Dr Gray: 2, University of Western Australia: 0

Implications of the Full Court Decision in University Western Australia v Gray.

The Full Federal Court has unanimously upheld the first instance decision of Justice French, confirming that inventions made (and patents obtained) by academic researchers during the course of their employment by a university, even using university resources and equipment, will not automatically be owned by the university (University of Western Australia v Gray [2009] FCAFC 116. 

What you need to know
In order to own inventions made by academic researchers, university employers need to include explicit provisions in employment contracts to automatically assign to the university all inventions made in the course of employment or using university resources.  A university employer should not rely on an assumption that such a provision will be implied into the employment contract.

Background – facts
Dr Gray was employed as a Professor of Surgery at the University of Western Australia (UWA) between 1985 and 1987.  During the course of his employment at UWA, Dr Gray conducted research and developed technologies for use in the treatment of cancer.  Dr Gray applied for several patents in respect of this technology, in his name, and ultimately transferred these intellectual property rights to Sirtex Ltd (Sirtex), a company of which he was a director, in order to commercialise and market the technology. 

UWA commenced proceedings against Dr Gray, seeking a declaration that all of the rights and interests in the relevant intellectual property were held by Dr Gray and Sirtex on trust for UWA.  UWA claimed that Dr Gray had breached his contract of employment and his fiduciary obligations to UWA.

The first instance decision
Although there was no express term in his contract to assign all intellectual property rights developed in the course of Dr Gray’s employment, UWA argued that such a term was implied.  UWA also claimed that its Intellectual Property Regulations operated so as to vest all intellectual property rights developed by its staff in UWA.  Finally, UWA argued that Dr Gray had breached his fiduciary obligations owed to UWA. 
Justice French rejected all of the above grounds. 

Importantly, Justice French did not accept that a term should universally be implied into employment contracts between universities and academic research staff to the effect that all intellectual property developed by staff would be owned by the university employer.  In this case, Justice French held that Dr Gray had been employed to teach and to carry out research and that a ‘duty to research does not carry with it a duty to invent’.  Accordingly, since invention was not a duty of his employment, there was no basis on which to imply a term providing that all inventions would be owned by Dr Gray’s employer.

With respect to UWA’s Intellectual Property Regulations, Justice French decided that under the relevant legislation, UWA was only authorised to make regulations relating to the control and management of its own property not to acquire or interfere with the property of others.  In any event, the regulations were not complied with by UWA so that even if they were valid, Dr Gray had not breached them. 

Finally, Justice French found that Dr Gray could not have any fiduciary obligations to UWA because UWA had no interest in the inventions.

The decision of the Full Federal Court
Justices Lindgren, Finn and Bennett endorsed all of the findings of Justice French and dismissed UWA’s appeal on all grounds.

Implication of contractual term
UWA’s primary ground of appeal was that Justice French had erred in finding that a term should not be automatically implied as a matter of law into a contract of employment. 

The Full Court made it clear that the implication of such a term into an employment contract is a matter to be considered according to the facts in each circumstance, and the important question is whether it falls within the employee’s duty to make inventions:

“Unsurprisingly, express contractual stipulation apart, with the employer’s entitlement turning on that which it was the employee’s ‘duty’ to do – and for which the employee was paid – the recurrent preoccupation in the case law has been in each instance with the actual subject matter and purpose of the employee’s engagement itself and with the question: ‘[w]hat is it that he is employed to do?’… was the employee ‘employed to make or discover inventions at all?’, or, as French J put it, did the employee have ‘a duty to invent?’”

In considering this question according to the facts of this case, the Full Court followed the approach of Justice French in considering the special nature of the employment relationship between a university and its academic researchers.  Although in this case Dr Gray had a duty to research and to stimulate research, the Full Court confirmed that the “insuperable difficulty” for UWA was that Dr Gray was not even required to perform tasks from which inventions might result as it was entirely within his discretion to determine the areas of research which he would pursue. 

In the circumstances, Dr Gray had no duty to invent and therefore there was no implied term providing that UWA would own any of his inventions.
Both Justice French and the Full Court considered the academic freedoms of researchers in universities.  In this case, there were no restrictions on Dr Gray’s freedom to publish his work or to collaborate with other universities or research teams and therefore, as such publications could potentially destroy the patentability of any invention, the Full Court stated that this freedom was inconsistent with the duty to invent.

Fiduciary duties
UWA conceded that this ground was based on the UWA succeeding in establishing an implied term in the Dr Gray’s contract.  Accordingly, this aspect of the appeal did not succeed and the Full Court held that Dr Gray had no fiduciary duty independent of his employment contract to make inventions or to entitle the university to own those inventions.

University intellectual property regulations
The Full Court held that although Dr Gray was bound by the Intellectual Property Regulations as a result of an express term to that effect in his employment contract, because UWA had not fulfilled its obligation under the regulations (to establish and run a patents committee which would review all potentially patentable inventions reported by employees), Dr Gray was not bound by this aspect of the regulations.  The Full Court stated that “the Patents Regulations were no longer part of UWA’s agenda and UWA acted accordingly”.  UWA’s appeal on this ground failed.

Consequences of decision
While the Full Court’s decision was tied to the specific circumstances of Dr Gray’s employment contract, a general principle can be applied to the effect that a university employer will not automatically own inventions made by its employees or academic researchers in the course of their employment or using university resources or funding. 

If a university wishes to be entitled to such inventions, it should be careful to expressly include such a term in all employment contracts.  To be prudent, a duty to invent should be expressly included in any employment contract which specifically sets out a detailed list of the employee’s duties.
If a university proposed to rely upon regulations to deal with the ownership of employee created intellectual property then is should ensure that those regulations are:

-  made in accordance with the powers to do so arising under the relevant university statute;
-  clear and succinct;
-  properly promulgated;
-  uniformly applied and communicated to employees;
-  complied with by the university itself; and
-  regularly reviewed.

For further information about the implications of his decision please contact Wayne Condon, Principal (wayne.condon@griffithhack.com.au) or Jacky Mandelbaum, Senior Associate (jacky.mandelbaum@griffithhack.com.au)

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