What is the core issue?
The lack of a provision in the Indian Patents Act, 1970, can be ascribed to a misunderstanding over who owns the patent, the employer or the employee. The Act does not indicate who owns a patent created by an employee under the authority of the employer. In contrast, an employer's position is significantly different under Section 17 of the Indian Copyright Act, 1957, which assigns the copyright to the employer if it is made during the course of employment (unless there is a contract to contrary).
As to WIPO website for most countries,’ if an employee has created an invention in execution of his/her employment contract – i.e. usually during his/her working time within the enterprise – the invention (and the corresponding patent rights) will belong to the enterprise’.
Indian Scenario
In India, in the lack of a clause governing patent ownership, enterprises engaged in research and development have always deemed it prudent to enter into pre-invention assignment agreements with the patent owners. Even though these agreements contain provisions for assignment, disclosure, and power of attorney, none of these provisions have been legitimized as of the time of this writing. A more serious issue comes when no such consensus is reached; what should be done in such a situation is the true question. Under that case, it would seem obvious to regard the employer to be the owner of the patent that has been invented using his resources, and this is also the approach taken in copyright law. However, under the Indian Patent Act, 1970, the inventor is considered to be the first proprietor of the work, and in the absence of a written agreement, the employee has an advantage over the innovation in court. In addition, the idea of vicarious liability, under which an employer is held liable for the illegal conduct of his employee, can be used to support the argument that an employer should not be held liable for the rightful acts of his employee performed within the course of his employment.
Legal Position in other countries
Numerous countries have included a provision about patent ownership in their patent legislation. To begin, section 39 of the UK patent act states that if an employee invents something as part of his duty or during the course of his employment, the employer is assumed to be the deemed owner of the invention. Employee inventions fall into two categories under German law: obligated and unobligated. Tied inventions arise out of the employee's duties in public or private organizations or are based on the employee's experience or activities in these organizations. All other inventions are deemed to be gratuitous and belong to the employee. For an indefinite term, an employer retains all intellectual property rights in an employee's invention made while employment. Additionally, Israel's patent law (Section 132 of the Israeli Patent Act), Japan's patent law (Article 35 of the Japanese Patent Act), France's patent law (Article L611-7(1) & (2)), and China's patent law (Article 6 of the Chinese Patent Act) all contemplate the concept of deemed ownership in favor of the employer. Thus, in a larger sense, if an employee has a 'responsibility to invent' and any invention results from this obligation, the employer is obligated to be the owner of the invention.
Surprisingly, the United States' Copyright law specifies "works created for hire" precisely and states that such works belong to the employer. Otherwise, there is no national statute legislation governing the ownership of employee-created innovations or other intellectual property. Under common law in the United States, under most circumstances, inventions developed by an employee while on the employment and using the employer's resources remain the employee's property, and the employer retains the ‘shop-right' to such inventions. In essence, a shop-right is a non-exclusive, non-transferable license granted to the employer if the invention was invented using his resources, allowing the employer to use the invention without paying any fees. Even if the employee who owns the patent sells his right in the patent, the employer retains his shop-right in the patent. However, ideas generated by employees "hired to invent" are normally the property of the employer. In the US patent law regime, the concept of "hired to invent" is an exception to employee ownership.
What can be done?
In India, the 'duty to invent' argument was presented to the Bombay High Court in Darius Rutton Kavasmanek v. Gharda Chemicals (2014), but the court declined to analyze it because the employer in this case was not required to invent, and thus the invention he created while utilizing the company's resources was outside his scope of employment, and as a result, the company was unable to obtain patent ownership for that invention. Thus, it can be justified in light of the fundamental fault in the Indian Patent Act, 1970. Incentivizing inventors is one thing, and it can be accomplished in a variety of ways. However, without granting ownership of these innovations to the firms or organizations that invested significant money and resources in them would limit these companies' ability to spend in R&D, so slowing the country's technical growth. Solving this issue by incorporating a provision of deemed ownership similar to that found in the copyright act, or by legitimizing the pre-invention agreement, or by incorporating a right similar to the ‘shop-right' in the United States of America is critical in order to protect the employer's interests and to continue the investments made by these employers, which automatically contribute to the country's technological advancement.
Takeaway:
In the lack of a specific provision protecting an employer's rights in India, the only thing that can be done is to include a clause in the appointment letter regarding the employee's ownership of patents created during employment. Otherwise, absence of such a clause and in accordance with the prevalent practice of recognizing the inventor to be the first owner, the employer would be excluded from the scope of patent ownership despite investing resources and money in the creation of the patent.
This article has been written by Ekta Dixit, intern at HMP Consultancy Services.