By - King Stubb & Kasiva on January 16, 2024
Intellectual property (IP) plays a critical role in the ever-changing field of employment by influencing corporate valuations and directing innovation. Human intellect and creativity are crucial to a company’s identity and commercial viability, which is especially important in rapidly developing nations like India. Technological improvements enable an abundance of IP, such as copyrights, patents, trademarks, and trade secrets. Trade secrets cover an even broader range of topics, including business processes, internal systems, protocols, guidance notes, manuals, and client lists.
Given the vital importance of IP to corporate success, organization valuations are now strongly reliant on the value of their intellectual assets. The lack of dedicated trade secret legislation related to employment in India highlights the importance of adding confidentiality terms into contractual agreements as a means of protecting sensitive data. Due to the distinction between author and owner of IPs that exists throughout employment, employers often retain ownership of IP developed by employees as investors in salary and resources. It is a legal principle by default, but it is not absolute. In certain circumstances, employees may claim such IP, thus necessitating a consideration of certain key factors.
This article aims to provide an overview of the relationship between IP and employment, especially in the post-employment scenario, in the following manner:
The Copyright Act of 1957 primarily establishes the statutory framework dealing with IP proprietorship in the context of employment in India. As per Section 17 of this Act, unless a contrary agreement exists, the employer is regarded as the initial proprietor of copyright in works produced under a contract of employment or apprenticeship. This provision specifically deals with copyrights and names the employer as the primary copyright holder for any work generated by an employee during the course of their employment, unless otherwise specified in the contract.
Specific statutory rules protecting ownership rights during employment, on the other hand, are glaringly absent in the case of other categories of IP, such as trade marks and patents.
As a result, it is strongly advised to include explicit clauses in employment agreements outlining how IP developed by employees during their employment will be handled.
Determining IP ownership rights is critical in an employment circumstance to avoid conflicts between employers and employees, particularly at the end of a term of employment. Executing specific and explicit agreements can ensure harmonious relationships while minimizing the likelihood of disputes. These agreements and all clauses need to comply with constitutional and statutory provisions
In the case of VT Thomas v. Malayala Manorama Co Ltd., the Kerala High Court held that Section 17 (c) of the Copyright Act does not apply to works that existed before employment. The court affirmed the creator’s post-employment freedom for work existing before employment.
The intricate intersection of IP and employment necessitates a mindful approach, particularly in the post-employment landscape. To navigate this landscape, employers must prioritize clear, comprehensive agreements that specify ownership and confidentiality. On the other hand, employees must be vigilant in understanding their rights and obligations, keeping records of independent work, and thoroughly assessing any agreements that are presented. Both parties stand to benefit from legal counsel and fostering an environment of mutual respect for intellectual contributions. Maintaining transparent channels of communication and adhering to the current legal framework is critical to ensuring a seamless transfer of IP following an employee’s leave, allowing mutual growth and development in their respective spheres.
Generally, yes. Per the Copyright Act, unless stated otherwise in an agreement, the employer is the initial owner of copyright in works created during employment. The case for patents and trade secrets, however, differs and is determined on a case-to-case basis.
Courts rely on principles like the ‘duty to invent’ and ‘nature of work,’ emphasizing the need for clear employment contracts in defining ownership rights.
Employees should properly document ideas developed independently on personal time, with personal equipment, and away from business resources to establish a clear record.
 VT Thomas v. Malayala Manorama Co Ltd., AIR 1989 Ker 49.