Intellectual property created by employees and consultants.



Intellectual Properties can be anything such as patents for inventions, copyrights that cover literary and artistic works like manuscripts and songs, software, trade secrets, trademarks, and logos. Businesses have every right to protect their trade secrets, logos, trademarks, or software for competitiveness and business growth. 

According to the law, the ownership of Intellectual Property (IP) vests with the person who brings it into existence until there is any contrary contract. Employees and consultants play important parts in developing IPs. 

There is a statutory presumption that in most countries, an employer owns the IP, which an employee creates during employment. An employee will be still careless to think that the rights of an employee on such intellectual property are extinguished. Employees can still claim the rights of moral rights, author, and right for objecting alternations to any work. 

The general rule when employees are concerned 

The general rule in IP creation by the employee in the employment is that the first owner is the employer in the absence of an agreement. The first owner of the copyright, invention, database, or design vests in the employer. The statutes do not deal expressly with non-economic rights including moral rights, and copyrights that are personal to employees. Even, employers may not be interested in non-economic rights either. It’s the IPs with vested economic interests that create problems sometimes for which employers must clear their positions to the employees. 

Better, and employer and their employees sign an agreement in this matter. A lawyer having expertise in this domain should be consulted at the time of preparing the agreement. The agreement that defines the IP rights should include the following:

  • Employers own the IP created by the employee during employment.
  • Terms that the employee shall sign the documents required reasonably for recording the ownership of an employer during the employment. The obligation must continue during and after employment.
  • Confidentiality terms that require the employees to keep confidential information confidential and neither disclose nor use it outside the employment.

IP created by consultants

When a person provides services to any business, the question of IP ownership shall arise. The parties involved should first decide whether the individual is a consultant or is engaged as a contractor or an employee. When IP arises because of the person’s involvement as an employee the issue of ownership shall be different from IP rights arising from a consultant.  A consultant can claim ownership of the IP created by him or her outside the course of employment duties. 

As a consultant is an independent party than otherwise agreed, IP created by consultants shall be owned by them and not the company that engages the consultant. Companies must ensure through a lawyer that there is an appropriate consultancy agreement that is entered into between the consultant and the company. The agreement should state clearly the terms of the engagement such as time, remuneration, indemnities, project scope, deliverables, and services and a provision that shall expressly state that the IP in the services and deliverables shall be transferred to the company instantly upon creation. The scope of work of a consultant should be clearly stated in the contract for avoiding uncertainty regarding IP ownership. It’s tricky when it comes to verbal contracts and how to prove a verbal agreement in court, so it’s best to get everything in writing.

Intellectual property is a crucial asset of a company. In fact, this is what develops market competitiveness and the trust of stakeholders. Considering the instances where the employees look for second projects or jobs outside their employment, it becomes necessary to define the terms of employment and job descriptions to effectively protect valuable intellectual property. At the same time, while working with the consultants outside the scope of employment, the ownership of IPs should be clear to both parties.