australia) from 2001 to 2002. She was specifically engaged to assist in obtaining accreditation for its courses, as well as writing teaching and assessment materials for residential workshops for a variety of courses including shopping centre management, corporate real estate, property development and property investment and finance. To avoid GST, Ms Cassidy arranged for Edsonic to enter the contract with the Property Council on her behalf and to pay her 85% of the Property Council's fees. Edsonic also paid her superannuation and worker's compensation and made tax deductions, while retaining a small fee for itself. While this relationship had characteristics of an employment relationship, it was only directed to her employment on a particular project or task, namely providing material as required by the Property Council, not developing VET materials.

Materials created outside the terms of employment

Ms Cassidy claimed that she commenced writing the VET materials in 1998 and continued to develop and refine the VET materials between 2000 and 2002. Edsonic claimed that Ms Cassidy created VET materials while being employed by Edsonic during 2001 and 2002. While favouring Ms Cassidy's version of events, the court nevertheless found that, even if the VET materials were created during Ms Cassidy's employment with Edsonic, as a result of the narrow terms on which she was employed (i.e. creating material for the Property Council), the VET materials were outside her terms of employment.

Ms Cassidy succeeded in establishing ownership and control of the VET materials (and the right to licence those materials to others), including the right to receive payment for use of the VET materials by Edsonic.

Clearly defining the terms of employment

Generally speaking, if an employee creates material in the course of his or her employment that he or she is engaged and instructed to do during the time of employment, during working hours, and using material provided by the employer, the copyright in the material created will be owned by the employer.

However, what is critical is determining the duties of employment and what is meant by "in the course of employment". When the employee is requested to step outside the terms of employment, the copyright in that new work created will vest with the employee. These issues can be avoided if the employment terms are clearly and broadly defined and if the employment contract includes a complete author assignment of rights to the employer.

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