Protecting your valuable IP assets
There is a constant stream of cases involving intellectual property rights (IP) and employment. In this article, we look at some recent issues.
Ownership of contacts
A company’s database of contacts can be a valuable asset. When an employee leaves a company, can the employer prevent him taking his contacts with him so as to hinder unwelcome competition ? Even if there are no non-compete covenants, IP law can assist if you can show that the employer owns IP in the contact database and any use by a former employee would be an infringement of that IP.
In the recent case of Pennwell Publishing v Ornstien, the judge said:
" where an address list is contained on Outlook or some similar program which is part of the employer’s e-mail system and backed up by the employer, the database or list of information … will belong to the employer."
In that case the employer was entitled to retain the list of contacts and got an injunction preventing use of it, but not of individual parts of its content which were known to the employee by other means.
In another case, Hays Specialist Recruitment v. Mr Ions, the information was not held on the company’s own internal systems but was held on LinkedIn, an on-line social networking site. Hays alleged that Mr Ions had uploaded business contacts from the company’s confidential database to his account at LinkedIn and sought an order for disclosure of documents in connection with an action for breach of confidentiality. The employee argued he had been encouraged to join LinkedIn and that once a business contact had accepted the invitation to join his network, the information ceased to be confidential as it could be seen by all his contacts. The court decided that, even if confidentiality in the information had been lost, Hays may still have a claim against Mr Ions and ordered disclosure but only in relation to contacts he had made while an employee at Hays.
The case highlights the tension between encouraging employees to use social networking websites for business reasons on the one hand and wanting to protect confidential information on the other.
Employee compensation for creating IP
If an employee creates some valuable new IP, is he entitled to claim any compensation in addition to his contractual salary and benefits ?
Normally, the answer is “no”. However, if the new IP leads to a patent for a new invention then, under the Patents Act, an employer could face a claim for statutory compensation in respect of that invention if it is of outstanding benefit to the employer and an award of compensation would be just.
There has never been a successful claim for compensation under the Patents Act – at least, until now ! This followed an amendment to the Patents Act that was made to encourage further claims in relation to patents applied for on or after 1 January 2005.
In Kelly and Chiu v GE Healthcare Ltd  compensation was awarded to the employees for the part they played in development of a new drug. In assessing the amount of the compensation the court took into account the fact that the employees received remuneration for their work, a team contributed to the research and the inventions depended significantly on the contribution of the employer. These considerations meant that the share was towards the bottom of the scale: 3% of the £50 million benefit was split and the employees received £1.5m.
Internet Domain names
Domain names are a form of quasi–IP although they are not intellectual property rights as such. However, they can be hugely important and valuable to businesses who require the domain names for their email addresses and websites.
The problem is that many companies have lax policies in relation to the management of their domain names. For example, it is common for employees to register domain names in their own name. Usually this will not be an issue until the employee leaves. And even then, often the company does not know about it until the domain name expires because it has not been renewed. In worst cases, the name can then get taken up by a third party and can be difficult to retrieve.
Most employees should not have an issue transferring the domain name over to the employer. But what if an employee refuses, is not contactable or simply does not respond ?
The majority of disputes over the ownership of domain names are resolved through one of the agreed dispute resolution procedures known as the Uniform Dispute Resolution Procedure (UDRP). Where there is a dispute, then the UDRP may be invoked by the employer to secure a transfer of the domain name.
However, a company does not have an automatic right to recover a domain name. In order for a claim to succeed you need to show that :
o The employer has a registered trade mark for the name;
o The employee did not have a legitimate interest in it (for example, it is not their surname, as it might be for a founding director of a company); and
o The registration and subsequent use of the domain is in bad faith (for example, it can be shown that the employee registered the domain only for the purposes of selling it back to the employer for profit).
In the recent case of Eli Lilly and Company v David Clayton a claim against an ex-employee succeeded and the tribunal ordered that the domain name be transferred from the former employee to the employer where it was shown that the employee had no reasonable reason to be registering the domain name and the intent was to block the domain name from being available to the company.
However, you can’t always be certain that you will be able to prove all of these things and, even if you can, there will be the unwelcome time and cost of having to bring a UDRP case. As is often the case, prevention is better than cure and companies should actively manage their domain name portfolios.
Please contact Nigel Miller for advice on any of the issues raised in this article on 020 7614 2504 or email NMiller@foxwilliams.com