Patent Dispute that Reaches High Court has far Reaching Implications

August 13, 2014

Patent Dispute that Reaches High Court has far Reaching Implications

When intellectual property rights are not the subject of proper agreements, the likelihood of a dispute arising is increased. When the responsibilities and rights of employees are not precisely stipulated, there is also possibility for disagreement.

A recent case involved a patent rights dispute that arose when three men registered a patent for use in waste recycling in the name of another company, rather than the one for which they worked. Their employer disputed their action, arguing that the patent should have been registered in its name. The three men argued that, since they were not directors of the company, they did not owe it a fiduciary duty nor were they obliged to ensure that the patent belonged to the company.

The three had never been appointed as directors of the company, but the company argued that the facts of their participation in the business meant that they were, for all intents and purposes, directors and thus they were also directors in law.

The High Court considered what factors must be taken into account to determine whether a person is or is not a director. Among other factors which must be considered, the Court ruled that the following are indications that an employee holds the status of director:

  • Participating in the running of the company on an equal footing with the directors;
  • Being held out by the company to be a director;
  • Using the title of director; and
  • Taking all circumstances into account, if the person is a part of the senior governance structure of the company.

The Court concluded that, taking all the evidence into account, the three men were not de facto directors.

This dispute would not have arisen had the precise rights governing the ownership of intellectual property created by those working for the company been clear. The case also has implications for the corporate governance of businesses.